Standard & Poor’s Whacks Providence’s Bond Rating
Last night, the Providence City Council voted to approve substantive, though compared to the shortfall, modest, pension reform. At the meeting, an irate firefighter demanded to know
Can you tell us what the rush is?
Today, Standard & Poor’s supplied the answer.
S&P lowered Providence’s credit rating to BBB, two steps from junk-bond status, from BBB+, citing the “ongoing fiscal pressure affecting the city,” and said the outlook is negative, meaning it could be cut further.
“Just a big overreaction by a bunch of know-nothings!”
Signed,
Greece
Perhaps S&P saw the illegal activity by the City Council then ratified by the Mayor as the next step toward the road toward bankruptcy for the city.
Once those in power resort to thievery, the end is near, and S&P knows it. My friend, Wayne Olivera, who asked, “what’s the rush” has paid into the pension system for 22 years only to see his legal right to monies promised him eliminated by a vote, rather than preserved through difficult work and proper reform.
Take no joy in this, people; city and state workers are just the beginning. When government is granted the power to break the law, bolstered by the approval of the majority who gets their kicks seeing the other guy take a hit, that power will only grow, and in due time will visit every one of us.
Monique, What do you mean by “modest?” The lengthy and well-written Providence Pension Reform report located on this website council.providenceri.com states that the comprehensive reforms passed by the Council and signed by the Mayor will IMMEDIATELY do three things: 1. The City’s pension funding ratio will immediately increase from 31.94% to 40%. 2. The amount of the unfunded pension liability would decrease by over $246 million, from $901 million down to $653 million. That is an IMMEDIATE 27% reduction in the unfunded liability – which will only get better with each year. 3. Report states that the “City’s fiscal year 2013 pension ARC payment would decrease over $16 million, from $64.8 million down to $48 million. Moreover, these savings in the ARC payment would repeat (and, in fact, grow) each year until the pension system is fully funded.” These significant changes include COLA suspension like the state did but also substantial disability pension reform – something that the state refused to advance — likely due to pressure from police and fire unions. If every other city and town passed similar pension reforms, the cumulative $2.3 BILLION unfunded liability of municipal pensions would immediately be addressed. I would think you would celebrate and not criticize the Providence City Council for these reforms. As for the commentator above who asks “what’s the rush” the answer would be two-fold: First, Central Falls firefighters saw up to 55% of their pensions taken away in bankruptcy; is that what this firefighter wants? Second, these changes clearly targeted retirees’s guaranteed raises in a COLA, not current union members and not to mention that retirees arent represented by the fire union or any other union and they apparently already rejected all offers made by the mayor according to all news reports that i have read. What i… Read more »
Michael – We all know that you aren’t addressing these issues in good faith and you have no interest in anything resembling a “discussion,” but I’ll just pretend that the contrary is true for the purpose of this response. The actions of the City Council and the Mayor weren’t “illegal.” At worst, they were a civil breach of contract, but it’s not a clear-cut issue. A judge will have to sort out the unique legal issues that this situation presents. In any case, the City and the Mayor are required to take all the steps available to them to avoid bankruptcy before filing. Negotiations with your union have failed (regardless of who was “at fault”) so they are using the legislative process instead. If that fails, their next stop will be bankruptcy court. They are following proper procedure. You should inform your friend, who has apparently been living under a rock (or in a union hall) for the past year, that the City of Providence is on the verge of bankruptcy and there is a rush in every sense of the word. His statement only demonstrates his own ignorance at the scope, immediacy, and depth of the crisis. “Proper reform” is exactly what occurred – you just don’t like the process. The 5-6% COLAs are gone, contributions are up, and disability has been reduced – that is precisely what needed to happen for the city to regain stability under any kind of objective analysis. If you don’t like your compensation being dependent upon the whims of politicians, I have a simple solution for you – don’t work for government. That which giveth can taketh away. I didn’t see any concerns raised when those same whims were being used to shower your union with quid-pro-quo gifts like said disability and 5-6%… Read more »
Prov lawyer, current employees that will be effected by this have worked and paid twenty, thirty plus years. It does not effect “just the retired.”
