Providence mayor foresees ‘deep, very painful’ budget cuts

By Michelle R. Smith
Associated Press / March 4, 2011

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PROVIDENCE — Mayor Angel Taveras cut a handful of city jobs yesterday, instituted a freeze on nonessential spending and hiring, and said he was working to renegotiate union contracts to help deal with an estimated $180 million structural deficit this year and next. Without immediate action, he said, the city is headed to financial ruin.

“These cuts will be deep and very painful, but we have no choice,’’ he said. “No one is immune.’’

A Taveras-appointed panel reviewing municipal finances said in a report that the city has a structural deficit of $70 million for the fiscal year that ends June 30, and a $110 million deficit for the next fiscal year. Because of one-time sources of funding, the city has a budgetary shortfall of $29 million this fiscal year.

The city has an unfunded pension liability of $828 million and an unfunded liability for retiree health care of $1.5 billion. By comparison, the state has an unfunded pension liability of $4.7 billion and an unfunded retiree benefit liability of $700 million, according to the state treasurer’s office. The state has more than twice as many retirees as the city.

Ernest Almonte, the former state auditor general and a member of the review panel, said pensions and retiree benefits, along with a lack of flexibility in union contracts, are to blame for the problems, as is the city’s failure to act sooner. “The city was late in tightening their belts,’’ he said. “This is not the time to work around the fringes.’’

Taveras yesterday said he has asked all department heads to submit budgets that show a 10 to 15 percent reduction next fiscal year, and that he plans to negotiate with the city’s tax-exempt hospitals and universities to ask them to pay more to the city in lieu of taxes.

Taveras’s most contentious budget-cutting move was last week, when his administration issued notices to all of the city’s nearly 2,000 teachers that they could be fired at the end of the school year, prompting the teachers union to file an unfair labor practices complaint. Yesterday he also proposed closing four to six schools for the next academic year, and while he wouldn’t say how many teachers would ultimately lose their jobs, he said he wanted around a 10 percent reduction in personnel costs.

Taveras was short on specifics when pressed about how he would deal with the immediate $29 million shortfall that must be closed in less than four months. He took an immediate 10 percent pay cut, cut 13 nonunion positions, four of which were vacant, for a savings of $1.7 million, and ended a benefits administration contract, saving $900,000. He said he will also eliminate all unfilled positions. To close the rest of the gap, he said he was speaking with city unions “to negotiate immediate savings,’’ but he would not say what concessions he is seeking.

He would not rule out additional layoffs, and said an increase in property taxes was likely, but not before cuts are made.