The Stephen Hopkins Center for Civil Rights will hold a panel Wednesday at noon at The Old Statehouse (150 Benefit St., Providence) to discuss something that has been largely off the table in the state so far – whether Rhode Island should default on the moral obligation bonds it sold to benefit 38 Studios.

Revenue Director Rosemary Booth Gallogly criticized that idea on Newsmakers earlier this month, saying the state can’t afford to risk its bond rating even though the 38 Studios bonds aren’t general obligation bonds. The panel will hear a countervailing view from Bloomberg View’s Josh Barro, who previews his thinking today:

Performing on the 38 Studios guarantee will cost nearly $100 million, a nontrivial amount in a state with just more than a million residents. Rhode Island lawmakers owe taxpayers an explanation of why the state issues moral-obligation bonds. If the answer is in order to preserve the option of default, they should provide guidance as to what kind of circumstances would lead the state to consider defaulting — and how that guidance relates to 38 Studios.

If the answer is that the state uses moral obligations to create general obligations, lawmakers should admit that’s an invalid reason, and stop issuing moral-obligation bonds.

Joining Barro on the panel are former R.I. Supreme Court Justice Robert Flanders and Roger Williams University Law Professor John Chung. The Hopkins Center is a libertarian legal-aid group organized last year that has taken a number of stands, including siding with Governor Chafee in the dispute over Jason Pleau.

• Related: Josh Barro: Rhode Island should default on 38 Studios bonds (May 29)

The General Assembly should give Rhode Island’s cities and towns as much flexibility as possible to fix their finances without declaring bankruptcy in order to help Providence and Woonsocket avoid following Central Falls into Chapter 9, according to a new study out Monday.

“Bankruptcy protection may aid municipalities who are having difficulties meeting their financial obligations by allowing greater flexibility with regard to contractual requirements and payments,” says the study by the Rhode Island Public Expenditure Council [pdf], the business-backed think tank.

“However, it often also results in greater borrowing costs for the municipality, and potentially for the state,” RIPEC says. “Furthermore, the community may become less attractive to current and potential businesses and residents … further straining the community’s fiscal capacity.”

The new study from RIPEC comes amid a growing debate over whether bankruptcy could be an unavoidable and perhaps beneficial step for some of the nation’s most fiscally distressed cities and towns. Robert Flanders, the receiver in Central Falls, has become a leading proponent of that view since putting that city into Chapter 9 last year.

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Central Falls receiver Robert Flanders is making waves in Rhode Island, all the way from Philadelphia.

Flanders flatly told a Bloomberg reporter there this week he sees no way Providence can avoid bankruptcy, a comment that appeared to leave Mayor Angel Taveras aghast – even though Flanders is advising him.

“I was surprised and I disagree,” Taveras told WPRI.com on Thursday when asked about Flanders’ remarks. “Providence is not Central Falls. I will do everything in my power to avoid that.”

“Providence,” the mayor repeated, “is not Central Falls.”

Maybe not, but Flanders is now a true believer in the power of letting cash-strapped municipalities file for bankruptcy under Chapter 9 of the federal code. The Huffington Post’s Matt Sledge reports on what Flanders told attendees at a Bond Buyer conference in Pennsylvania’s capital:

From the comments of Flanders and others at the municipal bonds conference, it seems like the industry is in agreement about one thing going forward: someone is going to have to suffer, and it shouldn’t be bondholders. And the draconian measures needed to stave off financial disaster will often require an unelected official – be it a receiver in Rhode Island or an emergency manager in Michigan – to assume near-dictatorial powers.

Bankruptcy, Flanders said, should no longer be a dirty word. Sometimes it’s the only way to extract concessions from public employees unions and retirees, who he said weren’t very happy when he first proposed slashing pensions by 50 percent. …

It was only bankruptcy’s provisions that let Flanders, as city receiver, actually go through with those cuts, he noted. “We could blow up any contract we liked.”

Public employees’ concerns should be balanced, he argued, against the investors whose money allows cities to operate.

Read the rest here. All this comes as Taveras continues to struggle in Providence, Woonsocket prepares to slap a 13% midyear tax hike on its residents, and Governor Chafee is beating the drum for his far-reaching package of municipal-relief legislation. Chafee will discuss his proposal on “Newsmakers” this weekend.

