Unpaid bills from decades of retirement promises made to public workers, combined with a lackluster economy and steep Wall Street losses, have built up a financial mountain that threatens to overwhelm budgets and operations in cities and counties across the country.
While it hasn't gotten the attention of the "fiscal cliff" in Washington, the pension crisis at City Hall could have similar effects as mayors are forced to raise taxes, cut government services or renege on retirement promises made to police officers, firefighters, teachers and other public workers.
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There's some evidence that may be changing, however, as mayors find they can no longer ignore mounting pension bills. Providence Mayor Angel Taveras successfully negotiated concessions with unions and retirees to shave $178 million off the city's future pension obligations. The city had faced $903 million in future pension costs, which Taveras had said could force the city into bankruptcy.
"Through collaboration, we have pulled Rhode Island's capital city back from the brink of bankruptcy while sparing taxpayers the unnecessary expense of a long, costly legal challenge that threatened our future," he said after the police union voted to accept the agreement, which will suspend pension increases and eliminate the practice of giving some workers compounded 5 or 6 percent pension increases annually.
The negotiated settlement is among the first of its kind in the country, and could foreshadow similar deals in other cities.
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