Michael – First you post about the importance of integrity, tolerance, and truth, and then as part of the same post, you ridicule and ban me from your blog for posting publicly documented facts about the role of your union in the financial crisis. Your actions are the epitome of hypocrisy, and you showed your true colors today. Apparently, integrity means filtering out anybody who interrupts your echo chamber, and truth means only what you want to hear. I extended you FAR too much credit in the past.
I put a lot of effort into my blog, and take a lot of pride in the content there, both from myself and people kind enough to leave comments, pro and con. I have given you ample opportunity to prove once and for all that your commentary is simply repetitive and boring. Your contributions now go directly where they belong; the trash.
Dan, we get that you don’t like or respect Mike or his opinions. We really don’t need to read your same boring attacks on him nearly every time he posts. You really must be a lawyer with the way you drone on repetitively.
Monique,
S&P downgraded Providence AFTER this reform was passed by the city council. Its opinion in effect suggests that S&P questions the legality of this reform and in their opinion is more than likely a huge false promise and a massive liability. This was even espoused on WPRO so I’m not sure how you missed it and thought this supported your argument.
Michael – When you deliberately fail to address an issue, expect to see the issue come up again. My comments are repetitive only because you have never once made a good-faith effort to address them. You have only ever treated my comments with insults and contempt – so don’t be surprised if they adopt a confrontational tone. It need not be that way, and I would prefer it not to be that way, but that’s clearly the way you want it, so that’s what we now have. If you made even the slightest effort to the contrary, there would be a more fruitful discussion. That’s not what you want – to borrow your own phrase, you only want to preach to the choir.
Don’t kid yourself – I’m the only one who ever leaves differing opinions on your blog of any substance. You have now restored your perfect echo chamber of agreement among your union buddies and supporters. Fine, have it your way, but that is the opposite of integrity and you care little for the truth.
Rich – Where did I say that I don’t respect Michael’s opinions? I do respect them, which is why I have solicited responses from him on certaint topics. Michael doesn’t respect my opinions, which is why he insults me and ignores my comments, and bans me from his blog. I think it’s a shame that he conducts himself this way because he would have a lot to offer if he made a real effort.
Reasonable reply, Dan. I’ll let you have it.
Likely will be struck down. Though with a pretty sane Supreme Court who knows?
Either way the unions lose. If they “win” in court they lose in bankruptcy.
Heads they lose, tails we win.
Hey 799 and police union-headed by an acquited rape defendant:
Were all those monies you donated to corrupt politicians and all those countless hours spent campaigning at polling places worth it now that their promises have turned to she-it?
The post at 2:15 PM is mine. Must have put the wrong name in cutting and pasting somehow.
Micheal, are you just now realizing that politicians lie?!?
Or perhaps you didn’t care as long as you could look forward to 6% compound COLA’s in your middle age.
Now that it cuts close to home (the politicians reneging on a promise).. NOW you see what the rest of us have seen since day one.
Open your eyes folks… if they’re talking they’re lying…
6% COLA? I never thought I’d get anything close.
Michael, I take no joy in this. Decades of grossly irresponsible, ethically bankrupt elected officials gladly took campaign contributions in exchange for hollow promises. The only word for their actions is despicable.
“What do you mean by “modest?””
Providence Lawyer – I meant exactly what I said: while substantive, the reform implemented is “modest” compared to the pension shortfall – the pension fund is 32% funded – it is intended to address.
Not only did they take campaign contributions, they also took our money from the pension fund to balance their budgets, then passed a law taking more.
No cost of living increase for 27 years. Just wonderful.
An old adage comes to mind – you can’t con an honest man. If somebody promised me 5-6% COLA for life, or a no-questions-asked tax-free disability pension at age 45, I’d be worried about the long-term sustainability of the system to say the least. I like to think that I’d raise the concern publicly or to my representatives at a minimum. I support my 401k-style retirement plan and salary freeze precisely because I am concerned with their long-term sustainability.
There is a decent chance that these reforms will be overturned. There is, however, a zero percent chance that the money will be there if they are. The next stop will be bankruptcy court. The union and retirees should think long and hard about whether fighting these reforms will benefit them in the long run. The laws of economics care nothing about the laws of men.
True, but desperate people are rarely rational.
“The laws of economics care nothing about the laws of men.”