HuffPo isn’t the only left-leaning publication covering Providence’s financial troubles, either. The Nation’s Erin Schikowski, who attended Taveras’s retiree town hall earlier this month, filed a story giving an overview of the situation on TheNation.com this week, too.

(photo: AP)

Providence Mayor Angel Taveras will be getting some guidance from Rhode Island’s leading authority on municipal bankruptcy.

Taveras is scheduled to hold a meeting Friday with Robert Flanders, the retired R.I. Supreme Court justice who has been Central Falls’ state-appointed receiver since last year, a person familiar with the matter told WPRI.com.

Flanders made Central Falls the first Rhode Island city ever to file for bankruptcy last August after he failed to win voluntary concessions on pension benefits from that city’s retirees. He was reportedly spotted leaving Providence City Hall.

Taveras warned Providence’s retirees on Thursday that he will reduce their benefits “one way or another,” even if it means following Central Falls’ example and asking a bankruptcy court judge to do so as part of a Chapter 9 filing.

Tim White contributed to this report.

(photo: Ted Nesi/WPRI.com)

Has Central Falls turned a corner? It’s starting to look that way after a series of positive developments this month.

Last week, the bankrupt city signed new agreements with its unions to cut costs and stabilize its budget. A tentative agreement on pension cuts has been reached with its retirees. And Tuesday, its Adams Memorial Library said the city will rejoin the state lending system on Dec. 1 thanks to a flood of donations from celebrities and others.

“This is all good news for the city and its taxpayers,” retired Supreme Court Justice Robert Flanders, Central Falls’ state-appointed receiver, told WPRI.com on Tuesday. “It definitely is a new beginning for the city.”

Governor Chafee’s spokeswoman, Christine Hunsinger, echoed the sentiment. “The governor believes this is what happens when people come to the table and work together to solve a problem,” she said. “He’s very grateful for all the hard work the unions and Judge Flanders’ team did in Central Falls.”

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Joseph P. Moran’s tenure as Central Falls’ police chief ended when receiver Robert Flanders eliminated his job on Friday morning – more than a year after the chief started collecting his pension.

Although Moran officially “retired” on April 1, 2010, he simultaneously signed a new five-year contract allowing him to continue working as the city’s police chief. The chief said it would save money over the long run.

The eyebrow-raising deal – reached just two months before the city’s leaders declared insolvency and filed for receivership – put Moran in line to earn roughly $121,000 this year: a $71,000 salary and a $50,678 pension.

However, Moran’s annual pension was slashed by 55% to $22,805 starting this month as part of the deep cuts ordered by Flanders following Central Falls’ bankruptcy filing, documents reviewed by WPRI.com show. With the loss of his salary now, too, Moran’s income has dropped by nearly $100,000 over roughly a month.

Moran’s original $50,678 pension was the second largest in Central Falls, topped only by the $52,055 paid to the widow of the city’s late fire chief, Rene Coutu; the ex-chief’s reduced $22,805 pension ranks No. 21 out of 134. Coutu’s is still the largest at $44,046, according to the receiver’s office.

Flanders voided the new contract Moran signed last year earlier this month. The other two Central Falls employees whose positions were eliminated today – the police department’s prosecution clerk and the deputy city clerk – moved to other jobs, a spokeswoman for the governor’s office said.

Nneka Nwosu contributed to this report.

Central Falls could be out of bankruptcy by the end of the year.

Hard to believe? Undoubtedly. But the city’s hard-charging and ever-optimistic receiver, former Supreme Court Justice Robert Flanders, was adamant that it can happen if unions and retirees agree to the five-year stabilization plan he unveiled on Thursday.

It’s still unclear how likely it is they’ll come to an agreement – particularly when the plan includes cuts of as much as 55% in some retirees’ pensions. But Flanders said the two sides have “made considerable progress” since he filed for bankruptcy on Aug. 1.

The centerpiece of today’s press conference, where Flanders was joined by Gov. Lincoln Chafee and local elected officials, was the unveiling of a 69-page five-year financial plan that would close a $6 million shortfall in Central Falls’ $16 million annual budget and, the receiver writes, help the city “avoid financial purgatory.” It would also allow the city to remain independent, making a merger with Pawtucket or another place unnecessary.

