As a former city councilman and a school committee member, Bob Cushman has spent years trying to get people to listen to him as he warned about an impending fiscal doom hanging over Warwick – a cloud rooted in unsustainable retiree healthcare and pension costs.
He found a captive audience in the Warwick Public Library last Wednesday, as around 80 residents filled the main meeting room to attend the first meeting of the “Warwick Financial Crisis Committee,” a group of citizens concerned about the fiscal outlook of the city that was riled up about the recent revaluation, which they fear will price people out of their long-time home city.
“We are not in good shape in the city of Warwick,” Cushman said to begin the presentation, adding later that, “Today I’m not going to talk about the specific things we need to do to solve this problem. I just want you to be aware of this. I’ve said this stuff before, and I’ve gotten a lot of criticism. These are the numbers.”
The presentation broke down budgetary numbers from city records over the course of a 15-year period, and showed that, according to his data, the city is on track to rack up an approximately $78 million deficit over a five-year period – and that is assuming that the city raises the tax levy by the maximum allowable rate of 4 percent each of those years.
The presentation included a slide showing a breakdown of municipal spending since 2004. In 2004, approximately 19 percent of the city budget went to retiree expenses, while 57 percent went to active employee costs. Fifteen years later, retiree costs have jumped to 28 percent of the total budget, accounting for 43 percent of all cumulative new spending in that time frame – the same percentage of money spent on active employees over that stretch.
“We’re spending as much money for people that used to work for the city that performed services in the past than the employees who are currently performing services for us today,” Cushman said. “That’s a big problem.”
For better context, Cushman told the audience to imagine they ran a business where 43 cents of every dollar made had to go towards paying former employees that no longer work for that business.
“What would you do? You’d probably have to close up shop,” he said. “It wouldn’t be worth staying in business. That’s the problem we have right now in the city of Warwick with the city budget.”
Cushman pointed to multiple policies regarding pension and OPEB (other post-employment benefits) expenses that contributed to unsustainable retiree costs, including lifetime healthcare for city employees and their spouses after they retire with 30 years of service with no co-pay, annual 3-percent compounded cost-of-living adjustments (COLAs) for retired firefighters and police – among others, like a lifetime prescription drug plan for those aged 65-plus that has a $600 co-pay before going unlimited.
“We have very, very generous retirement plans in the city,” Cushman said. “In the next five years we have to pay $280 million for pensions and healthcare. That’s about $60 million a year, about 30 percent of the city budget for this.”
He mentioned how six people who recently retired from the fire department had contributed $750,000 into the fire pension system throughout their careers, and how those same six individuals will draw $10 million from the system over 20 years.
Cushman claimed that former mayor Scott Avedisian “hid a lot of this,” leading many people to believe that the city was in a much better financial position. He said city officials must be diligent in addressing these costs, otherwise they will only compound and get worse. He emphasized transparency and honesty as the most important factors in local governance moving forward.
“I’ve been at the budget hearings the last 10 to 15 years. I knew this was going on,” he said. “I’m not happy this is happening, but I’m not surprised that this happened… One of the things that we want? Transparency from our elected officials. Tell us the truth. Don’t hide the facts. We’re all adults in the room, and I think we can handle what the situation is.”
Cushman has faced backlash for his work before, once resulting in a publicized tiff with the fire department where members of the fire union allegedly contacted his employer in an attempt to get him fired. He emphasized at the meeting that none of his information was an attempt to personally single out any one person or entity within the city.
“I don’t want to be accused of attacking anybody. I’m not attacking anybody, I’m just stating the facts,” he said. “The changes are not going to be easy but they need to be made. We can’t afford this anymore if we want to have a sustainable city and if we don’t want to be taxed out of our homes.”
While Cushman didn’t let schools off the hook for their own fiscal problems, he pointed out that the schools do not face the same retiree expense problem faced by the city, likely he reasoned because school retirees do not enjoy lifetime healthcare benefits.
The school department’s primary driver of costs, as he showed in a chart, is active employee salaries and benefits, which accounts for about 73 percent of the school’s nearly $170 million budget.
Cushman echoed the fact, which the school department regularly points out, that since they were slashed 5 percent in total funding in 2011, schools have been essentially level-funded year after year, and are at the same funding level in 2019 as they were around 2010. He showed how, of $74 million in cumulative new property tax dollars made by the city between 2004 and 2019, 64 percent of those ($47.7 million) went to the city, with $26.3 million going to the schools.
Cushman also noted that the percentage split of the budget between the city side and school side shifted from a 60-40 split in favor of the schools in 2004, to 52-47 percent in 2019. To survive this reality, Cushman pointed out how the schools have consolidated buildings and cleaved employment by about 200 positions between 2011 and 2019.
Although he was unable to stay for Cushman’s presentation, Ward 5 Councilman and city council finance committee chairman Ed Ladouceur attended the meeting and had a short speaking portion of his own, taking time to answer questions from the attendees.
While only speaking on his own behalf, Ladouceur also pointed to employee benefits as being “not sustainable” and noted how as of June 2018 the city officially had more retirees collecting on their benefits than it had active employees working.
Additionally, Ladouceur pointed to spending trends in how the city awarded bids that contributed to other fiscal problems, trends that he says he and the finance committee have worked hard to correct since he was elected to the council in 2012.
“We don’t have a money problem,” he said. “We have a spending problem.”
Ladouceur noted how the finance committee now refuses to consider bids that don’t follow up with bidders, don’t provide accurate, current pricing information and don’t perform adequate due diligence.
“The city council has not been sitting on its hands,” he said, adding that they have enlisted the help of a CPA firm – YKSM of Providence – and a certified fraud examiner to look into issues pertaining to collective bargaining agreements entered by the city in previous years, many of which have come to light in recent months. However, he said he couldn’t comment further on the status of those inquiries.
An Access to Public Records Act (APRA) request from the Beacon recently came back with the city likewise claiming that no finalized reports regarding those analyses has been received.