It didn't take local unions in Providence long to declare they intended to sue the city to stop it from ending cost-of-living adjustments to pensions. Providence's city council voted on the change, designed to cut the city's unfunded pension liabilities by about $240 million, earlier this week, and unions promptly announced their plans to go to court to challenge the change. Unions have already won one court battle with the city when a judge ruled it couldn't move public employees into the federal Medicare program as a way of reducing its retiree health care costs.
In supporting the council's action, Mayor Angel Taveras noted that the rich COLA benefit in Providence, sometimes averaging as much as 6 percent per year in increased pension benefits, are helping drive the city toward insolvency. He pointed out that one former fire chief who retired with a pension of $63,510 annually has seen his pension increase to $196,813 thanks to COLAs. The move against COLAs, Taveras estimates, would save the city budget some $19 million annually.
So far, courts in other states have taken various approaches to attempts to change COLAs. Even in states with laws protecting pension benefits from being altered, courts have ruled that COLAs are not necessarily part of the pension contract that employees earn, but merely an additional benefit that the employer can take away.
One thing that both Taveras and union officials in Providence agree on, and that is if a judge rules against the city, it could very well be headed for bankruptcy.
So far, courts in other states have taken various approaches to attempts to change COLAs. Even in states with laws protecting pension benefits from being altered, courts have ruled that COLAs are not necessarily part of the pension contract that employees earn, but merely an additional benefit that the employer can take away.
One thing that both Taveras and union officials in Providence agree on, and that is if a judge rules against the city, it could very well be headed for bankruptcy.
If the judge will rule against the city then it could be very well to be aheaded for bankruptcy.