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News Rhode Island: The Little State With a Big Mess

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  1. Oct 27, 2011 #1

    rhody

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    From http://www.cnbc.com/id/45006325" [Broken]

    From our State Treasurer, Gina M. Raimondo...
    This is troubling because you can easily see that that situation has all the elements for class warfare, pitting the rich against the poor, its seniors against the population in general of all age groups and incomes. Communities have step up and make tough choices.

    Rhody... :frown: :uhh:
     
    Last edited by a moderator: May 5, 2017
  2. jcsd
  3. Oct 28, 2011 #2

    rhody

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    Did I touch a nerve ? Are any of you who live in the US close to or in an almost identical situation R.I. is in right now ?

    Rhody... :bugeye:
     
  4. Oct 28, 2011 #3
    No this is exactly what "conservatives" have been saying was approaching since the 90's

    We can no sustain the governement outlays at this rate.
     
  5. Oct 28, 2011 #4
    my bold
    How many people are included in the $14.8 Billion pension fund?

    The state population is 1,052,567 and 14.4% over 65 - about 151,000 total retirees (all types - not just public employees).

    If EVERY person in the state over the age of 65 was eligible - the obligation would be about $97,600 per person?

    http://quickfacts.census.gov/qfd/states/44000.html [Broken]

    Even the NY Times took an interest:
    http://www.nytimes.com/2011/10/23/b...the-pension-crisis-is-now.html?pagewanted=all

    "Illinois, California, Connecticut, Oklahoma, Michigan — the list of stretched states runs on. In Pennsylvania, the capital city, Harrisburg, filed for bankruptcy earlier this month to avoid having to use prized assets to pay off Wall Street creditors. In New Jersey, Gov. Chris Christie wants to roll back benefits, too.

    In most places, as in Rhode Island, the big issue is pensions. By conventional measures, state and local pensions nationwide now face a combined shortfall of about $3 trillion. Officials argue that, by their accounting, the total is far less. But with pensions, hope often triumphs over experience. Until this year, Rhode Island calculated its pension numbers by assuming that its various funds would post an average annual return on their investments of 8.25 percent; the real number for the last decade is about 2.4 percent. A phrase that gets thrown around here, à la Rick Perry describing Social Security, is “Ponzi scheme.”"
     
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  6. Oct 28, 2011 #5

    rhody

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    Thanks WhoWee,

    In trying to keep things as simple as possible, in essense, it comes down to this.

    Do we slash budgets (police, fire, municipal, infrastructure, etc...) to make up the shortfall promised to the people receiving pensions, and raise taxes too, or do we not raise taxes, and find a way to reign in future pension payments, (i.e. reduced compound cola's).

    In either scenario, we have to reduce future liability, and raise the contributions and minimum age at which people can retire with a full pension with reduced benefits from the old system

    Do we punish all taxpayers (uncluding those now receiving pensions) by raising taxes to pay for an out of control pension system to the benefit a small percentage of the population in addition to slashing operating budgets, or do we not raise taxes and keep approaching the abyss of bankrupcy by paying pensions with out of control compunded cola's, or do we find a way to defer paying promised increases (as propsed now) based on compounded cola's and keep retiree's from reaping the rewards of incomes that vastly are ahead of inflation ?

    I presented a case in my first post where taxes were raised and budgets were slashed to reward the few at the expense of the many. Will that happen again in R.I. ?

    Rhody...
     
  7. Oct 28, 2011 #6
    From your first post: my bold
    "After decades of drift, denial and inaction, Rhode Island’s $14.8 billion pension system is in crisis. Ten cents of every state tax dollar now goes to retired public workers. Before long, Ms. Raimondo has been cautioning in whistle-stops here and across the state, that figure will climb perilously toward 20 cents."

    For the percentage to double - either the cost is doubling, revenues are falling - or both. Again, how many people are covered in this system and what as been promised? If the state can't pay - either all interested parties in RI will find a way out - or call on Washington to solve their problems.

