EAST PROVIDENCE — It appears the city manager wasn’t exaggerating when he testified last month that East Providence’s financial problems — he said the city was on the verge of bankruptcy — were unlike those of any other community in the state.

An arbitrator in the local teachers contract dispute agreed wholeheartedly in his nonbinding decision released yesterday. The last contract covering the more than 500 members of the East Providence Education Association expired Oct. 31.

“Seldom, if ever, has the neutral member of the panel encountered a school system in greater financial difficulty,” arbitrator Michael C. Ryan wrote. “Not only is the city somewhat hamstrung by statute from raising revenue through taxation, but the department’s longstanding deficit has been compounded by a once-in-a-generation national economic crisis that began only a few months ago [and] is projected to extend years into the future.”

Ryan called for no pay increases this year and for requiring teachers to pay part of the cost of their health insurance coverage. But he sided with the union on other issues.

The competing proposals that the School Committee and the teachers union had presented to Ryan’s panel were worlds apart.

The School Committee wanted to scale back the base salaries of its teachers by 5 percent and make the educators pay a 35-percent share — 50 percent for new hires — of their health insurance costs; currently they contribute nothing. In addition, the committee wanted to increase the teachers’ work year and rid the district of a buyback clause that as much as $5,100 be paid to teachers who decline the city’s health insurance coverage.

School Department and city officials who testified before the arbitration panel said the last teachers contract was too generous and was unaffordable for East Providence’s already strapped taxpayers. They also said getting concessions from the teachers would be the only way to pay off its growing deficit, which was topping $4.2 million. And the city needs money for crucial school building repairs, they said.

The union’s proposal did not call for immediate salary increases but called for increased stipends for coaching positions. It called for establishing a joint committee to study citywide employee contributions to the cost of health insurance.

Union representatives contended in testimony before the arbitration panel that the city’s fiscal problems are “self-inflicted” and said the burden of fixing them shouldn’t fall solely on the teachers.

“It is fruitless to focus on who is to blame for the accrued deficit,” arbitrator Ryan concluded in his decision. “Regardless of fault, the department has a current, pressing, bona fide lack of ability to pay for competitive increases…. Obviously the School Committee will not be able to meet the teachers’ salary and benefit expectations, therefore, now is not the time to impose additional performance demands on an already heavily burdened teaching staff.”

He added, “… It could be said that no other school district is truly comparable to East Providence because none is facing the same fiscal crisis.”

Although nonbinding on financial matters, the decision did not call for extending the teachers’ work year and did not endorse increasing coaching stipends. It suggested no increase in the base salaries for the first year of a new contract and 2 and 3 percent increases in years two and three, respectively.

“The extreme financial distress of the East Providence school system must result in a wage settlement that will be less than satisfactory to its teachers,” Ryan said. “... The department’s finances, already dire, are likely to get worse owing to the domino effect of the falling stock market and declining property values. That being said, the department cannot expect the teachers to bear the entire brunt of its financial distress. Its proposal for a pay rollback of some 5 percent is untenable…”

Ryan agreed the teachers should pay part of the cost of their health care, but not 35 percent, as the school board proposed.

He said cost-shifting from employer to employee has been a “fact of life for well over a decade” and suggested a gradual increase to 15 percent over a three-year contract — 5 percent in year one, 10 percent in year two and 15 percent in year three. New hires would contribute 15 percent immediately.

The arbitrator didn’t agree the buyback clause for declined city health coverage should be removed. But he suggested reducing it to a flat dollar amount — $1,500 for individual coverage and $3,000 for family coverage — rather than a percentage of premiums.

Mayor Joseph Larisa Jr. said the arbitrator’s findings, if followed, would create “financial ruin for the city and its taxpayers.”

School Committee Chairman Anthony Carcieri said, “It’s not helping anybody. He’s giving us nothing. This is ridiculous. There is no money and that’s in black-and-white.”

The committee will meet in closed session Dec. 30 to discuss the decision and decide the district’s next step.

The union will also meet soon to share the decision with its members. Its lawyer, John A. Leidecker Jr., concurred with the arbitrator’s opinions. But he said the city’s problems are the result of negligence by its elected officials and have little to do with “our national and international economic crisis.”

apina@projo.com