On the night of September 8, Gina M. Raimondo, a financier by trade, rolled by with news that nobody wanted to hear: Rhode Island, she said, was bankrupt.
Maybe not today, maybe not tomorrow. But if current trends held, Ms. Raimondo warned, the Ocean State would soon look like the Narragansett Athens: too small and too broad. Its economy wither. Jobs would disappear. The state would be increased.
This is not the kind of message you might expect from Ms. Raimondo, a proud daughter of Providence, a venture capitalist success and, above all, the current treasurer of Rhode Island. But it's a message worth hearing. The smallest state in the Union, it turns out, has a debt problem is very important.
After decades of drift, denial and inaction, the system of Rhode Island Retirement $ 14.8 billion is in crisis. Ten cents of every tax dollar the state will now retired public workers. Before long, Ms. Raimondo was warning the whistle stops here and across the state, this figure will climb to 20 cents dangerously. But the scary thing is that nobody really knows. The Providence Journal recently tried to count all municipal pension plans outside the state system and stopped at 155, conceding he may have missed some. Even the Securities and Exchange Commission asked questions, including the general: These figures are for real?
"We are in the fight of our lives for the future of this state," said Ms. Raimondo in a recent interview. And if the battle is lost? "Either the pension fund cash-strapped cities or out of business."
All this may seem small in the scheme of national affairs. After all, this is Little Rhody (population: 1,052,567). But the nightmare scenario is that Ms. Raimondo saw the future of America and is Rhode Island. As Wall Street, a mounting financial disaster in Greece, a fiscal wreck is played here. And chances are it will not last. Before this is over, many Americans may be forced to rethink what government means, state and local level.
Economists have talked endlessly about a settlement of financial accounts for the United States, a point in the not-so-far-away when prodigality of the nation catch up. But Rhode Island, that time is now. The state has moved to protect its bondholders, to avoid being excluded from the credit market. Last week, the General Assembly went into session and proposed reducing benefits for public employees, including those who have already retired. That the plan will succeed is anyone's guess.
Central Falls, a city north of Providence small, did not wait for news from the Statehouse. In August, the city went bankrupt rather than keep its pension promises to retired firefighters and police officers.
Illinois, California, Connecticut, Oklahoma, Michigan - the list of states stretched runs. In Pennsylvania, the capital, Harrisburg, went bankrupt earlier this month to avoid having to use valuable assets to repay creditors Wall Street. In New Jersey, Governor Chris Christie wants to reduce benefits, too.
In most places, as in Rhode Island, the big issue is pensions. By conventional measures, the state and local pensions nationwide now face a combined deficit of 3 billion dollars. Officials argue that, by their accounting, the total is much less. But with pensions, hope triumphs often experience. Until this year, Rhode Island has calculated its figures retirement, assuming that its various funds would show an average annual return on investments of 8.25 percent, the actual number of the last decade is about 2, 4 percent. A phrase that is thrown around here in the Rick Perry, describing the social security is "Ponzi scheme".
That night in September, Ms. Raimondo joined the Cranston Portuguese Club to deal with yet another angry public. People like Paul L. Valletta Jr., the head of Local 1363 of the firefighters union.
"I want to get the biggest farce of the road here," Mr. Valette exploded at the back of the room. "You're going after retirement! In economic times, how could you possibly retire later?"
Someone else in the audience said Rhode Island has a moral obligation to return.
Ms. Raimondo, 40, stood his ground. Rhode Island, said she had a choice: he could pay for school books, road work, care for the elderly and so on, or it could keep every promise to retirees.
"I would ask you, is it morally right to do nothing and not to provide services to vulnerable citizens of the state?" She asked the crowd. "Yes, sir, I think what is moral. "
For many Americans, the state of the ocean conjures up images of mansions of Newport and Narragansett chic. The global reality is more prosaic. Rhode Island, is now a place where roads and bridges are among the worst in the nation and where jobs are particularly difficult to find. Unemployment has risen faster during the 2008-9 recession than in any other state. The official unemployment rate is now 10.6 percent, compared to the national average of 9.1 percent.
Textile mills and manufacturers of jewelry that once used by thousands fell apart. Large employers are now in health care and education, both of which rely heavily on government spending that has been drying up.
Many states and cities can credibly say that their pension plans are viable, even when these plans are not fully funded. This is because the pension funds of state, such as social security, pay the benefits gradually over several years.
But unlike, say, California, with its large diversified economy, Rhode Island is so small that there is little margin for error. Leaving the state to escape taxes, is almost as easy as moving across the city. Efforts to balance the state budget by reducing the strength of public works have left Rhode Island with a problem like that has plagued General Motors: the state has more retirees in the public sector as public sector workers.