    My guess is all of your state and local taxes will be raised - almost a given. The current retiree benefits will most likely not be touched other than scaling back COLA's and possibly dropping healthcare benefits - put people into Medicare system.

    The next issue is future retirees - they will probably be at the mercy of the situation.

    I know my opinion is unpopular on PF - but I don't think there should be any public sector unionization.

    On a positive note - maybe someone should start a class action initiative among non-Government residents to achieve a specific outcome? With a population of 1 million - you might get 600,000 signatures - if taxes are about to double.
     
  8. Oct 28, 2011 #7

    rhody

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    Question, what happens when Congress's http://www.mediaite.com/online/jay-carney-zings-herman-cain-and-congress-9-approval-not-the-kind-of-nine-that-they-want/" [Broken] hits 0.0 ?

    Then what ?!@

    Rhody...
     
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  9. Oct 28, 2011 #8

    Vanadium 50

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    Historian Walter Russell Mead has written about this http://blogs.the-american-interest.com/wrm/2011/10/23/rhode-island-athens-of-america/". Some excerpts:

     
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  10. Oct 28, 2011 #9

    AlephZero

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    Doesn't the Constitution say that's the time you are allowed to start shooting each other? :devil:
     
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  11. Oct 28, 2011 #10
    By the time the 2012 election is over, the "rich" will be so demonized the Newport Mansions will have been taken by force and "rented" out under Section 8 for enough to cover the pension shortfalls - just kidding/IMO of course.
     
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  12. Oct 28, 2011 #11

    rhody

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    V_50, WhoWee, Aleph,

    We may share similar views because deep down I am a pragmatic realist, I sense you all share similar beliefs. Please correct me if I am wrong.
    This belief applies to every aspect of my life, not just politics. I have always improvised and adapted to every difficult situation in life.
    It has served me well, and I believe that attitude will be an asset in the uncertain times that lie ahead.

    Rhody...
     
  13. Oct 28, 2011 #12
    IMO - we are on the same wavelength. I think we needed a crisis to wake up the average working person. Agree with me or not about how or why - but our rights have been taken away very gradually over the past 50 years - and replaced with a future obligation to take care of a permanent underclass (restricted only by the system that pretends to help). At the same time, the Government (at every level) has been allowed to grow to an unmanageable size and further disfigured by public sector unions.

    I've learned one thing in my business experience - the best time to deal with a problem is now - the longer you wait the more complicated it becomes (and painful to fix).
     
  14. Oct 28, 2011 #13

    BobG

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    The state government does the same thing that homeowners overextending themselves on their home loans, car loans, and credit card debt do. They make the payments they promised to make. Or else they default on the promises they made and destroy their ability to borrow any money in the future. Or at least it should work that way. Chances are, deciding not to honor the pensions they promised won't affect their credit ratings in the same way defaulting on loans would.

    There's a problem with this line of thinking about punishing all taxpayers. It implies that this is somehow unfair - that state residents would elect state legislators that would approve these pension benefits, not care about it when it was done, and only later get upset and say they never realized the legislators they were electing were ruining their economy.

    They didn't care then - and now they reap the results of not caring then.
     
  15. Oct 29, 2011 #14
    We had a thread a while back about budget cuts in California - it went a little off-track but there are similarities.
    https://www.physicsforums.com/showthread.php?t=462688
    *****

    Then in this thread - we found out how much a lifeguard's pension might cost taxpayers.
    https://www.physicsforums.com/showthread.php?p=3293484&highlight=lifeguard#post3293484

    "How would we characterize this pay structure?

    http://biggovernment.com/dspady/2011...in-retirement/ my post number 5 from that thread:my bold

    "Newport Beach has two groups of lifeguards. Seasonal tower lifeguards cover Newport’s seven miles of beach during the busy summer months. Part-time seasonal guards make $16 to $22 per hour with no benefits. They are the young people who man the towers and do the lion’s share of the rescues. Another group of highly compensated full-time staff work year-round and seldom, if ever, climb into a tower. According to the City Manager, the typical Daily Deployment Model in the winter for these lifeguards is 10 hours per day for four days each week, mainly spent driving trucks around, painting towers, ordering uniforms and doing basic office work—none are actually manning lifeguard towers.