We’ve uploaded the PDF to WPRI.com, and you can download it here. The two sides will be back in court Friday as they debate Flanders’ decision to throw out the unions’ contracts and cut retirees’ pensions.

Do you have questions about the plan? Leave them in comments and I’ll do my best to answer. In the meantime, here are some of the highlights from the report.

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A Projo.com commenter wrote this the other day about retired Rhode Island Supreme Court Justice Robert Flanders Jr., who is serving as Central Falls’ receiver:

Now that you have put CF into Bankruptcy, thus cutting the pensions of many dedicated and honorable police and fireman; my question to you is would you be willing to take a haircut on your own 100% state pension? Your pension is most likely in the range of 200k per year, maybe more.

You never paid one red cent for that big fat pension. You get a guaranteed COLA every year. COLA is gone for current state employees, with pension reform. Why aren’t you making a sacrifice?

I’ve heard this assertion quite a few times lately, so it’s time for a fact check: Robert Flanders isn’t getting a state pension.

Flanders served on the Rhode Island Supreme Court from 1996 to 2004, when he surprised many by resigning. “Supreme Court Justices have lifetime tenure,” the Projo noted, “and it is unprecedented, in recent memory, for a justice to leave at such a young age without a hint of scandal or illness.”

Flanders was not yet eligible for a judicial pension at the time of his resignation because his eight years on the bench didn’t meet the minimum number required. Therefore Flanders won’t receive a pension, health insurance or any other retirement benefit for his time on the high court.

Upon his resignation, Flanders got a refund for his eight years of payroll contributions to the state pension fund. The retirement system cut him a check for $91,431 in 2004, according to the general treasurer’s office.

Not that Flanders is hard up for cash. He was making up to $1 million a year before becoming a justice, and he now earns $675 an hour as a partner at the top downtown law firm Hinckley Allen Snyder LLP. (He’s only getting $200 an hour for his work in Central Falls.)

• Related: Watch WPRI 12′s ‘Newsmakers’ with guest Robert Flanders (Aug. 5)

city retirees hear about the pension cuts July 19

Central Falls slashed one in three of its retirees’ pension checks by more than half this month, with the majority of the city’s former public-safety workers set to lose tens of thousands of dollars a year.

Receiver Robert Flanders reduced 48 of the city’s 141 police and fire pensions by 50% or more, with all but three of those cut 55% from their original amount, according to financial records obtained by WPRI.com.

Only 27 pensions were left untouched. Eight of those are being paid for from a separate pool of assets, while 19 others were shielded from cuts because they’re worth less than $10,000 a year.

Three of the payouts that lost the most cash were granted in July:

• Former acting fire chief Gerard Dion’s pension dropped by $41,684 a year, from $75,789 to $34,105;
• former firefighter Robert Noury’s dropped by $37,628, from $68,414 to $30,786; and
• former policeman Steven Sullivan’s dropped by $36,493, from $66,351 to $29,858.

The smallest reduction went to Catherine Frechette. Her annual pension dropped from $11,522 to $10,000, a cut of $1,522 or 13%. Michael Long, the lawyer and retired police sergeant who is advising the retirees, saw his annual pension cut by $11,512, from $35,423 to $23,911.

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Central Falls is set to file a formal plan within the next two weeks that will lay out its proposed path for getting out of Chapter 9 bankruptcy, the city’s receiver said Thursday.

The proposal will include deep cuts to pension benefits and employee layoffs in order to bring Central Falls’ annual municipal budget into line with its $16.4 million in revenue; the city is projected to spend $22 million this year, giving it a deficit of more than $5 million.

Central Falls filed for bankruptcy Aug. 1, and receiver Robert Flanders said then that he wanted to submit an exit plan to U.S. Bankruptcy Court Judge Frank Bailey within 30 days. But Tropical Storm Irene forced Flanders to push back the self-imposed deadline.

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Central Falls filed for bankruptcy just last week, but the legal costs of the city’s 15-month-old financial crisis are mounting fast, according to a new story I just posted on WPRI.com:

A parade of lawyers has charged bankrupt Central Falls more than $1.2 million since its leaders declared insolvency – and state taxpayers have foot most of the bill, according to records obtained by WPRI.com.

As of Monday, the state had paid $1.07 million in legal fees to five lawyers and law firms for their work in Central Falls, while the city government had paid $158,215 to two more, according to the governor’s office. The city filed for receivership in May 2010 and declared bankruptcy last week.