Maybe not today, maybe not tomorrow. But if current trends held, Ms. Raimondo warned, the Ocean State would soon look like the Narragansett Athens: too small and too broad. Its economy wither. Jobs would disappear. The state would be increased.
This is not the kind of message you might expect from Ms. Raimondo, a proud daughter of Providence, a venture capitalist success and, above all, the current treasurer of Rhode Island. But it's a message worth hearing. The smallest state in the Union, it turns out, has a debt problem is very important.
After decades of drift, denial and inaction, the system of Rhode Island Retirement $ 14.8 billion is in crisis. Ten cents of every tax dollar the state will now retired public workers. Before long, Ms. Raimondo was warning the whistle stops here and across the state, this figure will climb to 20 cents dangerously. But the scary thing is that nobody really knows. The Providence Journal recently tried to count all municipal pension plans outside the state system and stopped at 155, conceding he may have missed some. Even the Securities and Exchange Commission asked questions, including the general: These figures are for real?
"We are in the fight of our lives for the future of this state," said Ms. Raimondo in a recent interview. And if the battle is lost? "Either the pension fund cash-strapped cities or out of business."
All this may seem small in the scheme of national affairs. After all, this is Little Rhody (population: 1,052,567). But the nightmare scenario is that Ms. Raimondo saw the future of America and is Rhode Island. As Wall Street, a mounting financial disaster in Greece, a fiscal wreck is played here. And chances are it will not last. Before this is over, many Americans may be forced to rethink what government means, state and local level.
Economists have talked endlessly about a settlement of financial accounts for the United States, a point in the not-so-far-away when prodigality of the nation catch up. But Rhode Island, that time is now. The state has moved to protect its bondholders, to avoid being excluded from the credit market. Last week, the General Assembly went into session and proposed reducing benefits for public employees, including those who have already retired. That the plan will succeed is anyone's guess.
Central Falls, a city north of Providence small, did not wait for news from the Statehouse. In August, the city went bankrupt rather than keep its pension promises to retired firefighters and police officers.
Illinois, California, Connecticut, Oklahoma, Michigan - the list of states stretched runs. In Pennsylvania, the capital, Harrisburg, went bankrupt earlier this month to avoid having to use valuable assets to repay creditors Wall Street. In New Jersey, Governor Chris Christie wants to reduce benefits, too.
In most places, as in Rhode Island, the big issue is pensions. By conventional measures, the state and local pensions nationwide now face a combined deficit of 3 billion dollars. Officials argue that, by their accounting, the total is much less. But with pensions, hope triumphs often experience. Until this year, Rhode Island has calculated its figures retirement, assuming that its various funds would show an average annual return on investments of 8.25 percent, the actual number of the last decade is about 2, 4 percent. A phrase that is thrown around here in the Rick Perry, describing the social security is "Ponzi scheme".
That night in September, Ms. Raimondo joined the Cranston Portuguese Club to deal with yet another angry public. People like Paul L. Valletta Jr., the head of Local 1363 of the firefighters union.
"I want to get the biggest farce of the road here," Mr. Valette exploded at the back of the room. "You're going after retirement! In economic times, how could you possibly retire later?"
Someone else in the audience said Rhode Island has a moral obligation to return.
Ms. Raimondo, 40, stood his ground. Rhode Island, said she had a choice: he could pay for school books, road work, care for the elderly and so on, or it could keep every promise to retirees.
"I would ask you, is it morally right to do nothing and not to provide services to vulnerable citizens of the state?" She asked the crowd. "Yes, sir, I think what is moral. "
For many Americans, the state of the ocean conjures up images of mansions of Newport and Narragansett chic. The global reality is more prosaic. Rhode Island, is now a place where roads and bridges are among the worst in the nation and where jobs are particularly difficult to find. Unemployment has risen faster during the 2008-9 recession than in any other state. The official unemployment rate is now 10.6 percent, compared to the national average of 9.1 percent.
Textile mills and manufacturers of jewelry that once used by thousands fell apart. Large employers are now in health care and education, both of which rely heavily on government spending that has been drying up.
Many states and cities can credibly say that their pension plans are viable, even when these plans are not fully funded. This is because the pension funds of state, such as social security, pay the benefits gradually over several years.
But unlike, say, California, with its large diversified economy, Rhode Island is so small that there is little margin for error. Leaving the state to escape taxes, is almost as easy as moving across the city. Efforts to balance the state budget by reducing the strength of public works have left Rhode Island with a problem like that has plagued General Motors: the state has more retirees in the public sector as public sector workers.
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