Rhode Island's fiscal reforms offer hope

Gillian Tett:

A few weeks ago, I wrote a column lamenting the dismal state of America's local public sector pensions system. For with some $3,000bn (or more) of unfunded liabilities, the maths looks truly alarming - particularly given the gridlock besetting so much of the American political machine.

But what my column did not address, for reasons of space, was what might fix these woes. So, in the spirit of spring (and Easter) cheer, it is worth noting one small example where a local American government is now attempting some fiscal rebirth - not least because it holds some intriguing lessons for investors, both in America and Europe.

The location in question is Rhode Island, the iconic north eastern US state. Three years ago, this epitomised everything wrong with American state finances: the public pension fund was underfunded by more than 50 per cent, and it looked as if the state would soon be using a third of all its annual tax revenue to meet claims. Big spending cuts loomed, and the unions and politicians were at loggerheads.

Posted by Jim Zellmer at April 15, 2012 1:14 AM
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