The biggest payments so far have gone to the Providence law firm Orson and Brusini. Theodore Orson, a partner there, is the city’s lead bankruptcy attorney. His firm has charged the state $365,951 as of this week.

Close behind is Edwards Angell Palmer & Dodge, a large firm with an office in Providence. Karen Grande, an expert on municipal law at the firm, is assisting Orson with Central Falls’ case. Edwards Angell has charged the state $350,060.

Patrick Rogers, Gov. Lincoln Chafee’s chief of staff, was a partner at Edwards Angell before joining the administration in January. Chafee’s father, the late Sen. John Chafee, was also a lawyer for the firm, which hosted fundraisers for the future governor during his campaign.

Read the rest of the article to find out how much the three receivers have made and why Robert Flanders is nervous about another legal cost the city could be facing.

You might have gotten whiplash if you listened to WRNI’s Political Roundtable and then watched WPRI 12′s “Newsmakers” last week.

Both programs touched on the topic of binding arbitration with their guests, Senate President M. Teresa Paiva Weed and Central Falls receiver Robert Flanders, respectively. The Senate leader offered a forceful defense of the policy and her decision to allow the Senate to pass it in June:

It was introduced as a type of dispute-resolution that is needed for a couple of reasons — to save the cities and town costs, to prevent strikes, and it is in the best interests of children. After what happened in East Providence, it became abundantly clear that we need to revisit dispute resolution in the area of education, and in particular what has got lost in the translation is that the form of dispute resolution which we passed was not the orginal form of the legislation.

On “Newsmakers,” Flanders described the policy in slightly less glowing terms:

These interest arbitrations have been, in my view, a giant vampire leech around the neck of Rhode Islanders relentlessly sucking the blood from our economy.

Before taking over as receiver, of course, Flanders was chairman of the Board of Regents for Elementary and Secondary Education. (By coincidence, contracts talks with Central Falls’ teachers are now going to arbitration.)

For more on binding arbitration, check out last month’s “Newsmakers” debate on the topic. Though it’s unlikely the issue will come up during this fall’s special session on pensions, Paiva Weed made clear she thinks it will be back on the agenda eventually.

Did receiver Robert Flanders wait too long to open concession talks with Central Falls’ unions and retirees?

That accusation was leveled in court Wednesday by Matthew McGowan, an attorney for the city’s retired firefighters. He called Flanders’ plan to slash his clients’ pensions “an eleventh-hour proposal” that they did not have enough time to review.

Central Falls’ attorney acknowledged separately how little time passed from the start of talks between the two sides and Monday’s bankruptcy filing.

Flanders was appointed in February, but he didn’t open negotiations with Council 94 until May 15; with the police and fire unions until July 1; and with retirees until July 5, less than a month before the bankruptcy filing, according to court documents filed this week by the attorney, Theodore Orson.

Flanders defended his handling of the situation on Wednesday, saying he waited three months to start negotiations because it took that long to figure out how much Central Falls needed in concessions to stave off bankruptcy.

“First we had to come up with an idea of what we were asking for,” he told WPRI.com. “It took a while to come up with that.”

But by the time talks began in earnest, Central Falls was already facing a severe cash crunch that was projected to leave the city unable to pay its bills this month, Flanders said. Without concessions or a bailout from the state, he said he was forced to file for Chapter 9 this week.

In effect, he said, the receiver’s office got “squeezed” between the time it took to get a handle on the problem once Flanders took office and the time when Central Falls’ cash was set to run short. Flanders’ predecessor as receiver, Mark Pfeiffer, was in charge of the city from July 2010 through last February.

McGowan took a different view in court. He told the judge it was incorrect to say there were “negotiations” between the receiver and the retirees, because they were presented with a proposal and told to take it or leave it, then weren’t given enough time to vet it before the bankruptcy filing.

McGowan suggested Flanders’ failure to formally negotiate with the retirees before filing for Chapter 9 could be a reason for the judge to dismiss the case and throw it out of court.

(photo: Associated Press/Stew Milne)

What is Judge Flanders going to tell us Monday morning?

That’s the question everyone is asking this afternoon after most of Central Falls’ retirees failed to agree to the reductions in their pensions proposed by Flanders, the city’s state-appointed receiver.

