POWIP Piece of Work In Progress – Former Abode of Dan Collins

Central Falls is fallin’ down, fallin’ down…

To follow up on my prior post, John Bury takes his own look at the state of Central Falls, RI. And the bottomline is that the law doesn't really matter when there's no money left.

Central Falls, Rhode Island will have to default on its pension promises. They threw in the towel in their May, 2010 Petition for Receivership claiming:

8. Because of its dire fiscal situation, the City has sold off much of its chief pension fund assets to satisfy annual pension obligations. Its actuarial accrued liability exceeds $35 million dollars and its assets are approximately $4 million. The City audit reports that for fiscal year 2009, its “required” contribution was over $2.7 million and the City’s actual contribution was $0. For fiscal year 2010, there are no funds available to contribute and over $1.5 million in assets would have to be sold to meet present obligations.

....

In poker a ‘tell’ is a clue that a player gives about the strength of their hand. Central Falls is a ‘tell’ to anyone who believes that governments are funding their retirement benefit promises adequately. They’re not and you may not find out that cold hard fact until assets are depleted and you get ‘asked’ to take less…….or ‘told’ to take nothing.

The thing is that no number of lawsuits can will money into being. This is why these sorts of promises need to be pre-funded -- if they're not, chances are pretty good that they won't be fulfilled.

Something like this doesn't develop overnight. Usually it takes years of larding up pay and benefits... starting out at a supportable amount, but then, as various groups accrue more power to themselves, they get too piggy. A point gets passed at which the excess can no longer be supported.

One can cry about fairness. Or legality. But once you've eaten up all the cake, crying won't make more appear.

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.