"The overall financial condition of this city is severe," said Finance Director Thomas Bruce, and the solution involves bad news for Woonsocket's 780 retirees and beneficiaries as well as its taxpayers.
On Monday, 3 p.m. at Woonsocket High School, the city and the Woonsocket Budget Commission will host an informational meeting to lay out the city's situation and retiree/beneficiaries' anticipated role in the solution.
Among the pieces of bad news people can expect to hear, Bruce said, is the elimination of the 3 percent Cost of Living Adjustment (COLA) for retirees.
According to a city letter sent to retirees and beneficiaries (see attached .pdf), Woonsocket's pension plan is critically under-funded at 56.7 percent ($58 million of a $98 million total obligation) as of July 1, 2012, under the 60 percent threshold set by the state, making suspension of the COLA a necessary part of the city's deficit reduction plan.
In addition, the city's Other Post-Employment Benefits (OPEB) - or healthcare obligation - stands at $210 million, which the city has made minimal contributions to, must also be addressed. Unless the city begins making signifcant contributions to the Annual Required Contribution (ARC), "...it will not be able to make payment to current or future retirees for some or any of the promised health benefits in the future," the letter reads.
To address the OPEB shortfall, the city will require retirees over 65 who qualify to switch from the city's health plan to Medicare this year, and the city needs eligible retirees to notify them of their Medicare status - either a Medicare card or a denial letter - by March 31.
Retirees who are not Medicare-eligible will have to pay a 20 percent co-pay and a $1,000 family deductible or $500 individual deductible.
Bruce said that while the hardships are dire, so is the sacrifice being asked of taxpayers. Also, he said, if the city is not able to make this and the rest of the plan work, a receiver will likely be appointed for the city.
For retirees who believe they welcome that development, Bruce points to the case of Central Falls, where a reciever cut base pay benefits nearly in half, from $300 to $170.
Bruce said the meeting should last two hours, and will involve input from pension system actuaries, members of the Woonsocket Finance Department, Budget Commission Chairman Bill Sequino, and city labor lawyer Dan Kinder.
During the meeting, officials will present the city's situation, the plan to fix the deficit and unfunded pensions/benefits, and three pieces of information:
1) Next year's COLA
2) Each year without the COLA
3) Payments beneficiaries would receive if Woonsocket followed Central Falls' lead in recievership.
The second hour of the meeting will be devoted to a question and answer session. "The retirees deserve all the information that's out there," said Bruce.