Government Spending

Rhode Island Cities Run Out of Other People's Money

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So while economic illiterates like Van Jones run around the country getting huge applause (and donations) from the left for saying stuff like "We are not broke—we were robbed, we were robbed. And somebody has our money," out there in the terra firma of accounts payable and receivable, governments are proving unable to pay for the promises they have negotiated with their own employees. Here's the story, from today's New York Times:

If you think City Hall is a dictator, wait'll you get a load of the bankruptcy judge

The small city of Central Falls, R.I., appears to be headed for a rare municipal bankruptcy filing, and state officials are rushing to keep its woes from overwhelming the struggling state.

The impoverished city, operating under a receiver for a year, has promised $80 million worth of retirement benefits to 214 police officers and firefighters, far more than it can afford. Those workers' pension fund will probably run out of money in October, giving Central Falls the distinction of becoming the second municipality in the United States to exhaust its pension fund, after Prichard, Ala. […]

The city, just north of Providence, is small and poor, but over the years it has promised police officers and firefighters retirement benefits like those offered in big, rich states like California and New York. These uniformed workers can retire after just 20 years of service, receive free health care in retirement, and qualify for full disability pensions when only partly disabled. […]

If the city were contributing the recommended amount to the [pension] plan each year, it would take 57 percent of local property tax revenue. […]

Other states limit what can be decided in collective bargaining, but Rhode Island's law says that for police and firefighters, "wages, hours and any and all terms or conditions of employment" are subject to negotiation.

"That means even the length of a mustache," said [Daniel L. Beardsley Jr., executive director of the Rhode Island League of Cities and Towns], who over many years has represented Central Falls and other municipalities in contract negotiations. Talks broke down more often than not, he said, and then the same state law called for binding arbitration, which for many years was a clubby process that emphasized comparable benefits all across the state more than any city's ability to pay.

Government spending really is a zero sum game–if you truly want to have your open-ended, silver-plated retirements for various subsets of government employees, then that really does mean you need to spend less money on Stuff Constituents Like. I look forward to this fact dawning on political dead-enders of every flavor.

UPDATE: Walter Olson has some thoughts on the Central Falls case & binding arbitration for public sector employees over at Cato.

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82 responses to “Rhode Island Cities Run Out of Other People's Money

  1. WTF with this 20 years of service ? In what universe does 20 years of worker bee activity generate enough value to support a person for the rest of their life ? I’ve go over 30 and so does my wife..67 combined years of productive work, and no retirement just yet.

    again…WTF

    1. You don’t “serve the people.”

    2. you exist to feed the union, so stop complaining and get me another Mai Tai!

  2. I’d rather spend the money on compensating our first responders than funneling it into a Koch Industries power plant.

    1. setting aside your false choice, sure compensate them for services rendered. But how does 20 years of work earn a lifetime pension with health insurance and the rest. They could easily spend double the years in retirement than they spent working. The math don’t work.

    2. mustard|7.12.11 @ 5:50PM|#
      I’d rather spend the money on compensating our first responders than funneling it into a Koch Industries power plant.

      …if it was actually your own money? (which if you’re the taxpayers footing the bill, it is)

      Even though the power plant might actually, you know… *make a profit*, and provide some return on investment?

      I’m going to go out on a limb and guess you’re not a particularly savvy investor.

    3. mustard|7.12.11 @ 5:50PM|#
      “I’d rather spend the money on compensating our first responders than funneling it into a Koch Industries power plant.”

      Oh, aren’t you a sweet little brain-dead?

      1. I demand better trolls.

        I mean, if you’re going to do it…why half-ass it?

        1. Notice the phrase “first responders”.
          I’m going to go out on a very short limb and suggest that is on the wall of every parasite union hall and on every parasite web site for the ‘edification’ of those who ‘wish to respond to X’.
          And inching not much more out on that limb, it’s an odds-on bet that mustard is a parasite.
          Right, mustard?

    4. so do it, but don’t force me to work another 15 years to pay off union fatcats

    5. “the money” is the key phrase here. “the money” doesn’t just appear from space. Most of it comes from people who work really hard for it. (Almost ?) all of it is NOT YOURS.

      You should feel free to give your money to first responders (or fishermen if you’re basing your remuneration on risk).

      As for my money? That’s my business, and you can go to hell.

  3. “Government spending really is a zero sum game?”

    Yeah, a government shouldn’t spend more than it’s revenues,that is why I wonder why spending against GDP as a measurement is used. The GDP doesn’t represent the fed’s piggy bank.

    1. a government shouldn’t spend more than it’s revenues

      A government shouldn’t spend more than it is revenues?

      1. grammar nazi alert

        1. I guess he never learned that an apostrophe can be used to show possession.

          A perfect example of that old maxim “grammar check is the last refuge of an idiot”.

          1. I’m retarded.

          2. My rule of thumb is:
            * He, She, It, They.
            * His, Hers, Its, Their

            Apostrophes for possession are usually in reference to a noun, not a pronoun. IE, John’s ball or the coin’s worth. But with a coin, you would have “its worth” using a pronoun.

