December 15, 2011

Local Bailouts

Patrick Laverty

I think I need to ask Justin to add a new category of "Wait, what?!" as it seems every day there's a new headline that just makes me shake me head and double check to see if I'm actually reading The Onion.

Today's is the Breaking News headline on the Providence Journal:

Chafee to ask RI General Assembly for $2.6-million Central Falls bailout for CF retirees
Ok, first of all, I understand the plight of the CF retirees and I understand the lack of fairness in this issue to them. Losing half your pension income without doing anything wrong was to put it mildly, harsh. But that's not the issue here. The issue is the thought of RI bailing out the retirees.

The article describes the deal as:

The agreement would give each retiree an average of $5,000 annually for five years.
So my questions from then are, how does the "average" work? And, after five years, then what? Will we hear then about how their pensions are getting cut again, because they're losing that $5,000? Plus, if there's no COLA involved in that five-year span, that same $5,000 won't go as far in 2017 as it did in 2012. The retirees will likely be looking for more than the $5,000.

This is the state looking to bail out a local mistake. If municipalities want autonomy, then they need to live with both sides of it. Otherwise, let's just dissolve all the borders and go with one big city, "Rhode Island".

This sets an interesting precedent. However, it would appear that this very same thing has already been done recently, under the guise of "a loan". Right Providence and ProCAP? That's what we're calling it?

I also wonder about the funding. Where is that coming from? Is the General Assembly able to just whip up $2.6M out of thin air, especially when it wasn't ever budgeted? If they're capable of doing that, then we may have more questions.

What would this do for the authority and credibility of the receiver, Robert Flanders? Flanders cut the pension and now Chafee is working to restore at least a portion of it. So in the future, who do people in the town work with and negotiate with, Flanders or Chafee?

Where was this idea a few months back when Flanders first cut the pensions? Especially at a time when the state's budget was still being drafted and this could have been vetted and written in. Or is this yet another attempt by the Chafee administration to run around the General Assembly and simply bypass their authority? Why was all the pain and anger and frustration allowed to happen if it was going to be fixed this simply? Why wasn't this option brought up earlier? Did Chafee and the retirees think they'd simply call Flanders' bluff and he'd never cut the pensions?

Another issue with this is here:

Neither Flanders or Chafee's office would comment on the details of the agreement, saying that a confidentiality agreement prohibits them from discussing the deal until it's approved by the retirees.
I don't understand why anyone in the government is allowed to potentially spend, or at least negotiate with, taxpayer money without the taxpayers being able to see what's being negotiated before it's signed. We require transparency with our Open Meetings laws, where we don't even allow three members of the same committee to meet over coffee and discuss things without public notice, but here the Governor could be setting quite the precedent and spending millions of taxpayer dollars, we can't find out all the details before the contract is signed?

To quote a former US Speaker of the House:

We have to pass the bill so that you can find out what is in it

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Precedent indeed. With East Providence and Woonsocket teetering on the precipice, are their retirees going to demand the same deal Central Falls received? It is unbelievable that money can be "found" for ProCAP and for bailing out CF when Providence is currently running a deficit in this year's budget and RI is still projected to have a $100 mil deficit for the next fiscal year.

Posted by: Don Botts at December 15, 2011 10:11 AM

This is not a $2.5 million bailout, it is a $2.5 million bailout EVERY YEAR.
If this goes through, Pawtucket will be in line for $30 million and Providence for $50 million.
A year.

Posted by: Tommy Cranston at December 15, 2011 10:29 AM

We should just combine all the cities from each county and RI would now have 5 cities that match the 5 RI counties.

Oh, and no bailouts. You reap what you sow. If the CF pensioners wanted to put blinders on and just take what their union heads promised them at face value, then I have no sympathy.

Posted by: John G at December 15, 2011 1:04 PM

It's not an issue of "fairness." Life isn't fair and certainly has not been to the taxpayers of Rhode Island. It's an issue of what is financially feasible in light of economic reality. This bailout would be grossly irresponsible in light of Rhode Island's current and future financial problems. Many of these retirees don't even live in Rhode Island anymore or have a second career while simultaneously collecting their pension. A significant number, particularly in public safety, are also scamming the system through disability fraud. And please, union folks, don't tell me it's not true - the percentages are public information, they are prima facie evidence of fraud, and any competent auditor or actuary would treat them as such.

Posted by: Dan at December 15, 2011 1:13 PM

Irony is those state pension plan members that were complaining about the bailout in the Projo article comment section. The people who only lost their COLA complaining that the state is bailing out those that had their pensions slashed in half. My personal favorite was:

"You take away from my State Pension, and now you going to give it to someone else."

Nothing like union on union crime.

Posted by: Max D at December 15, 2011 2:13 PM

"Oh, and no bailouts."


Patrick and Don Botts are correct - if the state grants one town a pension bailout, it would have to grant one to every other municipality which asks.

Posted by: Monique at December 15, 2011 8:24 PM

But then what about those in the private sector whose retirement income is less than these union retirees? Should the Governor show pity for them too and have the state's taxpayers subsidize their retirements as well? Where does this Governor think the money is coming from?

Posted by: Bill at December 16, 2011 10:04 PM
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