Does Mayor Allan Fung's budget for Cranston cover all retirement costs?

It wasn't that long ago that Cranston was facing an overwhelming bill for retirees and potential retirees, a crisis that prompted Mayor Allan Fung to seek concessions from the city's police and fire unions.

The city was in trouble because, for years, its elected officials failed to invest enough money to cover the retirement benefits they were promising.

So it caught our attention when Fung, who is running for governor as a Republican, sent out a letter with the city's new tax bills reporting that "Our budget funds 100 percent of the local police and fire pension and other retiree benefits costs."

So is Cranston's pension problem fixed and up to speed?

We decided to look at the numbers.

Cranston actually has several pension plans.

Police and fire workers hired over the past two decades, along with municipal employees, are covered by the state-run Municipal Employees' Retirement System.

The state sets a percentage of payroll that municipalities in the MERS system must contribute to cover their costs. If the municipalities don’t pay up, the state withholds aid to make up the shortfall.

For the current fiscal year, Cranston’s minimum was 13.69 percent of payroll; the city’s budget includes that amount -- about $4.8 million on the non-school side of the ledger. In other words, it’s paying 100 percent of the state-mandated MERS requirement.

Then there’s the funding level, the percentage of what the plans need to meet their pension obligations.

The city’s MERS plans are not funded exactly at 100 percent, but they're fairly close. According to the latest actuarial report, the city has 95.9 percent of the projected police retiree costs, 107.1 percent of the projected firefighter retiree costs, and 95.1 percent of all other municipal retiree costs.

Any plan with a funded ratio below 80 percent is considered to be in trouble.

However, the old police and fire pension programs, administered by the city, are a different story because, over the years, Cranston's elected officials neglected to put enough money into those programs to cover future retiree costs.

Although they have been closed since 1995, the city would need an additional $231 million to fully fund them. (To put that amount in perspective, the city's entire budget for the current fiscal year is $262 million.)

The old police pension is only 18.3 percent funded and the old fire pension program is just 24.1 percent funded, according to information from the city's latest actuarial report.

They’re far from 100-percent funded.

However, the city is now on a payment plan designed to wipe out that shortfall by 2042. (The date has been 2037, but a recent court settlement with the unions forced the date to be pushed back by five years.)

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George Nee

stated on October 19, 2011 in a pension forum

"This is the first time in our state, and one of the first times in the country, where benefit reductions . . . has happened to people who are retired."

Under that plan, the city should be paying $22,353,591 this year, according to the city's actuarial firm, Buck Consultants. Fung, in an email to PolitiFact Rhode Island, showed where the city's appropriation for this year will actually be $22,518 more than the recommended amount.

To cover other benefits, primarily retiree health insurance, Buck recommended that the city budget $5.1 million. The city has set aside $4.6 million and plans to cover the remaining $500,000 by using about a third of its $1.6 million hospital stabilization account, which is savings accumulated because the city self-insures its workers.

Fung, in an interview, said he didn't intend to leave the impression in his letter to taxpayers that the city had covered 100 percent of all its pension obligations.

"If I had meant that, I would have said it was 100 percent fully funded, which is not true." Instead, he said his point was that, unlike in past years, the city is paying for 100 percent of its annual required contribution to solve its pension problems.

We should note that Fung has not been shy about talking about the unfunded liability of the city's old pension systems, mentioning it in interviews and on other occasions.

Our ruling

Cranston Mayor Allan Fung said, "Our budget funds 100 percent of the local police and fire pension and other retiree benefit costs."

The city is making the minimum required payments for retirement benefits through the state-run MERS system and to pay down this year's share of the bill for the huge long-term liability incurred by the city's older police and fire pension systems.

But his statement could lead a reader to conclude that 100 percent of the city’s $231 million debt for the old plans is covered by this year's budget when, in fact, the only thing the city is paying in full is this year's installment on a plan that won't retire that debt for another 28 years.

Because the statement is accurate but needs clarification or additional information, we rate it Mostly True.

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