Rhode Island: The Little State With a Big Mess

  • Context: News 
  • Thread starter Thread starter rhody
  • Start date Start date
  • Tags Tags
    State
Click For Summary

Discussion Overview

The discussion centers around the financial crisis of Rhode Island's pension system, highlighting the implications for state services, economic stability, and the moral obligations toward retirees. Participants explore the potential consequences of budget cuts, tax increases, and the sustainability of pension promises.

Discussion Character

  • Debate/contested
  • Technical explanation
  • Conceptual clarification

Main Points Raised

  • Some participants express concern that Rhode Island's pension crisis could lead to severe economic consequences, comparing the state to cities like Vallejo, California, which faced bankruptcy.
  • Others argue that the state must choose between maintaining pension obligations and funding essential services for vulnerable populations, suggesting that failing to act could be morally questionable.
  • One participant questions the sustainability of government outlays and suggests that the current financial trajectory has been predicted by conservatives for decades.
  • There is a discussion about the number of retirees covered by the pension system and the financial obligations per person, raising questions about the feasibility of meeting these obligations.
  • Some participants propose that the state may need to reduce future pension liabilities and increase taxes, while others warn against the potential for class warfare and the impact on taxpayers.
  • Concerns are raised about the implications of slashing budgets for essential services versus raising taxes to cover pension costs, with no clear consensus on the best approach.

Areas of Agreement / Disagreement

Participants express a range of views, with no consensus on how to address the pension crisis. There are competing perspectives on the moral implications of pension cuts versus the necessity of funding state services.

Contextual Notes

Limitations include uncertainty about the exact number of retirees covered by the pension system and the assumptions underlying the financial projections. The discussion reflects a complex interplay of economic, ethical, and political considerations without resolving these issues.

Who May Find This Useful

Individuals interested in public policy, state finance, pension systems, and the socio-economic implications of fiscal decisions may find this discussion relevant.

  • #61
turbo said:
We also don't hear about how the Wall Street's machinations stripped the future value out of the investments that were supposed to provide the income to support the defined benefit plans.

Well, one thing you could do is compare the financial plight of private sector pensions with public sector pensions. Neither is good, but one may be worse than the other, and you could look at their investments and funding levels before and after our recent financial disaster to see how different policies have performed. I assume since you are upset with the media for not having done this, you have some information on it.

I would like to say I agree with your sentiment re the union scapegoating. Everyone seems to be coming into this conversation with their ideological sticks out, ready to get beating. There is precious little discourse on execution. I've complained about this a couple of times in this thread.

Maybe you could help me understand how your post improves on this.
 
Physics news on Phys.org
  • #62
Locrian said:
Well, one thing you could do is compare the financial plight of private sector pensions with public sector pensions. Neither is good, but one may be worse than the other, and you could look at their investments and funding levels before and after our recent financial disaster to see how different policies have performed. I assume since you are upset with the media for not having done this, you have some information on it.

I would like to say I agree with your sentiment re the union scapegoating. Everyone seems to be coming into this conversation with their ideological sticks out, ready to get beating. There is precious little discourse on execution. I've complained about this a couple of times in this thread.

Maybe you could help me understand how your post improves on this.
Well, let me tell you what I'm doing. I'm riding out this wave of crap, hoping that my IRA will regain some value, and hoping that the Fed doesn't engage in another round of "quantitative easing", which is just another term for shoveling free money at Wall Street to keep the stock market from tanking in the short term. My wife has a 401K and I have a roll-over IRA that we had hoped would keep producing income for us as we retire (soon). We also have a large money-market account that is earning only about a half of a percent per year in interest because the Fed keeps shoveling free money at the banks, so they don't have to pay savers anything. In the past 30 years or so, big-money interests have taken over economic policy in DC to the extent that it will be very difficult for the next generation(s) to save enough money to even climb into what we now consider the middle-class.
 
