The city of Central Falls, R.I., offers a lesson to the entire United States on the consequences of runaway spending and debt.
Central Falls made lavish promises of retirement benefits to city employees but didn’t bother to dedicate the necessary money over the years to fund those benefits. With some shaky accounting practices, the city managed to keep people from realizing just how serious a financial problem it was creating. Finally, disaster struck: The city simply didn’t have the money to pay its bills, and so the state of Rhode Island enacted a law letting Central Falls file for bankruptcy.
But that’s when the real pain started.
The mayor and City Council were removed from power, and a former state Supreme Court justice was empowered as a “receiver” to do whatever it took to balance the city’s books.
The receiver shut down the library and community center. He laid off nearly two dozen police officers, and he raised taxes and reduced pensions for retirees.