Providence retirees could face a 73% haircut on their pension benefits if Rhode Island’s capital city files for Chapter 9 protection, a bankruptcy expert says.
WPRI.com, the website of a Providence television station, quoted a working paper by University of Pennsylvania law professor David Skeel that suggests public-sector workers’ property rights only cover funded pension benefits — not unfunded ones.
If a bankruptcy judge agreed with Skeel’s argument, WPRI said, Providence’s retirees would have a secured claim on the pension fund’s $362 million in assets, but could write off all or some of the additional $958 million in unfunded benefits the city promised but hasn’t saved for, or about 73% of its total pension liability.
Central Falls, R.I., citing an $80 million unfunded pension liability, filed for bankruptcy protection last August.