Flanders is now “deciding upon the best possible course of action to put the City of Central Falls on solid financial footing,” according to a statement issued earlier today. “An announcement is expected Monday morning.”

That announcement will presumably take the form of a press conference in the cash-strapped city. The Chafee administration has put in place a news blackout until then, and spokesman Christian Vareika declined to break it when I called him. “We expect speculation,” he said.

You don’t need a crystal ball to know most of that speculation revolves around whether Flanders plans to pull the trigger and have Central Falls file for Chapter 9 bankruptcy early Monday. Governor Chafee briefed lawmakers about the situation on Thursday, the Projo’s Kathy Gregg reports.

Bankruptcy would help by giving the city more leeway in renegotiating contracts, but a Chapter 9 filing could also do further damage to the state’s image, Chafee said Tuesday during a taping of WPRI 12′s “Newsmakers.”

“So we’re trying to balance those two interests – what we can achieve in the laws of bankruptcy, with the perception of who is next and what bad things might flow from a bankruptcy in Central Falls,” the governor said. “We’re trying to balance those and avoid bankruptcy if we can.”

“It’s a high priority for the administration,” he added.

After the meeting with retirees earlier this month, Flanders emphasized that bankruptcy would be all but inevitable if he did not get most of them to agree to pension concessions. “If a substantial number say no, then bankruptcy becomes a much more likely option,” he said. “Then it’ll be up to the bankruptcy judge.”

Asked if there was another way to avoid Chapter 9 without the pension concessions, Flanders replied: “I don’t know of one right now.”

Not that Flanders has ever minced words about the situation in Central Falls.

Last month, he told me bankruptcy was “more likely than not” and that a decision would be made “certainly no later than the end of August … and perhaps much sooner.” In May, he said “the bankruptcy option looms much larger” unless state lawmakers provided a bailout (which they didn’t) or workers and retirees agreed to major concessions.

That doesn’t mean a bankruptcy filing is a certainty come Monday. Deadlines have a way of clarifying things in people’s minds, and sometimes a deal gets reached that wouldn’t have been possibly until the eleventh hour. And Flanders could decide Chapter 9 still isn’t the best solution there. But a filing does seem more likely than not.

If Central Falls does file for bankruptcy – which happens in federal court, not state court – the judge for the case will be appointed by Chief Judge Sandra Lynch of the 1st U.S. Circuit Court of Appeals in Boston, according to Flanders’ office. It won’t necessarily be Judge Arthur Votolato, the U.S. Bankruptcy Court judge for the District of Rhode Island.

For more on what would happen next, read my May Q&A with Chapter 9 attorney James Spiotto. “It is not a pleasurable experience,” he said. “It’s difficult and hard, and it’s stressful for everyone.” It’s also expensive – Vallejo, Calif., has spent more than $10 million since filing for Chapter 9 in 2008 and is still trying to get out.

More coverage of the Central Falls crisis on Nesi’s Notes:

• More than half of Central Falls pensions worth under $30K (July 21)
• Why Central Falls owes its retirees $80 million in benefits (July 19)
• What Chapter 9 bankruptcy would mean for Central Falls (May 11)
• Justice Flaherty rewrites history in Central Falls (March 31)

Flanders, left, talks to the press

This morning’s tense meeting between Central Falls receiver Robert Flanders and police and fire retirees made plenty of news, but that wasn’t all. Afterwards Flanders and his aides held a briefing for reporters, where they offered a few more interesting details about the potential bankruptcy filing there.

• The concessions proposed by Flanders today would reduce Central Falls’ unfunded pension and retiree health liability by about half, from $80 million to roughly $40 million, according to Buck Consultants, its actuarial firm. For a breakdown of where the $80 million number comes from, check out this post.

• Central Falls’ workers are basically being polled by mail to see if they’ll accept Flanders’ proposals. All the retirees and employees who would be affected have been sent a package outlining them and asked to reply before the end of the month saying whether they agree to them or not. While Flanders said he doesn’t need every single retiree to agree to move forward, if a “substantial number” say no, bankruptcy will be more likely. And the deal they’re offered in bankruptcy court would likely mirror this one, he said.

• One unhappy retiree suggested he would rather see what kind of deal they’d get in a Chapter 9 proceeding from Judge Arthur Votolato, the U.S. Bankruptcy Court judge for the District of Rhode Island, rather than accept the deep pension cuts proposed by Flanders.

