May 17, 2011

To Reform Pensions, Reform Everything

Justin Katz

In the comments to my post on RI Sen. Minority Leader Dennis Algiere (R., Westerly), Monique asks a reasonable question:

Is there even one municipality in Rhode Island who can fund the new (HIGHER) contribution specified last week by the state Retirement Board?

To answer, I think it is necessary to begin by saying that there is no policy solution. There is no "how a municipality can fund its pensions"; there is also no "how the state can fund the municipalities' pensions." Yet, there's also no chance that the state will find the will to adjust the benefits sufficiently to make up the gap, or that taxpayers will accept the necessary burden. I'd go so far as to say that there's no combination of these four that is politically workable in the current environment. It's an unsolvable problem on policy (as opposed to political) grounds.

I can certainly see the plain common-sense logic of pushing the pension problem up the government scale. After all, if you can spread the pain, it won't hurt so much, and if you can just get the right group in office, it can force the necessary change. But the latter is a huge if, and the former emphasizes that spreading the pain begins to tilt the scale in favor of those who stand to profit from a salvaging of that which is broken (who will have no change in motivation) and against those who wind up paying (who will have decreasing motivation as the pain spreads).

But I think municipalities can fund their pensions 100%, and here's how:

Year 1: As a political escape hatch, the General Assembly forces municipalities to fund pensions 100%. The average RI community makes some minor adjustments to spending to cover the cost but fills most of the gap with tax increases.
Year 2: Outraged residents begin taking over key roles in local government and/or applying pressure to elected officials in an exponentially greater degree.
Year 3 : Newly motivated people learn the ins and outs of local government and are tripped up by an establishment trick or two.
Year 4: Local elected officials with spine change unsustainable pension promises, refuse to implement any unfunded mandates, demand changes to state regulations that hurt them and their communities, and finally begin to focus on changing zoning and taxation policies in order to encourage economic development and broaden the tax base.

That's a much cleaner process than is likely to happen anywhere, and it's certainly not a sure progression everywhere. But it seems to me that pushing the issue to the state doesn't change the necessity of the steps; it just puts them on a playing field in which taxpayers have a weaker hand and ensures that the delay will be longer and the accumulated pain greater, probably with an end result that the General Assembly waits until enough other states reach the same critical condition to start a movement to push the problem on up to the federal government.

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"Outraged residents begin taking over key roles..."

I don't think that's at all likely. In fact, that's been the stumbling block to any sort of political re-balancing here.

Posted by: mangeek at May 17, 2011 12:54 PM

My prediction, many politicians kick the can one year more and then announce they're not running for re-election. So by this time this year, they're all lame ducks and checked out. "Not my problem". Probably some will even sign a few more dumb contracts before they lose their responsibilities and power.

Posted by: Patrick at May 17, 2011 1:29 PM

I have changes to our local burdens that I would implement immediately!

Unfortunately, I cannot make them because some a-hole negotiated a benefit way back in the seventies and the firefighters and police won't give it up in negotiation, under ANY circumstances. That means we will have to try to effect change through the binding arbitration process.

Keep your head up, you will sooner see pigs fly than an arbitrator recognize the true plight of the taxpayer and allow the current politicians to fix what the morons allowed back when.

Posted by: John at May 17, 2011 1:39 PM

Under Patrick's prediction it is likely no one will want to be elected to deal with the problem aside from the usual union suspects.

Posted by: justasking at May 17, 2011 1:41 PM

"many politicians kick the can one year more and then announce they're not running for re-election"

That already happened last year. Just look at how many old-school Dems bowed-out of the state senate. Nobody wants their name on a bill that 'backstabs' their number-one fans. I wouldn't be surprised if it happens again.

In the last election we learned that the state will probably move farther to the left should this occur. 'Social conservative, fiscal liberals' are on the way out and progressives appear to be taking more seats (Tanzi, Cimini, Raimondo, Chafee, Taveras, etc.). Frankly, until the legislature has enough Republicans to matter, a few suburban seats from the right flying elephant flags are of virtually no consequence to the operations of the legislature.

Even now they're talking about binding arbitration, statewide minimum manning, property rights on promised pensions, dropping the two-year welfare limit, and filing suit to keep teaching jobs even when there are not enough students to fill the schools.

Posted by: mangeek at May 17, 2011 2:38 PM

Just an observation, I don't have any answers.

In a typical day on Rescue 1 in Providence, we answer seventeen 911 calls. Most of those calls are for rides to the ER from Providence residents for free health care from the hospital. These rides are usually two miles or less. We go to their rent subsidized apartments,full of food from the local food bank or purchased at the first of the month when the government checks come out, or sporadically throughout the month with their EBT cards. A few of these 911 calls are usually made from 222 Elmwood Avenue, in the former Jake Kaplan Jaguar property, now a health and human services administration building, which is staffed with probably hundreds of social workers whose primary purpose is to help people navigate the complicated paperwork needed to qualify for the above mentioned government assistance. The place is usually packed with people waiting for their turn to get theirs. Now and then one of them "collapses" when they do not get the answer thew want to hear, and we bring them to the ER for thousands of dollars worth of tests paid for by taxpayers.

When the first of the month social security checks arrive, the stores are full of people spending government money in the private sector establishments. Those businesses would close if not for the influx of g0overnment money, and the neighborhoods would sink further into decay. Crime would soar, and spread outward.

Five or ten of these calls are for intoxicated "homeless" people, who stay in the government assisted homeless shelters until six, when they are shown the door, then drink away their government disability checks and collapse in the street when the government provided ambulance service picks the up from the gutter and they are brought to the ER, and bathed, and fed, and kept safe until the next day so they can do it again.

