Attorney argues: Balancing school budget on pension illegal
A controversial mediator’s decision that concluded the city did not need to provide more funding to the Warwick School Department to close its budget deficit for the fiscal year ending June 30 – and seemed to instruct the department to take up to $4 million from its private pension fund in order to do so – would violate federal law if implemented, according to a legal opinion released by the schools on Wednesday.
The opinion was concluded by attorney Cory Bilodeau, partner at McLaughlin Quinn LLC, and sent to the Warwick School Committee Chairwoman Karen Bachus on Friday, May 24.
In the letter, Bilodeau concludes that taking money from a pension fund and infusing it back into the operating budget of the pension operator would be in violation of the Internal Revenue Code of 1986, and would result in federal tax consequences and other penalties if implemented, including but not limited to the fund losing its tax exempt status and the incurring of fees and other financial penalties, which would cause significant financial harm to pension beneficiaries and the school district.
“The Withdrawal cannot be made without incurring ‘financial penalty or adverse tax consequences’ as discussed in the Decision,” the letter concludes.
Read more: http://www.warwickonline.com/stories/balancing-school-budget-with-pension-funds-illegal-tax-attorney-argues,142735?