Last edited:
  • #63
http://www.washingtonpost.com/business/lawmakers-in-tiny-ri-poised-to-act-on-one-of-the-largest-pension-problems-in-the-us/2011/11/17/gIQA1jjSTN_story.html

PROVIDENCE, R.I. — Despite jeers and the threat of a union lawsuit, Rhode Island lawmakers on Thursday approved sweeping changes to one of the nation’s most underfunded public pension systems.

The state’s heavily Democratic General Assembly defied its traditional union allies to pass the landmark changes. The legislation is designed to save billions of dollars by backing away from promises to state and municipal workers that lawmakers say the state can no longer afford.

Lawmakers said Thursday’s vote was one of the most wrenching they’ve had to cast, though the fight might not be over if unions follow through with promised lawsuits.

“It would certainly be a lot easier to walk away from this reform,” said Senate President Teresa Paiva Weed, D-Newport. “However, it is clear that doing nothing only puts our retirees’ and our active members’ benefits at greater risk. We owe it to them, as well as to all other taxpayers, to attack this challenge head on.”

Gov. Lincoln Chafee, an independent and one of the bill’s original authors, said he will sign the bill.

Hat tip to the AO thread I linked earlier.
 
Last edited by a moderator:
  • #64
http://247wallst.com/2011/11/28/best-and-worst-run-states-in-america-an-analysis-of-all-50/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+247WallSt_popular+%28247+Wall+Street+-+Most+Popular%29
To determine how well — or how poorly — a state is run, 24/7 Wall St. weighed each state’s financial health based on factors including credit score and debt. We also evaluated how a state uses its resources to provide its residents with high living standards, reviewing dimensions such as health insurance, employment rate, low crime and a good education. We considered hundreds of data sets and chose what we considered to be the 10 most important measurements of financial and government management.

This year, as a new component of our analysis, 24/7 Wall St. obtained additional budget data for each state. Examining the state’s revenue and expenditures, and what each government opted to spend money on, allowed us to determine if a state overspent limited resources, failed to devote funds to an urgent need of its citizens or spent a great deal of money but with poor results. While we did not use expenditures or revenue in our ranking, these numbers reflect how a state is managed. Together with other budget data, living standards and government services, it provided a complete picture of the management of each state. A fuller accounting of our methodology can be found at the end of the article.

The 24/7 Wall St. Best and Worst Run States is meant to be an analysis that will focus the debate about state management and financial operations. The analysis should also serve to empower and inform citizens who want who want to better understand the impact government decisions have on each state.

Guess where little Rhody places, 48th ! (Fiscal year 2009) Little Rhody has an average debt per capita of about $ 8800, only Alaska ($ 9400) and Massachusetts ($ 12300) are higher.

Debt Chart

Rhody... :cry:
 
  • #65
http://www.wpri.com/dpp/news/local_news/providence/prov-pensions-hit-by-comedy-of-errors?

PROVIDENCE, R.I. (WPRI) - Providence's pension system has been around for 88 years, but the bulk of its huge funding shortfall stems from "a comedy of errors" that took place between 1983 and the mid-1990s, a former city official said Monday.

The General Assembly created and controlled Providence's pension system from its creation in 1923 until the city got home rule in 1983. But the decade that followed saw a series of mistakes that have now thrown it into financial jeopardy, former City Solicitor Charles Mansolillo told a special City Council subcommittee studying the problem.

6% COLA! They note an actuary said it was affordable. It would be interesting to know how he or she came to that conclusion, and what discount rate they were being forced to use when it happened. . .

Who else would love a 6% COLA? Having my salary triple in 20 years would be quite an achievement.
 
Last edited by a moderator:
  • #66
As if this statistic was not predictable, Rhode Island has fastest population decline in US.
New 2011 census numbers released Wednesday show that Rhode Island's population decreased by 1,300 people from April 2010 to July of this year, a decline of .12 percent

and

Two other states -- Michigan and Maine -- also lost population but at a slower rate. Overall, the U.S. population grew by 2.8 million, reaching 311.6 million people. Growth was fastest in Washington D.C., Texas and Utah.

and

"We're traditionally first into a recession and last out," said Chafee, an independent. "That's contributing to this. People are going elsewhere to work."

