PROVIDENCE, R.I. (WPRI) – Rhode Island Gov. Gina Raimondo isn’t sold on the idea Providence should file for bankruptcy, but she said city officials need to begin making “difficult decisions” if they want to avoid the state taking more action.
In a televised interview with former Providence Mayor Joseph Paolino that aired over the weekend, Raimondo said she is concerned by the capital city’s “woefully underfunded” pension system and a school department budget that grows every year without an increase in city support.
“Providence should not go bankrupt,” Raimondo said. “I’ve looked at the numbers. However, they can’t do nothing. And there are some difficult decisions to be made. And the mayor and the City Council need to start making those decisions.”
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The cash-strapped city has faced repeated calls for a state takeover or bankruptcy in recent years, largely from pundits outside of City Hall. In 2014, Republican mayoral candidate Daniel Harrop campaigned on placing the city into receivership. (He finished with 2.6% of the vote.) In January, former Hasbro CEO Alan Hassenfeld suggested the city should consider bankruptcy. More recently, former Cranston Mayor Steve Laffey has written several op-eds encouraging the city to file for bankruptcy.
But those more familiar with the city budget have argued bankruptcy can be avoided if Mayor Jorge Elorza takes steps to solve the city’s financial problems. In April, the managing director of a firm assisting Providence with a 10-year financial plan said he didn’t consider the city “a problem that can’t be solved.” In June, state revenue director Robert Hull said the city has other options before it should file for bankruptcy.
Still, the city’s financial woes are real. In the short term, Providence is at least two years away from eliminating a cumulative deficit that grew to $13.7 million last year – meaning it has no cash reserves. (The administration has said it ended the 2015-16 fiscal year with a $6.3-million surplus, which puts a significant dent in the cumulative shortfall.) The larger problem, officials say, is an unfunded pension liability that grew to nearly $900 million in 2015. Providence also faces $1 billion in exposure for other post-employment benefits (OPEB), largely retiree health care.
Raimondo said the city needs to review its municipal union contracts, the pension system and the school department budget to find savings. She noted that the state has been the sole source of increased funding in the school department as Providence has level-funded its appropriation to the district at $124.9 million for seven consecutive years.
“So what I think is it’s time for the mayor to start making difficult decisions around where he can cut, not just keep raising taxes,” she said.
In a statement released after hearing Raimondo’s comments, Elorza touted his efforts to overhaul the school department’s central office, a change that moved several clerical workers out of the district office and into schools, “where they will be able to more directly support the work of principals and other school administrators.”
Elorza said Providence has taken action steps that “should be seen as leadership, not in one single department or district, but throughout the city for the long-term success of Providence.”
“No one in Providence is operating with a ‘kick the can down the road’ mentality in my administration,” Elorza said.
Raimondo cautioned that bankruptcy could result in further tax increases, like tiny Central Falls saw in the years following its bankruptcy. She also warned that a bankruptcy could result in the closure of public parks, libraries and after-school programs.
“If we’re sitting here a few years from now and it looks the way it is now, I might have a different opinion,” Raimondo said. “I think we need some leadership and some action. And make some tough decisions.”