PROVIDENCE - Municipal leaders told Governor Lincoln Chafee yesterday that they need the state’s help in tackling underfunded pension plans and chronic deficits, warning that their communities could be forced to seek bankruptcy protection if nothing is done.
Chafee, an independent, met privately with leaders from the state’s cities and towns for two hours yesterday on the financial crises roiling local budgets.
Following the session, mayors said they want additional school funding, relief from burdensome state regulations, and greater power to reduce pension benefits.
“We all have the same issues,’’ said Mayor Joseph Polisena of Johnston. “Something has to be done this year. We cannot have a study commission. We cannot say, ‘We’ll wait until 2013 or 2014.’ This is do or die.’’
Cities and towns across the nation’s smallest state are grappling with back-to-back budget shortfalls. State aid to local governments has been cut by nearly $200 million in the last three years.
The 39 cities and towns face a combined unfunded pension gap of $2 billion.
East Providence and Central Falls are now under state fiscal oversight. The state-appointed receiver leading Central Falls has filed for bankruptcy protection on behalf of the city. Other cities have seen credit rating agencies downgrade their bond ratings - a key indicator of a municipality’s fiscal health.
“You can’t have a healthy state when the cities and towns aren’t doing well,’’ said Mayor Angel Taveras of Providence. “Think about what it would mean if we had another municipality go the route of Central Falls.’’
Chafee, a former Warwick mayor, said he is determined to help municipalities avoid financial collapse. He said that without state assistance, cities might be forced to downsize services or raise property taxes to stay solvent.
Mayor Daniel McKee of Cumberland said local leaders are not looking for a bailout, but permission to do what is necessary to restore fiscal stability.
“Let us fix the problems without sticking the stigma of receivership or bankruptcy on us,’’ he said.
Specifically, the mayors want state lawmakers to authorize them to suspend automatic pension increases for municipal retirees. The General Assembly voted last year to halt increases for public workers on the state’s pension system, but the change did not apply to the municipal plans.
The mayors also want an increase in state funding for schools. Some $111 million in additional funds is needed to fully fund the state’s school finance plan, the mayors said.
Finally, several mayors blamed the state for enacting costly mandates without giving local leaders funds to pay for them. Polisena cited two examples of what he called unfunded mandates: state storm-water management requirements and unnecessary dam inspections.
“Get rid of the mandates, and let us decide,’’ he said. “We could save millions of dollars.’’
Chafee said he is working on legislation to empower local leaders to reduce pension costs. He would not say whether he also wants to increase aid to local schools. Chafee is expected to release his proposed state budget for the next fiscal year later this month.
Lawmakers were not invited to yesterday’s municipal strategy session, but Representative Jon Brien, Democrat of Woonsocket, said the need to help the cities and towns is obvious.
“My city is in junk bond status,’’ he said. “We’re on the verge of receivership. This has to get done.’’