A few calls are for people in their twenties and thirties, with a housefull of kids, and the state medical card, or RiteCare, with the words

Emergency Room co-pay 0
Doctors office Copay 0
Prescription Copay 0

boldly engraved on the front of the card. A few more of the calls are for the kids in those houses, some with fevers, some with scratches or bumps, with the same RIteCare card with the same co-pays, and we take them to Hasbro for free medical care.

A shooting or stabbing or two, most likely between rival gangs or drug dealers, or from somebody who has bought into the lies perpetrated by the entertainment industry pertaining to the "Thug Culture" is a daily occurrence, and assaults and beatings between family members as well.

Now and then somebody has a heart attack, a diabetic emergency a seizure or crashes their car, and if Providence's six rescues are not busy picking up the trash, those people might actually get some timely help.

You want to reform everything? Why not start at the bottom and work your way up. If 1/10 of the energy were put into this train wreck of a society that was put into public employee pensions maybe some progress would begin.

But it is easier to focus on the unions I guess. I'll never figure out peoples motivations, but I will continue to observe, and be amazed. Municipalities "defering" payment into pension plane. Using pension money to fill budget gaps. Judges getting 100% pensions. City Council members getting pensions and free healthcare. Legislative aids getting hundred thousand dollar compensation. A city hall and state house full of cronies. Whole departments created for non-essential political patronage jobs.

Yet still the flavor of the day is to attack not the political process that has created this pension mess, but the union employees who contribute to it.

And people wonder why we are reticent to trust the process that now finds it necessary to "give back."

Posted by: michael at May 17, 2011 2:48 PM

The only solution will be a revolution!

Posted by: John at May 17, 2011 2:55 PM

The obvious alternative is moving to one of the many solvent states left in the union. Preferably with right to work legislation, ensuring that it will stay that way.

Posted by: Dan at May 17, 2011 2:56 PM

Michael, here's the source of the confusion - there is no one "focus" for us. Rhode Island has many problems. If it's a welfare dependency story, we discuss welfare dependency. If it's a union abuse story, we discuss union abuse. Both frequent topics here, and one has little to do with the other except for the elected officials and their constituencies who allow it all to exist in perpetuity.

Your real gripe with this topic is with the progressives of the state, who will call you a racist, a liar, and a corporate lackey if you try to make them aware of what's truly going on out there on the ground level. They will tell you that the answer is to throw more money at the problem. You know that won't work. By contrast, the response to your narrative that you will get from conservatives and libertarians is, "Yeah, I know."

Posted by: Dan at May 17, 2011 3:34 PM

Michael. Great illustration of some of the problems we face. To your other point for years all the union leadership teamed up with the poverty pimps to elect the politicians they wanted. Unemployed welfare recipients are great recruits for GOTV and voter ID. Plus they vote for the politician the leadership tells them to for a sandwich and a cup off coffee. It is the rank and file that have let the overpaid corrupt union leadership steal your pensions and drive RI to bankruptcy while they get 200k plus and give
cushy state jobs to each others family.

Posted by: Sean Gately at May 17, 2011 6:49 PM

"Year 2: Outraged residents begin taking over key roles in local government and/or applying pressure to elected officials in an exponentially greater degree.
Year 3 : Newly motivated people learn the ins and outs of local government and are tripped up by an establishment trick or two.
Year 4: Local elected officials with spine change unsustainable pension promises, refuse to implement any unfunded mandates, demand changes to state regulations that hurt them and their communities, and finally begin to focus on changing zoning and taxation policies in order to encourage economic development and broaden the tax burden."

Dream on dreamer. In 5 or 6 years we will trail only New Jersey for the worst property taxes in America.
Meanwhile Florida's new Republican governor and 2/3 Republican legislature is LOWERING the state's already low property taxes.
Wake up and smell the coffee Justin and get out of this miserable f****** state while you are still young enough to enjoy it.

Posted by: Tommy Cranston at May 17, 2011 7:00 PM

Bet there main plan will be refinancing the pension debt

Posted by: Bob at May 17, 2011 11:12 PM

Sean, you cannot continue to blame "the unions" for electing people. Of all the copouts I've heard over the years, including the ones union members are most often accused of here, "I just do my job," that is the weakest. Anybody can organize. Anybody can vote. Participation in union meetings and activity is about 5% of members. Nobody knows what happens in the voting booth. We have a political action committee that assesses the candidates and makes suggestions based on their voting records which concern our interests, not demands. We've endorsed Republicans, though not in a while, and judging from the most recent batch, not for a while to come.

Through the AFL-CIO we endorse and contribute to candidates whose political views are conducive to what is best for the union members. Our contributions are probably far less than those made collectively from corporate America, but I honestly don't know, just things I've read but never bothered to substantiate. The AFL-CIO supports causes that I am opposed to, but more often than not they support things I agree with, so I do not have a problem pitching in.

People who don't vote are who puts people in office.

Posted by: michael at May 18, 2011 8:24 AM

Raise federal taxes (especially those who benefit from the Bush tax cuts) for a few years. Hire more investigators for welfare, SSI, food stamps, etc. Hire more ICE investigators who have the authority to hold and deport illegals. Hire more border patrol officers and close our borders. Give money to the states to investigate state and municipal fraud. Keep this up for a few years and you'll have decreased the taxpayers money that goes to undeserving people. Tighten the rules (and the oversight of these programs) on an on-going basis, including criminal charges for all who abuse the systems - including fraudulent firefighter disability claims.

That is how we fix the problem. Not by cut, cut, cut just for the sake of balancing the budget. Shared sacrifice right?

Posted by: Tom Kenney at May 20, 2011 3:11 PM
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