Michael Riley: The Reality of Providence Pension Liability
Tuesday, October 07, 2014
Mayor Taveras uses among the highest discount rate in the country 8.25%. Moody’s will use and analyze using between 5.5% and 6%. We will use 6% for their analysis and a blended rate based on crossover points indicating 70% muni rate and 30% the providence assumption for returns. The 2012 CAFR is used and assets were then reported as $421 million dollars ( even though assets in the fund were only $247 million) First we will adjust assets down by $57 million based on the auditors admonition against Taveras accounting gimmick, next we will use market value as prescribed by gasb 67.
This table reveals the truth through analysis, if you want to believe Taveras lies then keep reading the Projo and WPRI. If you are an accountant or actuary including those employed by Providence please refute these numbers in public.
Analysis of Providence Pension Liabilities Taveras vs Reality
The true Status on Providence Pension funding ratio is between 11 and 16%. The people have been misled by Taveras and Cicilline, and the media that dutifully repeats his lies without independent analysis and confirmation.
Providence is in true Crisis. 3 years of a flat to down stock market will virtually bankrupt the pension plan. The math is simple benefits cost nearly $100 million a year. Contributions are about $68 million (including arc).If there is no gain in the investment account and /or contributions from the government decline to $60 million there will be less than one year of benefits left in the fund. The next step is IOU’s once tried in California or receivership.
Just for fun, I added the reported Pension Fund status in 2002 showing the very poor condition of the plan and the lack of progress or urgency in 2002 by Buddy Cianci. I have not yet heard a plan from Elorza or Cianci to deal with reality in 2015.
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