Rhode Island Cities Run Out of Other People's Money


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:

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.