Chafee: Gloomy report 'predictable'

PROVIDENCE, R.I. (WPRI) - Governor Lincoln Chafee called a gloomy investment report by a ratings agency "predictable," because the state has continually slashed aid to cities and towns.

According to a report from Moody's Investment Services, Rhode Island communities are likely facing more credit-ratings cuts and the state is second only to Wyoming in the country for states likely to fall back into recession in the next six months.

"The facts are that over the last four years state aid to cities and towns –prior to my coming in –was cut by $195 million," Chafee said in an extended interview with WPRI 12. "Other state departments may have seen some reductions, but nothing like that."

Chafee said many municipalities were forced to curtail funding to their pension plans pushing their unfunded liabilities further into the red.

"These reductions in the bond ratings are very relevant to the lack of support to city and towns," Chafee said. "There is just not a lot of fat in cities and towns."

In his last budget, Chafee tried to increase funding to communities, though the assembly did not approve all the money he requested.

"The truth is in this building there are very few legislators that have served at the local level, they have just come into state service;they have not been on school committees or town councils," Chafee said."Some have and they know, as I do,that it's no fun raising property taxes."

The Moody's report highlighted several Rhode Island communities that could be facing further credit-rating downgrades including: Central Falls, Woonsocket, East Providence, Pawtucket and North Providence.

Pawtucket received some good news on Monday when Fitch ratings agency upgraded its credit outlook from negative to stable.

Though the Moody's report lauded the state for trying to intervene in Central Falls and East Providence, it warns more communities could need similar help putting a burden on the state.

Chafee told WPRI 12 he expects he will appoint a budget commission in East Providence, one step short of receivership.

The Moody's report cited severely unfunded locally run pension plans as one of the primary reasons for the negative outlook. The landmark pension reform legislation did little to help independent plans that are underwater.

Chafee said he has little confidence the General Assembly will have the appetite to take another bite at the pension reform apple.

"I'm not going to be totally pessimistic. When we see these reports from Moody’s and what's happening in East Providence, hopefully there will be a sense of urgency," Chafee said.

Tim White ( twhite@wpri.com ) is the Target 12 investigative reporter for WPRI 12 and Fox Providence. Follow him on Twitter: @white_tim