It’s a good thing that Alex Rodriguez doesn’t play in Detroit. As the city struggles through the early stages of bankruptcy, baseball’s top diva has been whining that the latest revelations about his use of banned substances and the subsequent cover up is driven by the Yankees’ desire to rid themselves of his ridiculous contract. Unlike A-Fraud, the people of Detroit have done nothing wrong (except make really bad choices at the ballot box for generations) and yet because of the bankruptcy, many find themselves in a financially perilous place. I can’t imagine his bellyaching about the more than $100 million he is owed would go over well in a city where people are picking through each other’s trash.
Detroit’s experience and the numbers from cities and states around the country can make team Rhode Island feel a little better about ourselves. Illinois pension liabilities are a staggering $133 billion (which is nearly two and half times its annual revenue). Connecticut doesn’t look much better with liabilities that equal nearly twice their annual revenue. In California, three cities have already filed for bankruptcy and Los Angeles appears to be headed that way within the next four years. While we have significant municipal shortfalls and several cities teetering on the verge of bankruptcy, at least our state pension system is on firm financial footing.
With contracts and pensions all the talk in baseball and politics, a recent New York Times op-ed, “A Plan to Avert the Pension Crisis” by former Los Angeles Mayor Richard Riordan and journalist Tim Rutten caught my eye. It called on President Obama to create a big government plan to back municipal pension plans and avoid a string of bankruptcies. The plan would allow cities and towns to sell bonds that would cover their liabilities and the federal government would guarantee payment to the bondholders. To get this insurance, the cities would have to implement certain reforms and agree to a single rate for projecting pension returns.
I have a lot of respect for Richard Riordan, but creating another huge federal program seems misguided at best. Any proposal that has a government “guaranteeing bonds” makes me extremely nervous in post-38 Studios Rhode Island and any requirement that there be least common denominator reforms makes me think that the “reforms” will kick the can down the road, creating a burden for the next generation. And while I think it’s critical that cities select a realistic rate of return, setting a federal rate takes away their ability to self-govern.
The truth is that sometimes bankruptcy is a necessary evil to save a city, but we can’t lose sight of the fact that people get hurt. Central Falls retirees were stripped of their health care benefits and had their pensions pared down to a fraction of what they were expecting – and unlike A-Fraud — they did nothing wrong. So perhaps as Mr. Riordan thinks through his plan, he should narrow his focus a bit and think about how the federal government could incentivize state and local governments to reform their own pension plans and then think about ways to help those who are actually going to need it, rather than creating a huge government program and implementing cookie-cutter reforms.
For perhaps the first time, it seems that Rhode Island has it right. As other states grapple with their unfunded pension liabilities, we can be an example of how to enact responsible reform. As for A-Fraud, I hope MLB can make an example out of him and show other players that there is no tolerance for drugs in baseball. Unlike the taxpayers and retirees, he did do something wrong and he should pay the price.
Cara Cromwell is a public affairs consultant with more than twenty years experience managing issues campaigns for corporations, non-profits, associations, coalitions and candidates on both sides of the aisle.