The Fall of Central Falls
Wednesday, June 29, 2011
Back in 1895, when the town of Lincoln split in two becoming Lincoln and Central Falls, I wonder if anyone believed nearly 120 years later Central Falls would be a town on the verge of bankruptcy and the poster child for government mismanagement. Still here we are with the latest news that the library and community center will be closing.
Also, as GoLocal reported, bankruptcy is a real option. From Central Falls Receiver Robert Flanders:
Time is running out and while my obligation as Receiver includes maintaining essential municipal services, absent the securing of significant cost reductions in the near future, all options, including bankruptcy, remain on the table. To protect the integrity of the process of obtaining cost reductions, I will have no further comment until such a time as an announcement is warranted.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTFurther, Central Falls’ Moody’s rating is the lowest amongst every community in the United States except one. And let’s not even talk about the situation with the school department. None of this is new as Central Falls has been in receivership since the spring of 2010 and in financial trouble long before that. What you and I should be concerned about are other cities and towns falling to a similar fate.
Central Falls a warning, not an aberration
Let’s establish the fact that Central Falls mayor Charles Morneau & the city council tried to partially fill a budget gap with revenues coming from the Wyatt Detention Center that never materialized. Bad idea #1. Let’s also not forget the $80 million unfunded pension liability and with 19,000+ residents the median income is $22,000 and prior administrations hadn’t the foresight to see that such pensions would be an albatross for the city. Bad idea #2.
As sad as these figures and the stories of Central Falls corruption sound, the fiscal constraints that befell Central Falls did not occur in a vacuum. No, as GoLocal has profiled numerous Rhode Island cities and towns are staring at historic budget problems. From Providence to Woonsocket to Cranston and everywhere else in between pensions are killing city budgets.
Central Falls should serve as a stern warning to all city managers, mayors, and city councilors. Ignore the pension deficit at your peril.
Are the unions to blame?
In a 2010 Wall Street Journal article on the situation facing the smallest town (in terms of land mass) in the smallest state, the author certainly casts a disparaging eye towards unions, especially the public variety saying, “since Rhode Island's public employees received the right to collectively bargain in the 1960s, government unions have driven Central Falls into the ground.”
Subtle, yes?
Nonetheless it’s hard to argue that the contracts negotiated with public sector employees have not significantly contributed to our current deficit and Central Falls case in particular. As I’ve mentioned before, when talking about unions politicos in this state are usually black or white. In other words, they either love or hate the unions.
Some say unions are akin to the Black Plague while others consider them the 2nd coming of Ted Williams. Analogies aside, Central Falls is the first victim in a soon-to-be long line of public pension disasters.
I always ask, is it the union boss’ fault that politicians gave their union members exorbitant deals? I don’t think so. Is it the union members’ fault for living longer than most predicted when the pensions were negotiated? No, we’d all like to live as long as possible.
Nonetheless, as many of us have said and will continue to say public employee union contracts seem out of date with economics of the last two decades or so. While private sector companies shy further away from pensions – because of cost – public union contracts have continued almost untouched. This is truly what destroyed the financial stability of Central Falls, in my opinion, and will also destroy the rest of our cities and towns if we do not do something drastic.
If you don’t want to see a receiver coming to a town near you, contact your legislator and tell them not to let 2012 see the light of day until there is structural pension reform that reigns in costs both today and in the future.
If you don’t, like Central Falls, your community may be faced with difficult decisions that will impact your pocket.
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