Note to the State Retirement Board: It’s Not Happening
On Wednesday, the Retirement Board ordered that Rhode Island taxpayers boost their annual pension contribution by $266 million in a desperate effort to make up for the decades of underfunding of state and local pensions that were far too generous to begin with. By the way, the unfunded liability of public employees’ post-retirement benefits is not included in this amount.
South Kingstown Town Manager Steve Alfred pegged it.
“Unsustainable,” he said, summing up the new pension payments in one word. What the retirement board did “with the stroke of a pen,” he said, was to saddle current taxpayers with the burden of making up for years of insufficient pension funding. “This does not take into account taxpayers’ ability or willingness to pay,” he said.
So let’s look at those last two items. Bless him for talking about willingness to pay. But we are well aware that the willingness of and, for that matter, fairness to the taxpayer has rarely entered into the consideration of Rhode Island’s elected officials when they contemplate contracts and laws which cater to their pet special interest.
Ability to pay, however, is quite another matter. Certainly, along with willingness and fairness, our elected officials have failed to factor revenue realities into too many of the contracts, laws and promises that they made. Unlike the first two items, however, it is not an element that they are able to overcome simply by executing a contract or passing a law.
Shall we review current budget conditions at the capitol and around Rhode Island?
Even after an unexpected and welcome boost in revenue projections popped up this week, the state’s annual operating deficit is still north of $200 million.
Providence runs out of cash in late August. And even that is optimistic in that it is based upon a projection that assumes that the city secures contract concessions from city employees and a wholly new revenue stream from non-profit property owners, none of which is a certainty.
Perhaps the scariest news item I saw this week was the Moodys one notch downgrade of Warwick’s general revenue bonds. Freakin’ Warwick??? With its miles of commercially taxed properties, I always thought of Warwick as even more fiscally stable than Barrington and EG, 100% comprised as they are of multi-millionaires. (Multi-millionaires can hop on their private jets and relocate at a moment’s notice; businesses tend to go and stay where there’s revenue.)
With regards to the other thirty seven cities and towns, rather than bore you with a complete run-down, I’ll simply ask the question: how many of them are consistently running an annual seven-figure surplus that they can funnel towards the Retirement Board’s wishful thinking?
As for the capacity to wring additional revenue from Rhode Island taxpayers, the state already has the fifth highest state and local tax burden and one of the worst business tax climates in the country. Prima facie, we’re maxed out on revenue and, in fact, we very much need to reverse course on that front.
It’s brutally simple. The largest per capita unfunded pension liability in the country is not going to be solved with an increase in contributions. The choices, accordingly, are stark. Write every current and future retiree a check for the amount that they’ve got in the fund, as former Mayor Steve Laffey recommended yesterday. Or adjust benefits.
The passage of time is not going to amplify these choices or make them any easier. Anyone – politician or union leader – who says otherwise is either grossly delusional or lying. (Speaking of delusional or lying, who organized last week’s teacher rally demanding that Providence hire back all teachers? Can I have some of the drugs you’re on? They must be goooo-ooood.)
The state is no longer in a position where it can ignore the problem for political reasons. We are now at the point where we can see that state checks – pension, paycheck or both – will bounce. “Down the road” has arrived for the can; there’s no place further that it can be kicked.