But it turns out Votolato wouldn’t necessarily handle the city’s Chapter 9 case, should it come to pass – the presiding judge would be picked by Chief Judge Sandra Lynch of the 1st U.S. Circuit Court of Appeals in Boston, according to Central Falls’ bankruptcy attorney. So there’s no way to know for sure who would be making the decisions about Central Falls’ future in Chapter 9.

• One group that’s not being asked to sacrifice for Central Falls? The city’s bondholders. Flanders said that’s because of the new law signed by Governor Chafee that makes repaying them a city’s top priority in the event of a bankruptcy filing – everyone else, including pensioners, are unsecured creditors. The city owes $31 million in principal and interest payments on its debts through 2028, according to a report last December.

(photo: Ted Nesi/WPRI)

Central Falls’ state-appointed receiver, Robert Flanders, will hold a meeting at the city high school this morning where he’ll ask police and fire retirees to accept cuts in their retirement benefits as a way to avoid exhausting their pension fund. Let’s set the stage.

Central Falls has three pension plans, according to a report the previous receiver put out last December.

The biggest – and most underfunded – is the one for police and fire personnel hired since July 1972, sometimes called “the John Hancock plan.” It covers 155 people: 76 current workers; two who are deferred but vested; 28 retirees getting disability pensions; and 49 retirees getting regular pensions.

The second (“the 1% plan”) is for police and fire personnel hired between 1925 and 1972; all 57 people in the plan are currently retired. And the third, for Council 94 members and non-unionized city workers, is part of the state-run MERS system. That covers 68 employees and 30 retirees.

Here’s a snapshot of the three plans’ financial health from the report:

You can see there just how little money is saved to cover the two police and fire pension plans – less than $8 million to cover $54 million in benefits. And it’s also more evidence of why it seems to be better to have cities enrolled in the state-run MERS system, which docks their state aid if they try to skip a pension contribution.

The report goes on to spell out the basic problem of an unfunded pension liability:

It should be noted that the cost of these pension benefits … is being paid by current residents and taxpayers, although the benefits were generally earned years ago. This creates significant generational inequity, as today’s taxpayers are burdened with the significant cost of pension benefits for services that, in many instances, they did not receive. This problem is particularly pronounced in Central Falls and represents a significant drain on current resources due to the failure of previous generations to appropriately fund the benefits they extended to municipal employees.

In addition to the three pension plans, Central Falls also provides health insurance to its retirees. Like most places, the city hasn’t put any money aside to cover that benefit and funds it on a “pay-as-you-go” basis. Central Falls had a $32 million unfunded liability for future retiree health costs as of June 30, 2010; its actual spending on health insurance was $1.47 million in 2009-10.

Retiree health benefits “are largely stipulated in [collective bargaining agreements], thereby significantly reducing the city’s ability to address the impact of this large and growing cost center,” the December report said.

Adding together the $48 million unfunded liability for pensions and the $32 million unfunded liability for retiree health is where you get the oft-cited figure of $80 million for Central Falls’ outstanding financial promises to its retirees. And that’s what Flanders will have in mind when he speaks to retirees today.

The House Finance Committee’s refusal to pony up money to cover Central Falls’ budget deficit means the cash-strapped city may file for Chapter 9 bankruptcy before the end of the summer, its state-appointed receiver says.

“I think it’s more likely than not,” Robert Flanders told WPRI.com late Tuesday. “I don’t want to handicap it beyond that, because I want to give everybody a chance to step up here.”

Flanders is trying to secure large concessions from the city’s unions to avoid a Chapter 9 filing in federal court. He said the city is “rapidly running out of cash” and the denial of a state bailout will require the talks to move even faster.

“There are going to be very big ‘asks,’ so it’s hard to be optimistic about it,” he said. “On the other hand, bankruptcy could be even worse, and as I’ve said before, a haircut still looks better than a beheading.”

The finance committee approved a budget proposal last Friday that does not include $4.9 million Governor Chafee wanted to spend to buy more time for Central Falls to stabilize its finances. The city filed for receivership more than a year ago.

