This is indeed groundbreaking.
Retired police and firefighters from Central Falls, R.I., have agreed to sharp pension cuts, a step thought to be unprecedented in municipal bankruptcy and one that could prompt similar attempts by other distressed governments.
If approved by the bankruptcy court, the agreement could be groundbreaking, said Matthew J. McGowan, the lawyer representing the retirees.
“This is the first time there’s been an agreement of the police and firefighters of any city or town to take the cut,” he said, referring to those already retired, who are typically spared when union contracts change. “I’ve told these guys they’re like the canary in the coal mine. I know that there are other places watching this.”
Central Falls is taking the necessary steps to remain solvent under the weight of a far-too-generous pension system. The question is not whether or not Rhode Island values their police and firefighters; they certainly do. It doesn’t address the appropriate size of their forces which is determined by demographics, population density, crime rates, and other factors. What it does address, however, is the question, at what cost? This is the relevant question.
All towns need police and firefighters, but few towns, judging by the number facing severe long-term budget shortfalls, have found the resources necessary to fund their respective pension plans which for years far outpaced inflation as unions demanded, and politicians supplied, free lunch after free lunch. I’ll scratch your back and you scratch mine. (The plans could be described as Greek.)
Time magazine reported earlier this month about Rhode Island pensions in general:
Perhaps they and thousands of other Rhode Island public employees should never have believed in their pensions to begin with. Then it wouldn’t hurt so much when the fantasy finally came to an end–the fantasy of ever more retirees’ living ever longer lives, receiving ever growing checks from a half-empty fund. But it’s hard to fault the workers; denial has been a state-sponsored pastime on the Narragansett for decades.
“This is about math, not politics,” says Gina Raimondo, Rhode Island Treasurer. More specifically, this is about local math, not local politics. The solution for Rhode Island’s woes – theTime article is entitled “The Little State that Could.” – will be found in Rhode Island. The solution for Albany’s woes will be found in Albany. And so it goes. The solution will not be found in Washington, whose focus should and must be on the long-term national debt problem. (More on that in a second.)
So the solution will be local, and may also have to come from the Left. Gina Raimondo is a democrat, and one who volunteered to take the inglorious position of the adult in the room. She did so because the weight of the pension funds was not just unsustainable, it was also punishing. As the pensions grew to assume more and more of the state budget, funding for things such as libraries – which Raimondo, a Rhodes Scholar and Yale Law graduate, credits with her success – were being crowded out.
“I was reading a story about budget cuts in the Providence Journal,” Raimondo recounts. “The story talked about libraries closing and bus service being cut” because of budget gaps widened by pension expenses. “I had an image of a kid like me trying to get into the library and it’s closed. The public bus is how I got to school every day. The public library is where I studied. It’s where my grandfather taught himself English.” You didn’t have to have an Oxford degree to see the connection: unless the pension hole was filled, those services and others would face even deeper cuts. That’s when Raimondo made up her mind to run for state treasurer in 2010.
Could a republican survive making such cuts? Not likely, unless s/he had a clear mandate to do so. Otherwise, a back-scratching democratic politician would promptly arrive to challenge such an injustice. But it is unlikely a republican would be able or willing to challenge a democrat making such cuts. Only Nixon could go to China. Only a democrat can cut entitlements.
An exception to this was democrat Adrian Fenty losing his DC mayoral election to fellow democrat Vincent Gray because Fenty dared to challenge teachers unions and taxi drivers. But DC is often an exception, isn’t it?
“One thing I think we’ve demonstrated in Rhode Island is, we really have a functional state government,” Mr. Orson said. “We are pulling together and making what we believe to be difficult decisions that you don’t see Congress making right now.”