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Donna Perry: The Biggest Risk of All

Thursday, November 03, 2011

 

The word “risk” has certainly surfaced numerous times since the pension reform hearings unfolded at the state house.

We have heard the unions and the AARP claim that suspending retirees’ COLA’s will put them at great risk for living on insufficient funds in old age. We have heard the unions fretting that the volatile stock market poses too great a risk for public employees in the proposed hybrid defined contribution system.

But perhaps there is now a central risk that needs its own moment of consideration.

Flash forward five autumns from now. It’s the fall of 2016 in Rhode Island.

First of all, the state remains embroiled in a bitter court fight that has raged for several years since the unions went to court in the spring of 2012 to block all further changes to the state pension system. The General Assembly that year prolonged what had been designed as a short, efficient fall session to review and vote on a comprehensive pension reform package for the state administered pension system. Various legislators started picking around the edges of the plan, watering down pieces like the across the board COLA suspension; pushing for a lower than age 67 retirement age; and proposing a longer extension of the debt by stretching out the reamortization.

A much smaller and far less comprehensive package emerged, that did nothing to help cities and towns curb their own steep pension debt, and stumbled its way to passage with a close vote.

But the Unions seized upon the bill, even in its watered down version, and immediately went to court to block its implementation and so the state’s taxpayers are expected to come up with over a billion dollars in payments this year.

Soaring Costs Kill Business

The soaring pension costs, and the taxes demanded to supplement them, have left the state’s private sector in shamble. GTECH was able to negotiate its way out its long term agreement with the state and found a world headquarters building elsewhere, as the deteriorating appearance of Providence around its gleaming office tower downtown just didn’t match the image it was seeking to project. Bank of America pulled out of its Providence offices several years ago and the landmark building, that was home to a succession of banking interests in Providence for nearly a century, now sits completely abandoned.

The ongoing business flight from the state has pushed the unemployment rate to a staggering 17%, setting off a whole range of new problems. The high unemployment,coupled with the lack of funds from the dwindling budget revenues for human services,and scarce federal funds now coming from Washington, has produced unprecedented numbers of Rhode Islanders seeking shelter on the streets.

There are many news reports and talk radio debates about the numbers of homeless people living on streets in both urban and suburban neighborhoods, and no one seems to know how to address the ongoing dilemma.

Receivership

Numerous other serious events have unfolded. There was a highway bridge collapse in Pawtucket that turned fatal when part of the crumbling foundation of an exit ramp came crashing down, killing numerous people in cars.

The state’s soaring budget deficit led elected officials to continue to put off the infrastructure upgrades desperately needed on the state’s roads and bridges over the past few years. Pawtucket is in receivership but could ill afford to take on the massive lawsuit that has now ensued.

Speaking of receivership, sadly, Rhode Island’s capital city has gone the way of Harrisburg, Pennsylvania, and went into receivership itself.

The city just could not endure the weight of numerous problems, centered on its inability to emerge from steep debt begun in 2010 and meetsoaring pension obligation payments that were never curbed through the failed reform process.The economic development the city so sorely needed also never materialized as the health care services entities the city and state were courting for a fledgling medical center site fell through due to the city’s tax expectations and the lack of a locally skilled workforce for the niche health sciences industry needs.

The city is itself in protracted litigation stemming from the receivership and the union opposition to the attempt to slash the billions owed in pensions and health care benefits. Sadly, the city is littered with empty and deteriorating buildings and city services are in a shambles.

In Cranston, long after the Mayor had to close the city’s libraries and senior centers; eliminate all sports; and turn over bus service, garbage collection and many other services to private vendors; a very drastic step was taken involving the high schools. By 2016, there are no longer two operating high schools in Cranston. The Mayor was forced to close Cranston East High School as crushing budget pressures no longer made it possible to operate two high schools. The merger of the school’s students into the Cranston West facility has not gone well and has left enraged parents and a severely overcrowded Cranston West High School running double session school schedules.

The Future

There are some who will view these possible 2016 foreshadowed events as fiction no doubt.

But it seems those who believe these events couldnot possibly unfold in a few short years have not been paying attention to the pension reform debate, and certainly were not listening this week as mayors and Central FallsReceiver Robert Flanders made their impassioned appeals to the joint finance committees.

Letting this moment slip through our grasp, they seemed to be saying, would be the biggest risk of all.


Donna Perry is a Communications Consultant to RISC, RI Statewide Coalition (http://www.statewidecoalition.com)

 

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