Early this month, freelance journalist Stephen Beale highlighted efforts by Ken Block, a software engineer and 2014 Rhode Island gubernatorial candidate, and former Hasbro CEO and Chairman Alan Hassenfeld to focus public attention on out-of-control government spending in Providence, their state’s capital city. (See the link below to read the whole thing.)
Reasonable people may disagree with Block and Hassenfeld’s assertion that Providence should seek bankruptcy protection. But there is no doubt that the city’s fiscal outlook is dire. And Rhode Island labor policies, which force public employers to recognize government union bosses as employees’ monopoly-bargaining agents and force public employees to bankroll unions, even if they opt not to join them, are clearly a major part of the problem.
As Beale pointed out, unfunded pension and retirement health benefit liabilities for city employees in Providence total nearly $2 billion. The pension system is just 27.1% funded. On a per-person basis, Providence’s estimated debt load is $10,669, or 82% as high as Detroit’s was when it went bankrupt in 2013. And the problem is rapidly growing.
Block contends that Providence’s massive, government union boss-induced pension debt is deterring investment in the city:
He points to acres of supposedly prime real estate in the middle of Providence that has been vacant for years after the relocation of Interstate 195. Although a new proposal for residential development has been aired, no deal has yet to be inked or ground broken. The potentially high taxes that will be needed to deal with the city’s pension obligations are deterring developers, according to Block.
“What business owner wants to move there and, by default, own a piece of that?” Block said.
The most prominent monument to the city’s sluggish economic recovery is its iconic Superman Building, which has sat vacant in the heart of the downtown for about three years, after Bank of America moved out.
Laws that hand government union bigwigs the privilege to speak for union members and nonmembers alike on matters concerning their pay, benefits and work rules create bad incentives for politicians. And the problem is greatly exacerbated in states like Rhode Island, where employee financial support for government unions is compulsory.
Regardless of whether or not bankruptcy is a viable short-term solution for Providence, the long-term need for it and other cities and towns across Rhode Island is repeal of union monopoly bargaining in government workplaces and passage of a state Right to Work law.
Politicians everywhere are apt to overspend, of course. But in states where Big Labor’s special privileges are relatively limited, politicians have far less incentive to make pension promises that taxpayers simply can’t afford to keep.