North Dakota's special legislative session in November will be exciting enough. There'll be lots of drama as the Fighting Sioux nickname law, redistricting and state flood assistance for the Minot and Bismarck areas come up for review.
But for stone-cold, serious-as-a-heart-attack politics, the special session this month in Rhode Island is the one to watch.
"Rhode Island, the nation's smallest state, may have the largest problem in the land," the Chicago Tribune noted this week.
The problem is a looming pension bill that the state utterly lacks the ability to pay. The state is "on the hook for billions of dollars' worth of pension benefits owed to police officers, firefighters, teachers, judges and state workers," the Tribune reported.
"But the money's not there. Projected investment gains never happened. State actuarial projections failed to keep up with public workers who are retiring earlier and living longer."
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How big is the problem? Well, Rhode Island's unfunded pension liability is estimated at $7 billion.
That's "slightly less than the entire state budget for one year," according to the Tribune.
And this month in its special session, the Rhode Island Legislature will consider dramatic pension reforms.
North Dakotans and Minnesotans should watch how events unfold. Both states also face unfunded pension liabilities, though not as large as Rhode Island's.
The attitude here should be, "Let's keep it that way." In fact, let's improve our pension-liability situation while we can, and maybe think hard about a hybrid 401(k)/ traditional pension system such as Utah has implemented.
Because as Rhode Island and Illinois, California, New Jersey and many other states have learned, pension problems quickly can spiral out of control. Private employers learned years ago that they can't afford to take on their employees' entire retirement risk.
Now, governments are learning the same thing. And sooner or later in most cities and states, that risk is going to have to be shared.
The Rhode Island community of Central Falls is a worst-case scenario. Central Falls -- pop. 19,000, "A City With A Bright Future," as its motto declares -- faces pension obligations of about $80 million.
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But the city's entire annual budget is only $17 million. So, Central Falls now has closed its library, closed its community center, laid off 32 percent of its work force -- and in August, filed for bankruptcy.
Much of this is a prelude to cutting retirees' pensions by up to 50 percent.
Rhode Island's own straits aren't that dire. But they're serious enough and almost certainly will result in retirees losing their cost-of-living increases.
At the special session, lawmakers also may propose raising the retirement age, capping pensions, starting a less-generous program for new employees and so on.
Pension promises are generating some of the most serious fiscal problems that states have seen since the Great Depression. Beleaguered Rhode Islanders are about to get a crash course in pension economics. North Dakotans and Minnesotans should watch and learn.
