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Grebien orders spending freeze

January 16, 2012

PAWTUCKET — Facing an unexpected deficit of $2.3 million that is sure to be compounded by a recent judge's decision regarding health benefits of retired school employees, Mayor Donald Grebien announced Friday that he has reinstituted a freeze on all city spending.
Grebien issued an announcement late Friday afternoon saying that he will require prior approval on a case-by-case basis before any city money can be spent.
He said that all city department and division heads will be required to have their spending requests reviewed by appropriate accounting, finance and purchasing staff before any proposed expenditures in their budgets are approved.
Grebien said that despite numerous and ongoing cost-savings measures, the city is running “at a small deficit for the current fiscal year, which ends June 30.”
He has put this figure currently at around $2.3 million. He noted that the nearly $13 million deficit his administration inherited upon taking office a year ago was later reduced to zero and said he continues to be optimistic that current shortfalls can be made up as well by the current fiscal year-end through rigorous fiscal management.
“We must now go even further to thoroughly identify that each and every expenditure of taxpayer dollars is fully justified as a necessity before any spending receives final approval, Grebien stated. He said his administration “will closely examine every penny before it is spent,” and said this includes “previously approved items in the current budget that was approved by the City Council, if we determine we can do without them or find more savings.”
The mayor said that accounting and purchasing staff have been instructed to review all items on a strict necessity basis, including all purchases, before any expenditures receive final approval. Priority will be given to expenditures that provide continuity of important services to the taxpayers. Areas such as supplies will also be examined for savings, he said.
Grebien added that these measures are vital if Pawtucket is to continue to avoid any form of state oversight intervention. “I am confident this interim step will help assure we maintain control of our finances in the near term, while we also continue to work on the solutions needed to tackle our structural challenges for the city's long-term financial stability,” he stated.
Coming into play also is a bench decision issued on Jan. 5 by Superior Court Judge Sarah Taft-Carter in the case of Botelho v. City of Pawtucket, in which she found that the city had breached its promise to retirees to pay health insurance benefits from the time of retirement until age 65.
Botelho v. City of Pawtucket was filed by Rhode Island Council 94, American Federation of State County and Municipal Employees, AFL-CIO, on behalf of members of the Pawtucket School Employees, Local 1352.
According to a press release from Council 94, Botelho v. City of Pawtucket was filed by Council 94 on behalf of 16 retired, non-teaching members of Pawtucket School Employees, Local 1352. For many years, the city paid the cost of medical benefits for the retirees until they became eligible for Medicare, as specified in their contract.
In 2007, the city began sending invoices to retirees for a health insurance premium co-share. The city claimed it had the right to charge retirees the same costs as active employees. Council 94 challenged this action as a breach of contract on behalf of the retirees. In 2010, Judge Jeffrey Lanphear issued an initial decision that did not fully resolve the dispute, and the case was heard again.
In issuing the most recent decision, Judge Taft-Carter found that the contract provided a vested benefit which could not be altered during retirement. In part, her decision stated that ...''rights which accrued or vested under the agreement will, as a general rule, survive termination of the agreement,” and a holding that stated, “Here, the Court has determined that plaintiffs' rights have vested, and thus they cannot be altered by the defendants without plaintiffs' consent.”
On Friday afternoon, several hours prior to Grebien's announcement of a spending freeze, Council 94 President J. Michael Downey issued a statement saying that the court's decision “represents a significant victory for retirees by affirming that employers cannot unilaterally cut retirement benefits.” He added, “We look forward to having the Court determine the appropriate remedy for these retirees. Council 94 is gratified by this decision and will keep on fighting for the retirement security of all Rhode Islanders.”
Council 94 represents over 8,000 municipal, state, and private sector employees and 2,500 retirees.
Grebien was unavailable for comment on Monday, but Antonio Pires, his acting director of administration, said that while the judge had not yet formalized the remedy for the 16 retirees involved in the suit, he said he expects it to cost around $50,000 or a little less, according to some rough calculations.
However, Pires also noted that there are more long-term and costly ramifications concerning municipal pension benefits involved in this ruling going forward, and said the city solicitor will be reviewing the judge's written decision more fully to decide whether or not the city should make an appeal.

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