Providence Passes New Budget with Fanfare, New Programs, and Ignores Old Liabilities
GoLocalProv News Team
Providence Passes New Budget with Fanfare, New Programs, and Ignores Old Liabilities
Elorza and many of the members of the city council congratulated themselves on the passage of the $539 million budget -- a budget that had no tax increases.
Last year’s budget was nearly $30 million less — $511 million. That budget was adopted 9 months into the fiscal year.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTIt is a feel-good budget with tens of millions in new spending. Council President John Igliozzi said, “I am pleased that we are able to utilize $42 million in ARPA funds to invest in summer programming for our youth, early learning programs, free public internet access at parks and recreation centers, anti-violence programs, homeless interventions, street sweeping and sewer repairs, our public libraries, and relief for our small businesses. In addition, this budget continues to invest in core City services including inspections and public safety, while holding the line on taxes.”
“Determining how to prudently invest the stimulus funds in areas of immediate need, with an eye toward longer-term fiscal stability, was indeed a collaborative effort,” said Finance Chairwoman Jo-Ann Ryan.
When asked if the city was starting new programs with one-time American Resuce Plan Act (ARPA) federal funds, Ryan said, "No, the ARPA funds used to balance the budget will be replaced through the recovery and growth."
But what wasn’t mentioned is the city's looming long-term underfunded pension and long-term healthcare costs that combined total more than $2.2 billion.
Ryan said, “Thanks to American Recovery Plan Act stimulus funds, this budget invests over $42 million in COVID-19 relief for our small businesses, community centers, and other projects that will address both immediate needs and pay long term dividends. In addition, I am pleased that this budget invests in public safety, expands Pre-K classrooms, and continues investments in affordable housing.”
The pension fund for Providence employees is one of the worst-funded in the United States. It Is 27% funded and faces a $1.4 billion unfunded liability.
Elorza during his six-plus years as Mayor of Providence has done little to address the funding gap, but has announced high-profile proposals.
First, Elorza proposed selling the Providence Water Supply Board — the state’s largest supply of drinking water — but that proposal received little State House support. Then, late in the legislative session, the Mayor sought legislative support for authorization to issue $700 million in Pension Obligation Bonds, an exotic funding scheme.
The last-minute proposal was shunned by legislators and numerous questions about the financial responsibility of the proposal.
Ryan admits that the budget does little to address the city’s pension issues. “The budget funds 100% of the “actuarially determined contribution” (ADC). We will continue to work with the Administration to evaluate all proposals to address the unfunded pension liability,” said Ryan. The city’s annual contribution is the minimum amount.
Relative to the unfunded $800 million liability for the long-term healthcare costs for retired city employees and their families, Ryan said, “We have been paying this as a pay as you go system."
"The ARPA funds used to balance the budget will be replaced through the recovery and growth,” claims Ryan.