            Then you have contractions, such as it’s for it is. Like it’s a shame we have to fight over grammar.

    2. “The GDP doesn’t represent the fed’s piggy bank.”

      Sadly enough, it sort of does…

  4. For 214 people, that 80 million amounts to almost $400,000 each. For 20 years of service, they get paid almost $20,000 in each of those years as retirement pay? That’s a sweet deal. Maybe a little too sweet?

  5. I think the fact that NPR is reporting that McConnell has come up with a way to betray the GOP and allow Obama to raise the debt limit without a vote really needs its own post.

    1. NPR is reporting that McConnell has come up with a way to betray the GOP and allow Obama to raise the debt limit without a vote….

      Really? You thought it would be otherwise?

    2. Doesn’t really seem a betrayal as the GOP has a consistent history of raising the debt ceiling.

    3. Well, someone had to do it, right?

    4. I hope Rand shivs his chinless ass.

      1. Are there many ass-chins where you come from?

    5. Does anyone else remember the Wizard of Id cartoon of a yield sign with Sir Rodney kneeling before it, offering his sword?

      Behold your GOP leadership.

  6. This is all an incentive problem. First, the fault lies not with the unions, but with the municipal managers/elected officials. Those managers/elected officials have no incentive to deal with long term cash flow problems in a responsible manner. So what if the pension is under-funded? They’ll be long gone by then.

    1. Did you read the article? When talks break down, RI’s law says they go to binding arbitration. The arbiters are/were more concerned about equality of benefits across the state and less about a municipality’s ability to pay. In this case (and I’m sure many others), it’s not the city’s negotiator’s fault – the fault lies completely with the union.

  7. Re: Van Jones

    “We are not broke?we were robbed, we were robbed. And somebody has our money…

    1) Wrong – Sorry Van by all objective measures we are broke.

    2) Correct – We were and are continuing to be robbed. By the banks and to a somewhat lesser degree by GE, AIG, auto union labor etc. ….aided in no small measure by a president who you had planned to work for. Yes, his predecessor too.

    3) Correct – see #2

    4) Correct – see #2

    Whats the matter Van? Valerie Jarrett not taking your calls anymore?

  8. Good thing Van JOnes has more credibility than this magazine. At least he wasn’t ignorant enough to try and say there was no crisis. He’s also closer to blaming the correct culprits for our economic troubles than this magazine. Do you ever wonder what your overzealous attacks on workers will eventually lead to? If you’re looking for a thug, make it easy on yourself, and look in the mirror.

    1. “do you ever wonder what your overjealous attacks on workers will eventually lead to?”

      Um, a worker’s paradise? You douche.

      1. “do you ever wonder what your overjealous attacks on workers will eventually lead to?”

        Fewer workers sucking on the teat? Let’s keep it up.

        1. “Do you ever wonder what your overzealous attacks on workers will eventually lead to?”

          A good start?

    2. At least he wasn’t ignorant enough to try and say there was no crisis.

      Funny how Austrian economists, whom this magazine tends to agree with, predicted our current crisis, while Keynesian clowns supported by statists like you were busy creating the bubble and cheering it on.

      1. This

    3. Word, ONNTA! “For a magazine called REASON….”

      First round’s on ONNTA! Yay!

      1. You know who else paid for the first round…

    4. You know who ele enjoyed overzealous attacks…

      1. Um, Mike Tyson? OJ?

    5. Hello, can you do simple math? If so, you should be able to figure out why the pension plans are a crisis.

      1. We olny needx totax tejh RICHZZZ!!!!!!!!!!!!!!!!1!11!111!!1!11one!!!!!!!1!!!!!!!!1111111!1111OENE1!11!1111111!111111!111!!!11!!!!!!!11!!11!!!111

        1. 1) Promise huge pensions for everyone
          2) Tax all the rich people
          3) ???
          4) FREE MONEY… FOREVER!

    6. HAHAHAHAHAHAHAHAHHAHAHAHAHAHAHAHA

    7. “At least he wasn’t ignorant enough to try and say there was no crisis.”

      Which magazine are you reading?

    8. “Good thing Van JOnes has more credibility than this magazine.”

      Seriously? If so, I’m sure that nitwit can solve the pension problem, eh?

    9. I know, right? The rich robbed us by not letting us take quite as much of our money as we were used to taking to piss away on vote-grabbing stunts that range from useless to actively harmful.

    10. It is true that my monocle chain doubles as a garrote. Efficiency.

  9. “That means even the length of a mustache,” said [Daniel L. Beardsley Jr…

    Hmm, a guy named Beardsley conveniently and “off the cuff” chooses an example involving facial hair…

  10. I’m entitled! I’m entitled! I’m entitled!

    To taxpayers money! I was promised!

    Do us all a favor, go kill yourself and your progeny.

    1. thug! (see above)

  11. Oh my God, they killed Kenny.

    You bastards.

    That’s my reaction any more reading these articles. This is today’s “dog bites man” piece, right?

    1. You really do hate the “workers”, don’t you?

    2. It’s like a nightmare, isn’t it? It just keeps getting worse and worse.

  12. I’ve been told that the Fort Worth police and fire bankrupted their pension because of this stuff- and were then allowed to join in with the rest of the city employees- who’s pensions are now in trouble.