Add to this fact we have 5 other major cities in danger of going bankrupt, and a lack of leadership by our Governor, and we have the all the ingredients we need to keep us down. It is frustrating and maddening at the same time. What ever happened to our "Can do" American spirit ? In this state, it is nowhere to be found.

Rhody...
 
  • #67
Issues to watch in 2012 RI session

Insight into what is on the mind of our state legislators and Governor.
TAXES: Gov. Lincoln Chafee has said he is considering a proposal to raise taxes to help eliminate the deficit without deep cuts to government programs. But lawmakers facing re-election this fall may be wary of even a small tax hike.
He tried to make this fly at the beginning of his term in 2010 and was shot down by the house/senate. I doubt it will p assif he proposes it again. He does not live the life of an average taxpayer, and seems not to "get it", or simply doesn't care. There is no way to tell.

Rhody...
 
  • #68
rhody said:
Issues to watch in 2012 RI session

Insight into what is on the mind of our state legislators and Governor.

He tried to make this fly at the beginning of his term in 2010 and was shot down by the house/senate. I doubt it will p assif he proposes it again. He does not live the life of an average taxpayer, and seems not to "get it", or simply doesn't care. There is no way to tell.

Rhody...
Fastest rate of population decrease of any state, what does the governor say? Raise taxes!
 
  • #69
mheslep said:
Fastest rate of population decrease of any state, what does the governor say? Raise taxes!
mheslep,

You really don't want me to answer that do you, really ? Like I said in my last post his ideas in many ways do not represent the average citizen of our state. He was elected with a 33% margin, and now enjoys a 27% approval rating state wide.

Rhody...
 
  • #70
rhody said:
mheslep,

You really don't want me to answer that do you, really ? Like I said in my last post his ideas in many ways do not represent the average citizen of our state. He was elected with a 33% margin, and now enjoys a 27% approval rating state wide.

Rhody...
No reply necessary; that was just my comment on the disappointing Chafee.
 
  • #71
http://blogs.wpri.com/2012/01/25/chart-the-decline-and-fall-of-the-providence-pension-system/

Hat tip AO.
 
  • #72
http://blogs.wpri.com/2012/02/22/prof-providence-retirees-may-face-73-haircut-in-bankruptcy/comment-page-1/

Not a lot new in this one, but it discusses a looming question:

If Providence declares bankrupcy, how much of its pension promise does it actually have to pay?
 
  • #73
Locrian said:
http://blogs.wpri.com/2012/02/22/prof-providence-retirees-may-face-73-haircut-in-bankruptcy/comment-page-1/

Not a lot new in this one, but it discusses a looming question:

If Providence declares bankruptcy, how much of its pension promise does it actually have to pay?
Not sure, for sure less than 100% minus the fees the lawyers will make fighting for and defending against it. What a mess, in the end, shame on us as a society for letting this happen, it is all too common these days, not just in little Rhody.

Rhody...
 
  • #74
rhody said:
it is all too common these days, not just in little Rhody.

Absolutely. I think it is worth the occasional reminder that, while this thread is dedicated to RI, they are far from the only ones with this problem.

I sometimes ask relatives how well funded their pensions actually are. The first time they always look at me like I'm crazy.
 
  • #75
Public Sector Pensions: 'Their Accounting Makes Enron Look Good'

But the Rhode Island reforms -- which are being challenged in court -- are seen as a template for other cash-strapped states to model, giving rise to more fears that pension systems may not be as unshakable as once thought. "Any change will hurt," Munnell says. "If you were counting on your pension and the value is reduced, it can be a painful adjustment."

Hat tip AO.
 

Similar threads

News Obama Inaugural Address: Summary & Analysis
  • · Replies 33 ·
2
Replies
33
Views
6K