    Like many communities across California, the city of Newport Beach is facing the harsh realities of budgeting with less revenue after housing values and the stock market plummeted. Now the city’s full-time lifeguard force has finally come under scrutiny. Next week the city council will decide if cuts are needed to the full-time lifeguard force where last year the top earner received $211,000 in pay and benefits, including a $400 sun protection allowance. In 2010 all but one of the city’s full-time lifeguard staff had annual compensation packages worth over $120,000.

    Not bad pay for a lifeguard – but what makes these jobs most attractive is the generous retirements.

    These lifeguards can retire at age 50 with full medical benefits for life. One recently retired lifeguard, age 51, receives a government retirement of over $108,000 per year—for the rest of his life. He will make well over $3 million in retirement if he lives to age 80. According to the City Manager, a new full-time guard costs less to hire than what is spent on this one retiree. The city now spends more taxpayer dollars on retired lifeguards than it does on those who are working.""

    *****

    My point is this - the people that approved these pay structures more than likely thought they were "doing smart business" (Paulie from Rocky IV or V when he gave POA to the accountant). They probably looked at the local cost of housing and the need for qualified crews - and perhaps never calculated the long term cost of the program?

    Personally, I live in the midwest and know the YMCA hires teenagers and college students for $8 up to less than $16 per hour - a full time position at the most exclusive swim club might pay a salary with benefits in the $30 - $40K range but would also include teaching classes and basic EMT. People in OH know an average annual compensation package of $120,000 for a lifeguard is too much money - in CA they either don't know or don't care?

    Now to be fair to Newport Beach, their budget shows current Lifeguard cost dropping from a high of $4,071,882 in 2010-11 to $3,440,666 in 2011-12 - a significant cut.
    (1st page under Expenditures)
    http://www.newportbeachca.gov/Modules/ShowDocument.aspx?documentid=10020 [Broken]

    In the same time frame, their total retiree costs increased about $400,000 over the year.
     
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  16. Oct 29, 2011 #15

    rhody

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    The state has been aware of the problem for decades, they have made five half baked attempt attempts to fix it. All failed. I have lived here for twenty seven years and in each election cycle was hoping that candidates who are realistic and pragmatic would be elected. I voted that way. It has not happened. This has led me to the conclusion that what it will take to break the cycle is:

    a: The block of voters who continue to vote with others who do not share my views retire and move away.
    b. The block of voters who continue to with with others who do not share my views pass away.

    Having said this however, that leaves the other side in a big dilemma, they cannot tax and reduce spending their way out of this mess. RI has some of the highest taxes in the country and is not a business friendly state to work in. There is no choice this time. Both sides are locked in an epic battle. How it will end remains to be seen. I will report the results as they unfold.

    Rhody...
     
  17. Oct 29, 2011 #16
    Here is where the battle will take place - same as Wisconsin and Ohio. my bold
    http://www.businessweek.com/ap/financialnews/D9QLBDE80.htm [Broken]

    "RI unions say pension problem overstated"

    "Rhode Island labor unions that are fighting a proposed public pension overhaul accused state Treasurer Gina Raimondo on Thursday of overstating the problem to justify extreme changes.

    Their remarks came during a third day of legislative hearings on a proposal by Raimondo and Gov. Lincoln Chafee and a day after hundreds of supporters and opponents of the legislation filled the Statehouse to weigh in on the bill.

    Paul Valletta of the State Association of Firefighters said Raimondo "cooked the books" with actuarial assumptions and conservative market projections that exaggerate the pension system's problems. He accused her of supporting "draconian" changes to the retirement system to raise her political profile.

