In the trenches of pension reform

As the state-appointed receiver for the Central Falls bankruptcy, former Supreme Court Justice Robert G. Flanders Jr., 62, has had the difficult task of trying to impose fiscal responsibility in a city where it was sorely lacking. More

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In the trenches of pension reform

COURT IN ORDER: Former Supreme Court Justice Robert G. Flanders was appointed receiver for Central Falls' bankruptcy proceedings. He says lucrative collective bargaining agreements are the root of the pension problem in many communities.
Posted 11/28/11

As the state-appointed receiver for the Central Falls bankruptcy, former Supreme Court Justice Robert G. Flanders Jr., 62, has had the difficult task of trying to impose fiscal responsibility in a city where it was sorely lacking.

Appointed to the task by Gov. Lincoln D. Chafee in January, Flanders proposed a five-year plan that cuts benefits to retirees, imposes givebacks on unions and raises property taxes.

Last week, the city’s police, firefighters and municipal workers agreed to new union contracts that include a funded pension plan.

Flanders said the city will likely need some form of state oversight going forward, so it “doesn’t fall back into its old ways.” And he thinks the city’s bankruptcy played a role in spurring political leaders to overhaul the state pension system.

“It became a bloody shirt that people were able to wave in the service of pension reform,” he told Providence Business News.

PBN: What does last week’s agreement with the unions mean for the city?

FLANDERS: It means that we don’t have to fight over this in bankruptcy court and we can get on with the business of providing public safety and other critical services to our citizens without pointing fingers at one another. And this is really a new beginning for the city, a time to now take pride in what we’ve accomplished and take the city up from the ashes of bankruptcy towards a new and more exciting and more economically prosperous world from the one which we’ve been mired in.

PBN: So this negates the bankruptcy?

FLANDERS: Well, this negates the fight that would have occurred in a bankruptcy court over whether the city was eligible to file for bankruptcy; over whether the statute that the state enacted giving preference to bondholders was legal; whether the receiver had the right to reject the contracts that previously existed and unilaterally impose his own terms of how the arrangement should work. All that goes by the board in favor of these new arrangements, which will govern for the next five years. Basically this is substantiality what our plan was when we implemented our five-year proposal.

PBN: What is the lessen for other communities from the Central Falls situation?

FLANDERS: The lesson is that if you enter into very expensive agreements with your unions and your retirees then you better find ways to fund them and not ignore the financial implications of those agreements. And typically that calls for raising taxes or finding other ways of revenue to pay for them. But I would hope the better lesson is not to enter into those agreements anyway and take more prudent ways to manage the city that doesn’t involve “Cadillac” health care plans and unsustainable retirement benefits that allow people to retire at 40 and get paid the rest of their life a substantial portion of their pay and while they’re getting money from other jobs.

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