How Pensions Achieved Such Underfunding
Here’s something mentioned in passing that jumps out of Steve Frias’s op-ed in yesterday’s Providence Journal (emphasis added):
In a Democratic primary, the incumbent was defeated and in his place John Nardolillo Jr., the president of the Johnston police union, was elected. Although City Council President Kevin McAllister accused the police union of hijacking the council, Nardolillo became chairman of its Finance Committee. Under Nardolillo’s stewardship, the City Council balanced the budget by dramatically raising taxes and using up most of the assets in the city’s pension fund.
It would be too much to expect to find union-backed municipal authorities in every Rhode Island city and town who led the way to underfunding pensions, but it’s certainly a broadly applicable lesson. Whether explicitly union candidates or not, elected officials have used pensions as a cost-lite way to promise total compensation of which taxpayers would never approve if there were (as they say) truth in accounting.
Rather than try to give even larger raises and immediate benefits, they’ve promised long, comfortable retirements, and then stood by as the money put aside to pay for that future expense was used elsewhere or never put aside in the first place. They knew that — by politics or by courts — the unsustainable promises that their supporters had made years ago under false pretenses would not be substantially undone when the bill came due.