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art.011/4/011/3

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ARTICLE 11 AS AMENDED

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RELATING TO MUNICIPAL INCENTIVE AID

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     SECTION 1. Title 45 of the General Laws entitled "TOWNS AND CITIES" is hereby

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amended by adding thereto the following chapter:

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     CHAPTER 13.2

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     MUNICIPAL INCENTIVE AID

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     45-13.2-1. Short title. -- This chapter shall be known as the "Municipal Incentive Aid

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Act."

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     45-13.2-2. Legislative Findings. -- It is hereby found and declared as follows:

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     (a) The fiscal health of its municipalities is of paramount importance to the state of

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Rhode Island;

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     (b) Local municipalities in Rhode Island are facing ever-increasing costs for retirement

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related expenses;

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     (c) Retirement plans represent significant cost drivers for municipal budgets;

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     (d) Many municipalities currently have significantly under-funded retirement plans;

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     (e) These unfunded liabilities either jeopardize or threaten to jeopardize the fiscal

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stability of municipalities;

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     (f) Fiscal instability in a municipality adversely affects the state's financial interests; and

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(g) Local municipalities should be encouraged to improve the sustainability of their

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retirement plans by reducing the unfunded liabilities thereunder and by funding the plans in a

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fiscally responsible manner.

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     45-13.2-3. Definitions. -- For purposes of this chapter "municipality" means any city or

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town of the state.

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     45-13.2-4. State Aid Incentive Program Appropriated. -- There are hereby

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appropriated funds for a state aid program entitled "Municipal Incentive Aid Program." For fiscal

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year 2014 the amount of five million dollars ($5,000,000) shall be appropriated, and an amount of

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ten million dollars ($10,000.000) will be requested for appropriation for fiscal year 2015 and for

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fiscal year 2016. Municipal Incentive Aid shall be administered and managed by the division of

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municipal finance within the department of revenue.

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     45-13.2-5. Purpose of the Municipal Incentive Aid Program. -- The purpose of this

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Municipal Incentive Aid program, shall be to encourage municipalities to improve the

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sustainability of their retirement plans and to reduce unfunded liabilities thereunder, by providing

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additional state aid to those municipalities that comply with the requirements and provisions of

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this chapter.

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     45-13.2-6. Distributions. -- (a) Municipal Incentive Aid described in this chapter shall be

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distributed to eligible municipalities on the basis of the most recent population estimate for each

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municipality as a share of the total state population reported by the U.S. Department of

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Commerce, Bureau of the Census. Such payments shall be made to eligible communities in

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March 2014, March 2015, and March 2016.

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     (b) For fiscal year 2014, municipalities shall be eligible to receive aid under this chapter

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if: (1) the municipality has no locally-administered pension; or (2) the municipality notified plan

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participants, beneficiaries and others pursuant to chapter 45-65, and submitted to the state's

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department of revenue a Funding Improvement Plan ("FIP"), pursuant to section 45-65-6, for

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every locally-administered pension plan in that municipality, and each FIP had been approved by

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the plan sponsor and the local governing body no later than June 1, 2013; or (3) there existed a

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locally-administered pension plan(s) in that municipality, but either: (i) no FIP was required

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pursuant to chapter 45-65; or (ii) a FIP is required pursuant to chapter 45-65, but, the due date for

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the FIP submission is after the March payment of state aid.

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     (c) For fiscal years 2015 and 2016, municipalities shall be eligible to receive aid under

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this chapter, if: (1) the municipality has no locally-administered pension; or (2) the municipality

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has transitioned all locally-administered pension plans into MERS by June 30, 2014; or (3) the

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municipality had notified plan participants, beneficiaries and others pursuant to chapter 45-65 and

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had submitted to the state's department of revenue a FIP, pursuant to chapter 45-65, for every

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locally-administered pension plan and each submitted FIP meets the guidelines of the Study

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Commission on Locally-Administered Pension Plans created pursuant to section 45-65-8 or

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otherwise applicable guidelines or regulations and each FIP has been approved by the plan

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sponsor and the local governing body; or (4) the municipality has implemented the original

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recommended FIP or an amended FIP pursuant to chapter 45-65 within eighteen (18) months

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after an actuary has certified that a locally administered plan is in critical status for a plan year;

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and the FIPs are approved by the plan sponsor and the local governing body; or (5) there existed a

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locally-administered pension plan in that municipality, but either: (i) no FIP was required

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pursuant to chapter 45-65 and the municipality is funding one hundred percent (100%) of its

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Annually Required Contribution (ARC); or (ii) FIP is required pursuant to chapter 45-65,

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however, the due date for the FIP submission or implementation is after the March payment of

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this municipal incentive aid.

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     (d) In any fiscal year that a municipality does not receive an appropriation under this

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chapter, the amount that would have been allocated to the municipality will be distributed in the

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month of May among the other eligible municipalities for that fiscal year, on the basis of the most

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recent population estimate for each municipality as a share of the total state population reported

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by the U.S. Department of Commerce, Bureau of the Census.

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     SECTION 2. This article shall take effect upon passage.