Ah, someone of my own heart. You can NOT escape reality, nor the “MATH” of it all…
Blame whoever you want folks, in the end the math will not change… underfund the plan and continue to draw too much from it and it WILL fail.
A friend of mine is a Firefighter and mentioned how there just weren’t enough young guys coming into the system (to keep it solvent). It was a great opportunity for me to explain how his statement was a perfect example of a ponzi scheme.
You just can’t escape the math. Blame the POLs for not funding the plan (which your Union leaders should have been keeping an eye one BTW..), blame anyone you want.
In the end, if the plan is unsustainable and nothing is changed (or you go to court to try to have a judge “make them pay”), it will eventually come to a crashing halt.
The longer a ponzi scheme is allowed to continue the larger the deficit will be when it finally crashes… just keep that in mind.
I don’t like the “you should have kept an eye on the funding levels” argument because it needlessly plays into the unions’ hands. They already have a whole song and dance number prepared about how they sued the city to do that and lost. Why even get into historical funding levels – they’re not all that relevant in objective terms.
Much cleaner is just to demonstrate to them through mathematics that 5-6% COLAs, which half of their retirees currently receive, have a doubling time of 12-14 years and will result in $1 million/year pensions if the retirees live into their 90’s due to the awesome power of exponential growth. Then simply show them the documentation that their union directly lobbied for those 5-6% COLAs in the early 1990’s and willfully misrepresented the cost at only 2% of the actual cost to the city.
There is nothing they can say to such a showing, and they know it, which is why Michael and all the rest of the self-righteous union blowhards turn tail and run whenever the subject is brought up. Nobody can argue that $1 million pensions are sustainable, and nobody can argue that Local 799 wasn’t directly responsible. They can’t argue with any of this, so they don’t.
Then if you really want to get ugly, all you have to do is get out some campaign finance reports. Local 799 gave money to all the worst of them.
Then if you really want to get ugly, all you have to do is get out some campaign finance reports. Local 799 gave money to all the worst of them.
Posted by Dan at May 3, 2012 1:03 PM
Right. The unions bought the pols and the pols made the “promises”.
So really the unions made the promises to themselves.
If 20 years ago they had agreed to a sustainable plan with a 55 year old retirement age, real COLA’s based on inflation (NOT automatic raises) and NO phony disability claims, none of this BS would be happening.
Instead they snuck through a referendum to the Charter creating a retirement board, stacked the board with union members and handed out bogus disability pensions and 6% compounded COLA’s.
They did it. Not Cianci. Not Paolino. Not all the useless turds that have “served” on the city council. It was the retirement board. Created by the unions and elected by them.
They were too clever by half.
F*** ’em.
PS-electing a creep as cops union head that got indicted for raping a teenage girl is a dumb ass move regardless of his beating the case at a jury trial.
Last time I looked, Local 799 had about 400 members. Are we the only ones who can contribute to campaign funds? Weak argument.
Michael – Taxpayers shouldn’t *have* to give campaign contributions to politicians just to get a functioning government or counteract the effects of what are clearly quid-pro-quo contributions from powerful interest groups, especially when those groups work for the same government. When widely-despised politicians like Ruggerio and Ciccone are being almost exclusively bankrolled race after race by huge sums of money from labor, there is something clearly wrong with the incentives system.
Your explanation raises more questions than it answers. Why and how does your union have so much money to throw at these politicians?
Last time I looked, Local 799 had about 400 members. Are we the only ones who can contribute to campaign funds? Weak argument.
Posted by michael at May 3, 2012 4:32 PM
No. There’s the police union (headed by a man indicted for raping a teenage girl). Plus the teachers. And the Laborers. And Teamsters. And SEIU. And Council 94. And the contractors. And the cronies-oh don’t forget the cronies. Call them the Axis Of Sleazy.
You DO admit that it was the unions and not Cianci or Paolino or Bush or the Man On The Moon that took over the Retirement Board in a sneak attack and granted hundreds of phony disability pensions and the 6% compounded pensions that broke the system?
It wasn’t Gary Sasse on the Reirement Board. Or Carcieri, Gina, Flanders, RISC or anyone else. It was you-the unions. You did it to yourselves. Look in the f****** mirror to see who destroyed the system cause it was the “brothers” on the Retirement Board.