“I’m not surprised at all,” Flanders said. “The suggestion [from lawmakers] was, ‘We’ve got other distressed communities; why should we help Central Falls over the others? We’re already funding the [city's] schools to the tune of $42 million a year. Enough is enough.’ ”

House spokesman Larry Berman was not immediately available to comment on the finance committee’s decision.

Last week, Moody’s Investors Service downgraded Central Falls’ bond rating again and gave it a negative outlook, saying the city could default on its obligations early in the new fiscal year that starts July 1. Flanders acknowledged that’s a possibility.

A decision on whether to file for bankruptcy is likely to come “over the next several weeks – certainly no later than the end of August … and perhaps much sooner depending on our cash flow, how well we collect our taxes, how well we manage our other obligations,” he said.

Related: What filing for Chapter 9 bankruptcy would mean for Central Falls

Central Falls could be forced into bankruptcy within weeks if it doesn’t get an infusion of cash from the General Assembly or major concessions from its unions, the city’s state-appointed receiver has warned.

“Right now time is our biggest enemy,” Robert Flanders told WPRI.com on Thursday. Central Falls closed its 2009-10 fiscal year $1.9 million in the red, and the city only has enough cash to cover payroll and other expenses for about 10 days, he said.

Flanders is hoping state lawmakers will provide a quick infusion of funds by transferring $1.9 million from Central Falls’ state-funded school system to its municipal government. Failing that, he plans to approach the city’s police and fire unions and ask for deep cuts in their compensation to tide the city over.

“If we can’t do that, and we can’t get those agreements, then the bankruptcy option looms much larger,” he said, adding later: “I’m hoping that at a minimum we’re looking at months and not weeks [before bankruptcy might be necessary], but that is very much dependent on uncertainties.”

A failure to get money from the state or givebacks from workers wouldn’t push Central Falls into Chapter 9 immediately, Flanders said; first he would ask large taxpayers like National Grid to speed up their tax payments to the city, which they agreed to do last year, and seek ways to juggle bill payment.

“The objective here is to try to avoid pay-less paydays and defaults, but at the same time manage cash,” he said. “We could potentially extend this thing out for a while.”

Governor Chafee appointed Flanders, who had been chairman of the Board of Regents for Elementary and Secondary Education, as Central Falls’ receiver in February. The situation Flanders described sounded much like the one faced by General Motors and Chrysler in the spring of 2009 – they wanted a government bridge loan to buy enough time to restructure their organizations.

“We’re basically looking to downsize Central Falls to the bare minimum,” he said. “All the so-called services that aren’t essential are on the chopping block.”

Flanders has ordered a study of Central Falls’ police and fire departments from the University of Massachusetts Boston’s Collins Center for Public Management that will offer options for cutting them without sacrificing public safety. He expects to receive it four or five weeks from now, and plans to offer a formal proposal to the police and fire unions after that.

Flanders said he is in talks about outsourcing all the city’s public-safety needs to a neighboring community like Pawtucket, Cumberland or Lincoln. He thinks it could be a win-win, providing new revenue for the other city while reducing Central Falls’ budget by cutting overhead.

“It’s basically, ‘Take my city, please’ – you know, Henny Youngman,” Flanders said.

The much-hyped possibility of annexation – that is, merging Central Falls into Pawtucket or another city – remains a possibility, but not a likely one in the short-term because it would likely require complicated constitutional and legal changes, Flanders said.

Another worry is the city’s so-called “John Hancock pension plan,” created in 1972 for police and fire retirees; actuaries tell Flanders it will run out of cash in October. Asked whether he worries retirees will resist deep benefit cuts even if the alternative is bankruptcy, Flanders replied: ”A haircut still looks a lot better than a beheading.”

At the request of Flanders’ predecessor, Mark Pfeiffer, the Chafee administration included $4.9 million in its 2011-12 budget proposal to close a deficit in Central Falls’ current $17 million budget. But “this appropriation does not solve anything,” Revenue Director Rosemary Booth Gallogly said in March.

Flanders also warned that the outcome of the crisis in the city he’s overseeing could have ripple effects across the state. ”This is not unique to Central Falls,” he said. “We’re just a little more advanced in the process.”

Despite the grim situation, Flanders expressed the hope that the lessons learned in Central Falls could help provide a blueprint for other communities. ”It’s like the manager who takes over the last place team,” he said. “There’s opportunity all around.”

Related: What filing for Chapter 9 bankruptcy would mean for Central Falls