Pension Showdown in Johnston

Pension Showdown in Johnston

The town of Johnston is overhauling its retirement system for police and fire, in a move that is expected to save the town between $1 million and $3 million each year in pension payments and address an $84 million unfunded pension liability.

Under the new system, a “scattered array” of pension funds for fire and police will be pooled into one fund that will be administered by a seven-member retirement board. The board will have the power to review pensions, and, if necessary, reduce those that exceed what retirees should be receiving. The board and the new fund will be established through an ordinance that the town council approved last night.

The reforms are aimed at reining in a pension system that is fraught with widespread problems—excessive benefits, private pension deals, and numerous pensions that are in violation of the law, as first reported in a GoLocalProv investigative series last summer. Of the more than one hundred pensions records reviewed so far, just about every one had an issue, according to Joe Rodio, an attorney for the town.

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The board is charged with reviewing all pensions in the town to bring them into line with local ordinances, state law, and union contracts. That review process is expected to consume the next year and a half, affecting roughly 140 retired police officers and firefighters.

Retirement costs have nearly doubled

As a result of the abuse and excess, retirement costs in Johnston have skyrocketed in recent years. For firefighters, the annual amount the town owes toward their pension fund nearly doubled over a decade—from $2.1 million in 2001 to $3.8 million in 2010. Pension costs for police likewise went from $1.7 million to $2.8 million between 2001 and 2008, according to town records.

“It’s unsustainable to continue to go like this,” Councilman Ernest Pitochelli said last night.

Due to the rising costs, the town is spending almost as much on benefits for retirees as it is on salaries for current employees, according to Rodio. About 20 percent of the annual budget is eaten up by retirement costs. When health care costs are included, the figure is 35 percent, Rodio said.

Nearly half of firefighters are on a disability pension

One of the biggest problems is with disability pensions. Out of 71 retired firefighters, 34 of them are on a disability pension, earning two thirds of their salary tax free. During the tenure of former Fire Chief Victor Cipriano, 15 firefighters retired—and all 15 went out on disability pensions. Even Cipriano himself went out on a disability pension, earning more in retirement last year than he did while working.

To put the numbers in perspective, just 8 percent of the firefighter pensions in New York City are disabilities. In Johnston, the disability rate is above 40 percent. “Those are unusual numbers,” Rodio said.

Rodio has estimated that 25 firefighter disability pensions are in violation of not one, but two state laws—one that says a retiree cannot earn more than he did while employed by a city or town and another that says those tax-free disability pensions needed to be approved by the state retirement board.

Big changes in disability pensions

The new ordinance aims to crack down on abuse by creating a distinction between total and partial disabilities. A police officer or firefighter who retires on a disability but gets another job will be considered partially disabled and can receive only half of their salary, rather than two thirds.

The ordinance also goes out of its way to define salary as base pay—excluding overtime pay, holiday pay, and other benefits from being used to calculate a disability pension.

In the future, a police officer or firefighter applies for a disability will have their case reviewed by three doctors—two of whom must confirm that the person is actually disabled. Once the disability pension is approved, a retiree has to undergo an annual physical and submit a sworn statement documenting how much they have earned for the year.

“This is not a witch hunt or a vendetta. We’re not singling out anyone to take anything they’re entitled to,” Rodio said. He said that retirement benefits will conform to what is agreed to in union contracts. “We don’t want to give them less than they bargained for, but we certainly don’t want to give them more than they bargained for—we can’t afford it.”

Police, fire a no show at hearing

The changes to disability pensions are the biggest bone of contention between the town and the fire and police unions, according to town attorneys. Yet no retired or active-duty firefighter or police officer spoke out on the changes at a public hearing before the ordinance was approved last night—nor did they have a visible presence in the audience. One police captain who was on duty at the meeting declined to comment.

But the hearing still drew a large crowd. Several in the audience who spoke with GoLocalProv said they were taxpayers who showed up to support Mayor Joe Polisena, who has led the charge to fix the town’s retirement system.

“I want to help support him because I think he’s very brave and ethical in what he’s doing,” said Joe DiCarlo. “I want him to know he’s got support from the taxpayers.”

Another resident, James Lombari, said he was angered over the pension abuse among police and firefighters. “They go in for collective bargaining, but they get more than they bargained for,” Lombari said. He too welcomed the new system. “This is the sign of the times in Rhode Island. The bubble is finally bursting, so we’re trying to correct it.”