Michael Riley: RI Municipal Pension Study Comm. Is in Failure Mode
Tuesday, April 08, 2014
In January 2012, Chairperson Rosemary Booth Gallogly laid out the mission and role of the Rhode Island Pension Study Commission during the group’s first meeting by asking commission members to review the Retirement Security Act of 2011 and the statutory requirements for the Study Commission. That was easy. Then Gallogly urged the commission to quickly develop a set of priorities. So far so good.
Playing politics from the start
But then, minutes after these organizing comments, Johnston Mayor Joseph Polisena immediately let us know why he was on the commission and what his goal was. Within the first 20 minutes, of the very first meeting, Mayor Polisena stated that “ his community had incurred an $8.8 million decrease in State Aid between 2007 and 2011….and If Johnston and other communities had not received cuts in State Aid and were not subject to unfunded state mandates perhaps Johnston and some cities and towns would not be in the financial position they are in now.” He stated this before any priorities had been set and before any studies had been completed or submitted. Maybe he should have said, “It’s not my fault or the cost of benefits or anything we did. It was the previous Governor’s fault.”
So there it was, Carcieri under the bus and within the first half hour of the first meeting one of the major weaknesses of this commission were revealed. The Mayor of one of the most “Critically underfunded” cities in the United States chose that particular moment to whine about the previous Governors reduction of aid to cities and towns. Johnston has $180 million of unfunded pension liability and $229 million of unfunded OPEB liability. The $ 8.8 million that Mayor Polisena talked about was literally a drop in the bucket. So Mayor Polisena decided this was the time and place to play politics. That was a very ugly start but maybe the problem with this ineffective commission was the structure and membership.
In failure mode
I have already determined that this dying commission is in “failure mode” and is winding down its never determined reason for existence but that doesn’t mean that each and every member should not be held accountable to the people of Rhode Island for their actions or inaction. As such, each of the members will receive grades (A thru F) and a thorough review scrutinizing the actions of the committee and committee members. Thankfully as a result of good government groups and public meeting laws we have access to the minutes of all the meetings, the attendance of members, the reports and compliance from critical status towns that were received and reviewed by the commission. This will provide a real set of information to determine how well this commission and its members have done addressing this crisis.
Attending last week’s Pension Commission meeting was extremely illuminating. The Pension Study Commission that was formed to address the municipal pension crisis barely had enough attendance to discuss the issues (next steps) and struggled to get to a quorum. Providence Mayor Angel Taveras, whose pension fund is 19% funded and Mayor Polisena, whose is 21% funded, did not attend the meeting or even bother to send a representative. They were instead reported to be at the Congressional delegation breakfast. Does anyone take this crisis seriously?
For those who still care about this crisis, the accountability of the commission, and the appointed members to the citizens of Rhode Island, the grades will be issued both through GoLocalProv and my blog http://rishrugs.blogspot.com/. For a full list of commission members, click here.
Related Slideshow: Providence Pension Liability
A new report shows that Providence’s pension fund—even after the recent reform—is still in trouble. The below slides break out the key numbers for the pension fund, including the unfunded liability, the assumed and actual rates of return, the current level of benefits, and how long it will take the city to pay off the unfunded liability. Figures are current as of July 1, 2013 and are taken from the new Jan. 31 actuarial report from Segal Consulting.
Impact of Lower Rates of Return
$72 million:The city unfunded liability increased by this amount when the city lowered its assumed rate of return by a quarter of a percentage point, from 8.5% to 8.25%
$506.2 million: The estimated increase in the unfunded liability were the city to use the 6% assumed rate of return recommended by Moody’s Investors Service.
Current Cost of Pension Fund
City Contribution: $58.1 million
Employees Contribution: $10.9 million
Net Investment Return: $18.1 million
Cost of Retiree Benefits: $95.4 million
Note: Net investment return is the return on investments after investment and administrative fees have been paid.
- Michael Riley: Providence Vying for Worst Funded City in America
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- Michael Riley: The Harsh Reality of the Pension and OPEB Crisis
- Michael Riley: The Municipal Pension Study Commission Is A Failure
- Guest MINDSETTER™ Michael Riley: Rhode Island’s Leadership Problem
- Michael Riley: The Pension Study Commission Needs To Face Reality
- Michael Riley: Analysing A Crisis
- Michael Riley: These RI Cities + Towns Could Be Next in Bankruptcy
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