To Reform Pensions, Reform Everything
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.