This is a story about the pension crisis that's tearing apart Providence and Central Falls and just might lay waste to the whole goddamn state.
OK, that's pretty alarmist. But even if the worst case scenario — or something approaching it — fails to materialize, it's still troubling stuff. And well worth exploring.
First, although the tale is a bit convoluted, it's a lot more interesting than you might expect.
Second, the story of Rhode Island's pension crisis is — at its core — a story about stuff you care about.
Every dollar that goes to the state's rapidly growing pension bill is a dollar that can't go to teacher salaries or health care clinics or public parks. And that, in turn, means growing pressure to hike your taxes to pay for it all.
So dig in. I've divided the piece into two parts: Part I, the state system; Part II, the municipal system.
And look for a bit on the skeptics who say all the hubbub around pensions — exploding piggybanks! — is hogwash.
THE STATE SYSTEMThe Backstory
Public pensions go all the way back to ancient Rome. Emperor Augustus realized that expanding and holding on to an empire that stretched across Europe, the Middle East, and North Africa was going to take more than blood. So, after 20 years of front line service his legionnaires were awarded a lump sum, 3000 denarii — some serious jing for a blue-collar stiff.
By the time the American Revolution rolled around, Congress was dishing out pensions to the Minute Men-types. And in 1857, New York City began offering cops tidy little retirement packages of their own.
The states came late to the game — with most plans taking shape in the early part of the 20th century. Lil' Rhody launched its state pension system, which now covers state employees, teachers, state police, and judges, in 1936.
And for decades the Smith Hill gang, like irresponsible pols nationwide, ran the thing on a pay-as-you-go basis — doling out cash to retirees as needed, rather than squirreling away money for the long-term.
That changed in time. And for the last quarter-century or so, the General Assembly has actually been pretty good about funding the pension system.
By 1999, the state's pension liability was 84.4 percent funded — not the best in the land, but above the 80 percent rate that's considered healthy.
There was trouble brewing, though. In the 1970s and 1980s, vote-hungry politicians had offered public employees all sorts of goodies — "Retire in your 40s? Sure, why not?" — without much regard to long-term impact.
That wasn't the only problem. The Internet bubble burst in 2000 and 2001.
And by 2006, that healthy funding ratio had plummeted to an unhealthy 54.6 percent.
The more recent market crash hasn't helped any. At last count, estimates of the unfunded liability stood at a daunting $4.8 billion. And it could be worse.
How screwed are we?
I'm glad you asked. The Pew Center on the States — in a report last year called "The Trillion Dollar Gap" — has laid it all out for us in a handy-dandy chart.