Rhode Island is one of the bluest states in the country, and one where public sector unions have long worked with sympathetic politicians to create a true blue system of well paid public employees retiring comfortably on generous pensions with cost of living raises automatically thrown in.
The only problem is that the state could never afford the beautiful utopia it was crafting, and so politicians and union leaders chose the path of systemic deceit. Taxpayers weren’t told what the bill for the system would be; public service workers weren’t told that the pension guarantees they’d been sold were worthless because taxpayers would not and could not foot the bill.
An economic crisis is nature’s revenge on those who make and those who accept false promises; it is a holocaust of lies when the dross is burned away and only what is real and true remains. Think of cotton candy melting and charring in the flame of a blowtorch; that is what is happening to the secure retirements that “caring” blue politicians and “committed” blue union leaders promised gullible state workers. From the Washington Post:
An ongoing pension reform effort is likely to result in reduced benefits for 51,000 public workers and retirees. Officials are pondering lowering retirement payments, replacing part of the guaranteed pensions with 401(k)-type accounts, and sharply reducing generous cost-of-living increases enjoyed by retirees. The Rhode Island legislature is expected to consider changes next month during a special session.
Rhode Island turned its pension program into a Ponzi scheme with the same basic technique that is being used in cities and states all over the country to bamboozle workers and taxpayers alike: it projected unreasonable rates of return on the money the state set aside to pay the pensions when the bills came due. When those rates of return failed to materialize (in part due to the financial crisis), the gap between what the state had promised to pay and what it had on hand exploded. Nationally, state and local government face something like $3 trillion in accumulated lies and deceit; tiny Rhode Island has the highest per capita amount of systemic dishonesty on its books — I don’t know if the Ocean State is unusually rich in both knaves and fools or if some other factor is at work.
Anyway, when the bills come due and the money just isn’t there, something has to give. Again from the Post:
Pension systems generally finance themselves in three ways: with annual payments from the government; contributions from public employees; and investing in stocks, bonds and other markets.In Rhode Island, as those investments have failed to live up to predictions, the yearly burden being borne by state and local governments is growing and is beginning to crowd out public services in ways that experts say could soon take hold in other parts of the country.The cost of funding pensions is one of the fastest-growing items in the Rhode Island budget. The tax dollars going to state pensions more than doubled between 2003 and last year, and the amount is projected to again double to about $615 million by 2013, according to a state report.
The Ponzi-scheme quality of the retirement system is becoming more and more obvious: current employees have to pay more and more into the system but instead of being set aside to pay their pensions, the money is going to current retirees.
The burden is also heavy for participants in Rhode Island’s pension system. Teachers contribute nearly 10 percent of their salaries to pensions, and other employees contribute slightly less. But the generous benefits promised by the government and the huge unfunded liability mean that most of that money goes to keeping up with payments to current retirees. That leaves little for future retirees and endangers the system overall.
How bad is it?
In Cranston, pension costs are pushing the city toward insolvency. A locally managed pension plan for firefighters and police is underfunded by $245 million — nearly equivalent to the city’s entire annual budget. Meanwhile, coming increases to pay for local workers enrolled in state-run pension plans would cost an additional $14 million next July — the combined cost of core services such as trash removal, parks and recreation, and libraries, Fung said.
Rhode Island’s blue paradise was built on lies — and for a while it worked. But yet again that horrible Thomas Carlyle has the last word: in the end, bankruptcy rules.
Great is Bankruptcy: the great bottomless gulf into which all Falsehoods, public and private, do sink, disappearing; whither, from the first origin of them, they were all doomed. For Nature is true and not a lie. No lie you can speak or act but it will come, after longer or shorter circulation, like a Bill drawn on Nature’s Reality, and be presented there for payment, — with the answer, No effects. Pity only that it often had so long a circulation: that the original forger were so seldom he who bore the final smart of it! Lies, and the burden of evil they bring, are passed on; shifted from back to back, and from rank to rank; and so land ultimately on the dumb lowest rank, who with spade and mattock, with sore heart and empty wallet, daily come in contact with reality, and can pass the cheat no further.
A lot of people who believed Rhode Island’s lies will now be looking for part time work in what they were told would be a secure retirement. As far as I can tell the union leaders and politicians who concocted this disaster between them have no plans to suffer any cuts in their own pay or pension plans — and intend to go on “serving the public” without any accountability at all.