Rhode Island Supreme Court Upholds Cranston Pension Cuts

High court reluctantly rejects challenge to 10-year suspension of COLAs.

Rhode Island’s Supreme Court has reluctantly upheld a lower court ruling that allowed Cranston Mayor Allan Fung to suspend cost-of-living adjustments (COLAs) for some of the city’s police officers and firefighters in a move to prevent the city’s retirement fund from becoming insolvent.

The high court agreed with a 2015 superior court ruling that found that while police officers and firefighters in Cranston have a contractual right to their retirement benefits under both the US and Rhode Island Constitutions, a financial crisis that engulfed the city made the move necessary and legally justified.

“It is with a decided lack of enthusiasm and only after prolonged research and reflection and hesitation that I concur in the result reached in the opinion of the court in this case,” Justice William Robinson, wrote in his opinion, “and I do so in a decidedly dubitante frame of mind.”

The Cranston Police Retirees Action Committee had initiated litigation against the City of Cranston, Fung, and the members of the Cranston City Council after the passage of two 2013 city ordinances that included a 10-year suspension of COLAs for retirees of the Cranston Police and Fire Departments enrolled in the city’s pension system. The plaintiff alleged a litany of claims ranging from constitutional violations to statutory infringements.

Robert Strom, Cranston’s finance director, testified during the trial that the city had suffered a financial crisis during the first few years of the Fung administration; Fung became mayor in January 2009. Strom also testified that he believed the city would face serious consequences if the 20-year guideline for emerging from “critical status” was not met, including reduced or eliminated state funds, which were instrumental to the city’s budget.

He also testified that raising taxes on the city’s residents would not have solved the pension system’s problems because the city would have had to raise taxes so substantially that it would have been unfair and unsustainable, particularly because Cranston already had one of the highest tax rates in the state.

In 2011, state lawmakers passed the Rhode Island Retirement Security Act, which includes a provision that allows for the suspension of COLAs if a system falls below 80% funded status in order to prevent changes to the core benefits package. During the trial, Fung testified that as of 2011, the city’s pension system, at its lowest point, was funded at only 16.9%, with $256 million of unfunded accrued liability.

“This is a historic day for Cranston, as by the Supreme Court upholding these changes, we are ensuring the long-term solvency of our locally administered police and fire pension plan,” said Fung in a statement in response to the ruling. “I cannot thank enough the union members and retirees who came to the table, saw the math in front of us, and worked with us to right the ship so that the funds will be there for them in the future.”

Fung also said the court decision “ensures that the Cranston taxpayers continue to receive the over $6 million in annual savings from these reforms.”

Related Stories:

Majority of Rhode Island’s Locally Run Municipal Pensions Flunk Financial Test

Ohio Teachers Pension Sued over Eliminated COLAs


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