    1. And to think, I still take visitors from out of state to the damned stockyards. You’re welcome, Ft. Worth.

      1. Why? it’s hot in that barrio man!

        1. My wife’s family is from NYC, so they get a kick out of seeing cows.

      2. Sundance Square and Del Frisco’s has it all over the Stockyards, imo.

  13. As a native Rhode Islander, let me say first that it is no surprise Central Falls is going bankrupt. It is a decaying mill-town that is completely overrun my the immigrant Hispanic population, to the point that it is one of the most densely populated areas in the Northeast, even though there is litterally nothing there of significance besides a correctional facility (right next to their high school football field.)

    In general, Rhody is dying. I moved away many years ago and though I love my home state, there is probably no way in hell I would move back.

    1. inmates watching cheerleaders, what could go wrong?

  14. Meh.

    Bankrupting a town is easy. We (Californians) have destroyed an entire state!

    What do we win?

    1. The unending abuse of libertarians.

      Congratulations.

    2. A lifetime supply of Cavanaugh columns.

  15. big, rich states like California
    internet spit take

  16. The impoverished city, operating under a receiver for a year, has promised $80 million worth of retirement benefits to 214 police officers and firefighters, far more than it can afford.

    Sure, and since the police and firefighters are pooled from very smart populations of people, the police and firefighters believed with no question that their pensions would be secure, without making any allowance for the fact that it was all bullshit.

    Talk about the survival of the fittest…

  17. as a former rhode islander (coffee syrup and clam cakes forever) who has feasted on the joys of surfing the fall/winter swells in the pristine coves of little compton…

    central falls has been the butt of jokes in RI since i was about 14.

    rhode island does corrupt and mobbed up like NOWHERE else on earth, whether it’s buddy cianci, patriarcha, or bianco

    and IN rhode island, central falls is considered corrupt and hopeless.

    the only good thing to come out of central falls was joe mills

    1. Dude, my cousin gets a house in Little Compton every summer for about a month and a half, and back when I was in CT I would go. I fucking love that place. You ever go to the private beach near The Stone House (my grandparents and Aunt and Uncle liked to stay there) and go snorkeling? FUCKING. AWESOME.

      1. haven’t been snorkeling there, but i know where you are talking about. little compton is nice jewel, kind of hard to get to/isolated from all those newport yahoos and i love it.

        ocean park , across the bridge in portsmouth is kind of sad now, but there is kick-ass fried clams place there

  18. as a former rhode islander (coffee syrup and clam cakes forever)

    Preach on, Brother Dunphy, preach on.

    I’m also RI born and bred and CF has been a disaster for as long as I can remember. It’s basically RI’s version of Lawrence MA.

    Many of my relatives still live in RI and I can’t for the life of me figure out why. Corrupt, expensive and no redeeming value.

    Life here in NH is much better.

    1. Yeah, but Lawrence at least has Tripoli’s Pizza and Bakery.

      1. i’ll always have a fond spot in my heart for little rhody, but i’m glad i left.

        i still visit relatives and providence has beautified, etc.

        rhode island: Prudence, Patience, Hope and Despair and little Hog Island way over there…

    2. I’d actually compare Cenral Falls to what Springfield MA will be in about 10 years

  19. Sadly, if Vallejo is any indication, bankruptcy is no guarantee of a change in course. Despite the fact that police and fire contracts were largely responsible for the bankruptcy, they chickened out of taking on the unions during Chapter 9.

  20. Hmm.. and no mention of the greatest business in Central Falls? Are Reason editors asleep or did they forget all about Wyatt Federal Detention Facility?

  21. —–> I paid $32.67 for a XBOX 360 and my mom got a 17 inch Toshibalaptop for $94.83 being delivered to our house tomorrow by fedex. I will never again pay expensive retail prices at stores.I even sold a 46 inch HDTV to my boss for $650 and it only cost me $52.78 to get. Here is the website we using to get all this stuff,
    BuzzSave.com

  22. I’m distressed at the lack of Koch Brother references in this thread.

  23. I’m embarrassed to be from RI right now. It’s a lovely state from an environmental perspective, but it absolutely sucks in every other conceivable way.

  24. (Non-native)Rhode Islander here. CF is the basket case of RI. RI is a state with no economic engine. It just leaches off the neighboring states.
    Don’t feel sorry for the people of CF, they have their entire school budget paid for by the state. When my school district was negotiating with the teachers, the teachers had a spreadsheet showing we always paid in the bottom 3 munis for every category/class of teacher. CF was usually in the top 3. Easy to pay top dollar when it isn’t your money.
    I can live with them starting to pay their own way on everything and stop picking my pocket. How anyone thought they could pay for a gold plated pension plan is criminal (SOP for RI).

  25. It would seem that, if mega-corporations like General Motors can go bankrupt over union pensions, a small town like Rhode Island (only slightly larger than Disney World) can most certainly go under.

    That citizen’s money was wasted in this cause is another story altogether.

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