A judge's ruling that the city of Providence,R.I., cannot move public employees into the federal Medicare program as a way of 
reducing its retiree health care costs has driven the city to the edge of bankruptcy, says Mayor Angel Taveras. "The time for action is now, we cannot wait any longer," Taveras said. "We will be forced into bankruptcy," the mayor said. "It's real.... I will do everything in my power to stop it from happening." Today Taveras was meeting with Rhode Island Governor Lincoln Chafee to seek aid for the state's biggest city, which is in danger of running out of money in the next few months.
reducing its retiree health care costs has driven the city to the edge of bankruptcy, says Mayor Angel Taveras. "The time for action is now, we cannot wait any longer," Taveras said. "We will be forced into bankruptcy," the mayor said. "It's real.... I will do everything in my power to stop it from happening." Today Taveras was meeting with Rhode Island Governor Lincoln Chafee to seek aid for the state's biggest city, which is in danger of running out of money in the next few months.
Taveras faced a staggering $130 million deficit when he took office in January of 2011, on a budget of approximately $600 million. He's whittled the city's structural deficit down to about $30 million, but the city is stuck with significant pension costs, amounting to about $60 million a year in required contributions, as well as the need to fund other post-employment benefits, specifically health care for retirees. Cost-of-living adjustments to pensions alone, the city estimates, cost the budget $16 million a year.
Providence was hoping to save $6 million a year by moving retirees out of private health insurance and into Medicare. But a judge blocked the ruling, saying the city was contractually obligated instead to continue providing the workers with lifetime health coverage from Blue Cross. The city argued that it faced a fiscal emergency which compelled the change, but Superior Court Judge Sarah Taft-Carter concluded that there was no sudden emergency that allowed for the move because the city had been warned by experts for years that the retirement benefits it was conferring on retirees were unsustainable, but continued to grant them.
After the judge's ruling Taveras claimed that, "We are being held hostage by the guaranteed, 5-percent and 6-percent compounded yearly raises that over 600 retirees are receiving." Taveras continued, "They have raised our pension liability and yearly contribution into the stratosphere." He said that one way or another, Providence will reduce those costs, even if that means bankruptcy. "Either the retirees will accept a suspension of their guaranteed yearly raises and changes in health care or they will follow the path of Central Falls retirees who have had their full pensions slashed drastically in bankruptcy court."
Providence was hoping to save $6 million a year by moving retirees out of private health insurance and into Medicare. But a judge blocked the ruling, saying the city was contractually obligated instead to continue providing the workers with lifetime health coverage from Blue Cross. The city argued that it faced a fiscal emergency which compelled the change, but Superior Court Judge Sarah Taft-Carter concluded that there was no sudden emergency that allowed for the move because the city had been warned by experts for years that the retirement benefits it was conferring on retirees were unsustainable, but continued to grant them.
After the judge's ruling Taveras claimed that, "We are being held hostage by the guaranteed, 5-percent and 6-percent compounded yearly raises that over 600 retirees are receiving." Taveras continued, "They have raised our pension liability and yearly contribution into the stratosphere." He said that one way or another, Providence will reduce those costs, even if that means bankruptcy. "Either the retirees will accept a suspension of their guaranteed yearly raises and changes in health care or they will follow the path of Central Falls retirees who have had their full pensions slashed drastically in bankruptcy court."
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