Tom Sgouros: Short Takes

Tom Sgouros: Short Takes

Central Falls: Solving the wrong problems

Last week the city of Central Falls and AFSCME, the union representing its municipal workers, came to an agreement with all sorts of concessions in it. In the current climate, with every day seeing a new step down in the city's finances, the union could hardly do better, but they had to give back a lot. The concessions are reported to be worth a million a year, which is no small thing for a union local that represents only a few dozen employees.

The same day, the Central Falls school system reported a $5.6 million deficit for next year. Apparently there's all kinds of maintenance on school buildings that hasn't been done, and the system is losing students to charter schools, so state aid is declining, too. As I've written about before, it's rare that a school system can save money as fast as its student population declines, and I doubt that Central Falls is any exception.

Which is just another way to say that the real issue in Central Falls has almost nothing to do with the cost of government there. As low as they can make it, as many concessions as the state receiver can force from its unions, as few services as he leaves the city to provide, it won't be enough. The forces that impoverished Central Falls are on the revenue side, and they will continue to force local revenue down. For the past 20 years, what has been obvious to anyone who is actually curious about the situation is that Central Falls will never be able to cut its way out of this crisis. All cuts will do is put off the inevitable day of reckoning a year or two or three.

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What Central Falls needs is what East Providence, West Warwick, Woonsocket and Providence need: an acknowledgement that our state cannot get high-quality public services in all the places that need them if they are only allowed to rely only on (or predominantly on) local revenue. It's really as simple as that, and complaints and cursing about unions won't change the fact.

Another example of solving the wrong problem

Now that the pension "reform" vote is behind us, we can bet on the next shoes to drop. (I don't really think it is behind us, as the courts are going to be involved now, but it will recede from the headlines, at least for a little bit.) The state of the municipal pension systems that aren't part of the state system is one likely possibility, but I bet we're also going to hear a lot more in upcoming months about health benefits for retirees, also called "OPEB" benefits (for "Other Post-Employment Benefits).

The Governmental Accounting Standards Board (GASB) insists that OPEB expenses be pre-funded, with accounting similar to pension expenses. While vaguely justifiable in principle, in practice this has led to such absurdities as the post office going broke in order to pay for the retirement health benefits of employees who haven't been born yet. Among the absurdities are the apocalyptic reports you'll see about how on earth our cities and towns and the state can possibly fund these gigantic expenditures to come.

The Pew Trusts put out a report this year estimating the state's liability for these costs at over $788 million, and estimates for the liabilities of the cities and towns are in the neighborhood of $2.5 billion. These are spectacular and frightening numbers, but we are fools to think of these numbers as a problem of municipal funding and we will only bankrupt ourselves if we cling to that illusion. That is, most of the reason these numbers are so large is that health care inflation is huge. But health care inflation is a huge problem not only for our government, but for all of us.

This is a problem that has to be solved, but not because it will bankrupt Providence or Central Falls, but because it will bankrupt all of us personally as well.

So in coming weeks and months, the same folks who scared you about pensions are going to try scare you about health care expenses, too. They will run ads and send mailings to try to make you think that the way to solve the crisis of health care inflation is to deny coverage to government employees. It makes no sense, but beating up on government employees seems to pass for popular entertainment these days, so just watch and see.

Tom Sgouros is the editor of the Rhode Island Policy Reporter, at whatcheer.net and the author of "Ten Things You Don't Know About Rhode Island." Contact him at [email protected].

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