    "She created this problem and now she's riding in on a white horse," Valletta said.

    Raimondo, a Democrat, insists that rising pension costs could cripple governments and force tax hikes or budget cuts. The state's unfunded pension liability stands at $7 billion and the state's pension costs are set to double next year to over $600 million. The state retirement system covers 66,000 public teachers, state and municipal workers, police, firefighters and judges.

    The proposal would save $3 billion over a decade by raising retirement ages for most workers and halting annual cost-of-living pension increases for most retirees. The legislation would also create a new system that combines traditional pensions with 401(k)-style retirement accounts."


    ******
    We now have a specific problem to study - pension funds for 66,000 people is under-funded by $7 Billion (roughly 47.3% of the $14.8 Billion total?) - about $106,000 per retiree or $6,650 per resident. The solution is simple - the people who are still working (and will later benefit) need to contribute more to the fund or the payouts from the fund will be less than expected. This should not be a taxpayer problem. The 66,000 people need to sue their incompetent plan administrators and/or throw them in jail.

    In the real world - I know quite a few people who took big hits to their 401k plans over the past few years - accordingly, their personal pension plans are now under-funded by comparable amounts - to the 47%. This is why I was against the GM bailout - it's unfair to all of the rest of us that work, pay taxes and aren't in a union or protected by politicians.
     
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  18. Oct 31, 2011 #17
  19. Oct 31, 2011 #18

    rhody

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    From a radio commercial I heard while getting lunch, it appears that the Unions are attempting to paint the rich as the bad guys in the pension debacle, then issue a challenge for them to fund it. They are saying is that the rich should pay for the system as it exists (unsustainable, I might add) by being taxed to do so. It seems to me that they (the union's) have no trouble at all with starting class warfare.

    Rhody... :yuck:
     
  20. Oct 31, 2011 #19
    At least one news organization is interested in the details of the problem.

    http://www.wpri.com/dpp/news/target_12/local_wpri_probing_pensions_double_dipping_20081106 [Broken]

    " Hidden in the pension database we spent five months compiling are some of the state's top double-dippers:

    • State Lottery Director Gerald Aubin collects $122,000 a year in state salary, and a $36,000 yearly pension from Providence as a retired police officer.

    • John Chartier nets a $101,000 salary as top dog at the state fire marshal's office, and an $86,400 yearly pension as former Warwick fire chief.

    • Providence DPW Director John Nickelson gets a $100,000 salary, plus an $87,600 yearly state pension for his time working for the Department of Transportation.

    • Providence Communications Director William Trinque has a $98,000 salary, plus a $79,200 yearly take from his state police pension.

    Double-dipping often leads to multiple pensions. Here are some heavy hitters in that category:

    • Vincent Pallozzi, former chief of staff to Providence Mayor Paolino, nets $58,500 a year from his city pension, and $87,000 a year as a retired state traffic judge.

    • Gerald Leddy injured himself on the job as a Providence firefighter, then hurt himself again working at the state fire marshal's office, resulting in two tax-free pensions totaling $56,400 a year.

    We also found a handful of triple-dippers:

    • Charles Donovan has a state pension, a pension as a legislator, and one from when he was a city politician in Warwick.

    It may sound outrageous, but it's not illegal.

    "That’s what the statute says, basically," said Frank Karpinski, executive director of the Employees Retirement System of Rhode Island, the state pension system that includes state workers, teachers, and employees from many cities and towns."
     
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  21. Oct 31, 2011 #20
    While double dipping and spiking are rightly upsetting, they can’t be blamed for the poor state of current pensions. After all, since they aren’t illegal and have been going on for some time, it should be straight forward enough to price their impact into the annual government contribution.

    But of course, those contributions routinely aren’t made, and no one seems to care when they aren’t. That’s the great thing about being a government run insurance product – you get to make (some of) the regulatory rules whatever you like and then oversee yourself.
     
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