Obscure Court Ruling Sends Ominous Warning Message

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While our news media focuses on the ongoing disasters such as the Russian Connection to the White House, the plunging stock market and the fate of those under DACA, some really important news is going under reported.

One such story cropped up on MSN from Business Insider last Thursday morning. This story has to do with pensions and retirement and the shortfalls occurring especially among government entities.

This story takes place in Cranston, Rhode Island. Cranston is a city of about 80,000 nestled with many other towns and cities in the Providence, RI metropolitan area around Narragansett Bay.

Here is the crux of the story:

“Ever since the mid-1990s, police officers and fire fighters in the town of Cranston, Rhode Island had been promised state pension benefits upon retirement.

But, facing critical budget shortfalls over the last several years that the Rhode Island government called “fiscal peril,” the state legislature voted to unilaterally reduce public employees’ pension benefits.

Even more, these cuts were retroactive, i.e. they didn’t just apply to new employees.

The changes were applied across the board; workers who had spent their entire careers being promised certain retirement benefits ended up having their pensions cut as well. “

Employee unions sued for full compensation. The state opposed and they went to court. The ruling that came down from the First District Court of Appeals was – in my opinion – stunning:

“Last week the First Circuit Court issued a final ruling and sided with the state of Rhode Island: the government has no obligation to honor its promises.”

What? That is a decision that will have ramifications across the country. They just said that a contract between a governmental agency and its employees doesn’t hold.

There are many chilling scenarios that can be envisioned from this ruling. The author chose to bring up one huge scenario. That is Social Security:

“This one certainly does. Because Social Security is in even WORSE condition that the State of Rhode Island’s perilous pension system.

We talk about this a lot in our regular conversations.

According to the Board of Trustees for Social Security (which includes the US Treasury Secretary, the US Secretary for Health & Human Services, and the US Secretary of Labor), the Social Security trust funds “become depleted and unable to pay scheduled benefits in full on a timely basis in 2034.”

Once again– that’s the Treasury Secretary of the United States saying that Social Security will run out of money in 16 years.”

The author then goes into some strategies an individual may want to use to lessen the blow of a downsized Social Security. My thoughts went in several different directions.

My first thought was – Will this be the final ruling on this issue? At the First District Court of Appeals? I certainly hope not.

Second and the obvious take from a story like this is that legislators, county supervisors and city councilors who have been short-changing these retirement accounts for decades just got a “Get Out of Jail Free” card. No more having to pretend to fund employee retirements while cutting taxes for their rich donors. 

My third thought is that Republicans now will never do anything to make Social Security work. They have a “Get Out of Jail Free” card. For many Social Security is their only retirement income and for most Social Security is at least a major component of retirement income. Not sure what people will do if a congress decides to just drastically cut Social Security. If you vote for Republicans you had better realize that cutting government pensions will probably be high on their list, even though they don’t mention it in any speech.

Finally – with a president who has a business strategy of breaking contracts and refusing to pay bills, who can really be surprised that a court would look at contracts as just so much paper? 

I certainly hope this is just the first chapter of this story. If this country stands for anything then the case will go higher and be reversed. But with our governments now-towing to the rich and well connected for the past four decades a person has to wonder if the system is so corrupted that this ruling will stand.

The Iowa legislature continually makes noises about changing IPERS. In light of this ruling let us hope they back way off on doing so.

About Dave Bradley

retired in West Liberty
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