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White House predicts soaring Providence deficit

Deficit projected to jump 1,100 percent over 10 years due to long history of reckless spending

Staff Writer
Friday, April 22, 2016

The National Research Network, a component of the White House’s Strong Cities, Strong Communities Initiative, released a draft report Monday regarding the state of the financial deficit in Providence. The report found that the city will face a $176 million budget deficit in 10 years — a 1,100 percent increase from the fiscal gap today — if nothing is done to slow debt accumulation.

According to Mayor Jorge Elorza, who announced the findings through a news release the same day, this issue primarily stems from four factors: largely unfunded pension and healthcare systems, a loss of state aid, the high carrying costs of the public workforce and the mismanagement of infrastructure. The deficit is structural, which means a one-time source of revenue cannot fix the problem.

But what does $176 million really mean? The NRN report estimates the baseline deficit for the 2019 fiscal year as $10 million. In purely monetary terms, $10 million is equivalent to the salaries of 105 police officers or a 4 percent commercial and residential tax increase across Providence. Still, these numbers all correlate to a budget shortage that is 17 times smaller than the projected 2026 deficit.

As Elorza stated in an April 11 press release, Providence has become deeply entrenched in a cycle that “rewards short-term thinking and forces us to scramble for one-time fixes instead of focusing on the investments we need to succeed.” This statement applies most plainly to the city’s infrastructure. According to the report, the deferred maintenance to the city’s roads, bridges and schools acts as both a cause and a long-term effect of the city’s hasty fiscal choices.

The report compared Providence to a number of other similar cities in New England in order to contextualize its findings. When measuring Providence’s profile against those of its peer cities, Providence falls short in almost every category. Among 11 cities, Providence ranked 10th in population below the poverty line and ninth in median household income, for example.

For its pension system, Providence ranked highest in unfunded liability — the difference between the amount of money governments have committed to pay pension recipients and the amount the governments have. Standing at roughly $894 million, Providence’s unfunded liability exceeds the median in the pool by almost $600 million. Stamford, for example, has only $50 million in unfunded liability. To make matters worse, from 2005 to 2016, state aid for the city of Providence decreased 32 percent, a drop of $17.5 million.

The report assigns part of the blame to the Angel Taveras administration, which preceded Elorza’s, for the widening of this fiscal gap.

Elorza stated in the press release that the city must “work with urgency to make sure we have a long-term frame of mind. So we’re making investments today that lead us where we want to go.” But Elorza did not specify how exactly the city would go about making such changes. This report could result in budget cuts and tax increases, as well as administrative restructuring.

Still, these findings have been somewhat divisive for the Providence community. Michael Solomon, who ran for mayor in 2014 and served as city council president under Taveras, remains both critical of the report and antagonistic of Elorza’s handing of the issue.

“I would like to see the mayor substantiate his comments concerning decades of neglect with respect to the last five years,” Solomon told GoLocalProv. “I was proud to stand shoulder-to-shoulder with Mayor Taveras to rein in an incomprehensible $110 million structural deficit. … Perhaps the mayor should take a page out of our playbook and choose to work with city stakeholders — such as our brave firefighters — instead of playing the divisive politics of the past.”

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  1. TheRationale says:

    The pensions are completely out of control. They planned on consistent 7% returns or so and have been getting basically 0%. You can retire in your late 40s! Private sector unions may have some justification, but public sector unions are always corrupt. This is what happens when you can elect your boss who cuts your paycheck with someone else’s money.

    RI has stupidly high taxes and a cornucopia of absurd business regulations that often double as corruption. As if that weren’t bad enough, the government takes to squandering tens of millions of dollars on high-risk ventures like 38 Studios or that stupid marketing campaign. The only major employers are Brown, RIH, and a handful of other largely immobile businesses. Everything else is relatively small and dull. The rich leave with their tax dollars and the middle class gets taxed to death until the politicians, unions, and poor are all left picking lint out of each other’s pockets.

  2. But what does $176 million really mean? It means the deals Brown, PC, and JWU cut under previous administrations will be “revisited”.
    Let’s not forget too that over 50% of Providence school district is funded by the rest of the state. It’s probably also not politically correct to mention the “White House” report fails to note the role of current Congressman Cicilline during his time as Mayor and instead throw the not in office so not relevant former Mayor Taveras under the bus.

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