March 13 Letter

As we continue to watch with dismay the deepening tragedy in Ukraine, and help in the limited ways we can, this week’s letter will discuss the war’s impact on the pension obligation bond proposal, while also discussing the Senate Finance Committee’s review of the implementation of the “safety net” programs enacted in January.

The Pension Obligation Bond Proposal

As you may remember from my February 6 letter, the City of Providence convened a working group (on which I served) that recommended seeking State and voter approval for the issuance of a $500 million bond to invest in the pension fund. This investment would allow the City to fund a portion of its pension obligation while mitigating the unsustainable increases looming on the current payment schedule. Last week, the City Council set Tuesday, June 7 as the date for a Providence voter referendum on whether to approve this initiative. To help voters learn about the issues, Council members Nirva LaFortune and Helen Anthony are holding a virtual town meeting on Wednesday, March 16 from 6:00-7:30 p.m. You can register for the meeting (and receive a Zoom link) by clicking here. I hope to join the meeting as well, if my Senate schedule permits. If you are unable to make this meeting, the Mayor’s office is currently planning a broader public engagement process which I hope they will announce shortly.

As addressed in the Working Group Report, a pension obligation bond can stabilize the City’s annual pension costs by borrowing money at a low, fixed interest rate and investing it to gain a higher expected rate of return. Recent market conditions caused by the war have changed both sides of the equation. On the one hand, recent declines in the stock market reduce the cost of stocks relative to earnings history. On the other hand, predicted increases in interest rates will increase the cost of the bond if it issues. The bond will not help the City’s finances unless there is a sufficient “spread” between expected cost and the expected return. Put another way, the pension obligation bond will not and/or cannot go forward unless each of the following three conditions are met: (1) Providence voter approval, (2) State approval (through the Governor and General Assembly) and (3) favorable financial conditions. The State legislation will not mandate that the City go forward with the bond; instead, it will give the City permission to issue the bond should it so choose. I have not read the language of the City referendum, but it is important that the referendum also make clear that if the voters approve the concept, the bond should not issue unless there are sufficiently favorable conditions in the financial markets. 

Mending The Social Safety Net

As I described in my January 9 letter, the General Assembly passed on January 6 authorization for the Governor’s “Rhode Island Rebounds” program to spend $113 million of American Rescue Plan Act funds to address immediate needs. One of them was to provide “retention bonuses” to providers of “safety net” services, such as social workers, health care workers, and pediatricians for disadvantaged Rhode Islanders. In the months leading up to the January 6 approval, both the administration and the providers emphasized the urgency of these additional payments above and beyond established (inadequate) State reimbursement rates, as providers were leaving the field for better opportunities, creating a crisis in care for our most vulnerable. 

At last Tuesday’s hearing, the Senate Finance Committee asked the Department of Children, Youth and Families for an update on the distribution of these urgently needed retention payments, only to learn to our great disappointment that none of them had yet been disbursed, more than two months after they had been appropriated. Other social service providers testified about the number of staff that had been lost in the past two months, and who might have been retained had the Department acted more urgently. In this way, the “retention bonuses” that had been requested and funded have yet to retain anybody, to the harm of our most vulnerable Rhode Islanders. 

On the other hand, as described in my December 5 letter, the administration awarded millions of dollars of “retention bonuses” to other State employees who were not identified as being at risk of leaving, originally calling those payments “vaccination bonuses” before realizing the unfairness of giving State employees bonuses for becoming vaccinated. Since then, the list of employees who are receiving these unsolicited and unnecessary “retention bonuses” has expanded, costing the State additional millions of dollars. In this way, the current “retention bonus” program is paying money to “retain” employees who were not at imminent risk of leaving, while failing to pay those who are. The Department of Children, Youth and Families stated that the first Senate-approved retention bonus payments would go out by the end of last week.