Rhode Island City Declares Bankruptcy Retiree health benefits sink city of Central Falls By Kevin Spak, Newser Staff Posted Aug 2, 2011 1:19 PM CDT 21 comments Comments In this July 7, 2011, photo, flags are planted at a veterans memorial in Central Falls, R.I. (AP Photo/Elise Amendola) (Newser) – Central Falls, Rhode Island, declared Chapter 9 bankruptcy yesterday, a virtually unheard of move prompted by a mass of unfunded pension and retiree health benefits. Central Falls, which Reuters calls "the smallest city in the smallest US state," has just 19,000 residents—yet it has a budget of $17 million and owes $80 million in benefits. The city has been under state control since last July, and has $21 million in debt. “This is a wake-up call for other struggling towns,” says one George Mason University researcher. “States should be looking at Rhode Island and saying, ‘How can we avoid this?’” Alabama’s Jefferson County, for example, is on the brink of the largest municipal bankruptcy the US has ever seen, and Harrisburg, Pa., is considering declaring as well.