Providence Mayor Angel Taveras defended his proposed cuts and reforms to the city's pension and health care system to a group of about 500 retirees and beneficiaries Saturday morning in Cranston. The changes are necessary to save the city from bankruptcy in June, Taveras said.
The mayor's acting chief of staff, Michael D'Amico, who gave a long presentation explaining the reasoning behind the cuts, said though he understands these actions will cause some pain, they are a necessary result of years of financial mismanagement by former administrations.
The Providence city government needs to cut $22.5 million before the end of the fiscal year or it may have to file for bankruptcy, a step taken by Central Falls last year. D'Amico established the parallel between Providence and Central Falls but said he hopes to avoid the smaller city's fate.
By the end of the fiscal year June 30, Providence will be in the red by between $11 and $16 million, D'Amico said. That debt will increase to $50 million at the end of July if nothing is done to confront it, he added. If the city declares bankruptcy, there most likely will be cuts made to the pension and health care systems without input from retirees, D'Amico said.
Despite intensive work and sacrifice, D'Amico said it would be very difficult to cut an additional $22.5 million. With the year almost over, the city only has $46 million left to run the city. The city would have to cut 48 percent of everything it does to fill the budget without reforming pensions and increasing payments from the city's nonprofits, D'Amico said.
Providence spends $137 million to run the city annually. The rest of the almost $1 billion budget goes to salaries, pension plans and debt — programs the mayor does not have the power to cut, D'Amico said.
In his presentation, D'Amico put additional pressure on the city's universities and other nonprofits to increase their contributions. The chief of staff focused on Brown as an example of an institution that can contribute more. Because Brown's original charter exempts it from certain taxes, it has a greater responsibility to contribute voluntarily to the city, D'Amico said.
The audience applauded when D'Amico and the mayor called on Brown to increase its payments to the city.
D'Amico said the mayor had planned to acquire an additional $7.1 million from the city's non-profit organizations, but so far has only secured $500,000. Negotiations between the University and the city are ongoing.
The nationwide recession that led to a decrease in revenue for the city, combined with the cost of funding pension and health care programs, forced Providence to consider all kinds of cuts, D'Amico said. The pension plan was not funded in the early 1990s, and now the city has to pay an additional $45 million per year to make up for that loss in finances.
D'Amico announced the specific reforms the city wants to make to the pension and health care system. The city will continue its efforts — recently blocked by a judge — to move pensioners over the age of 65 to Medicare. Taveras also wants to require a 20 percent co-share for new retiree health care plans for people under the age of 65. The mayor also intends to stop cost- of-living adjustment increases for pension payments until the pension budget reaches a safe funding level.
Pension funds are considered to be in a dangerous position if they are less than 70 percent funded, and only 32 percent of Providence's pension budget is accounted for, D'Amico said. Between pension funds and health care costs, the city must find an additional $2.1 billion in the coming years to keep its promises to pensioners and retirees.
D'Amico said the mayor will seek to address the structural issues with Providence's finances, instead of pursuing temporary fixes, like he said previous administrations have. As a result, this administration will not consider selling Providence Water, the city's most valuable asset, D'Amico said. Even if the city could profit from the sale, it would be a one-time influx of cash, allowing leaders to avoid the existing structural problems, D'Amico said.
Numerous Rhode Island politicians are suffering from severe unpopularity, but Taveras' work seemed to be appreciated by the audience. Several people who asked questions commended the mayor on his boldness in confronting tough issues.
The conference comes on the heels of a poll conducted by the University's Taubman Center for Public Policy and American Institutions and the John Hazen White Public Opinion Laboratory, which concluded Taveras had an approval rating of 60 percent. The same poll gave congressman and former Providence Mayor David Cicilline '83 an approval rating of only 14.8 percent. Commentators have attributed the unpopularity to the perception that, as mayor, Cicilline did not do enough to confront Providence's systemic problems.
D'Amico called for the retirees and beneficiaries to create a committee that would meet with city officials twice a week throughout April to come to a compromise regarding the cuts and other reforms.
