Providence Could Cut Pensions

by CalWatchdog Staff | February 2, 2012 3:32 pm

[1]John Seiler:

I’ve been arguing for a couple of years that the pension problem in California is so bad that the state will have to cut existing pensions. Is that supposedly banned by the California Constitution? It doesn’t matter. Constitutions can be changed. Actuarial realities cannot.

Such a cut could happen soon in Providence, R.I., a canary in the coal mine of pensions in America. Note that it’s Democrats making the cuts. Republicans there are even more scarce than in California.

Writes WPRI.com, a radio station there, “Rhode Island’s capital city will be in bankruptcy by June if it doesn’t get help resolving its financial crisis.

“That was the dire warning from Providence Mayor Angel Taveras during a Thursday morning news conference at City Hall. With five months left before the end of the fiscal year and the capital set to run out of cash by the start of summer, the city still faces a $22.5 million deficit in its budget for the current fiscal year, which ends June 30.

“The budget shortfall was projected at $110 million last March, when Taveras declared a ‘category five’ financial emergency in Providence. It was reduced after he negotiated new contracts with unions, laid off workers, cut spending and won increased state aid….

“Taveras said the city’s retirees must accept reduced pension and health care benefits to save the city from financial ruin. A decree signed in 1991[2] by Mayor Buddy Cianci pushed the city’s pension liability ‘into the stratosphere’ by giving annual cost-of-living increases of 5% and 6%[3] to more than 600 retirees, he said.

“‘These retirees have refused to sacrifice and are costing Providence taxpayers tens of millions of dollars a year,’ Taveras said, calling the increases ‘raises,’ not adjustments to keep up with the cost of living. The mayor will hold a meeting with retirees on March 3 where they will be asked for concessions.

“Taveras’s office released a list showing that the city’s highest-paid pensioner, former Fire Chief Gilbert McLaughlin, now receives an annual pension of $196,813 a year. He retired with an annual salary of $63,510. At the current rate of growth, McLaughlin’s pension will total roughly $796,871[4] if he lives to the age of 100.”

All across America, government-worker unions remain unreasonable in resolving the pension and budget crises they caused through their greed. But there’s only so much money out there. The economy isn’t growing fast enough for the funds’ stock portfolios to recover from the crash of 2007-09.

This is just the beginning. Soon, California also will cut existing government retirees’ pensions.

(Hat tip to Jack Dean.)

Feb. 2, 2012

Source URL: https://calwatchdog.com/2012/02/02/providence-could-cut-existing-pensions/

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