Riley: Elorza Purposely Underfunds Disastrous Providence Pension Plans

Tuesday, May 08, 2018

 

View Larger +

Jorge Elorza

Should Mayor Elorza explain to Bill Gates, Charlie Munger, and Warren Buffet why they are currently wrong and Elorza’s 8% investment return prediction is right? Here is Gates opinion in 2016 when Elorza acting as lead fiduciary for Providence pension plan used an 8.5% return assumption massively underfunding Providence pension plans.  

Elorza Purposely Underfunding Pensions

Elorza -- who touts himself as an “accountant” -- fully understands that overstating the assumed investment return reduces the amount of funding from the city to support the plan and its retirees.

Therefore, his behavior has been purposely underfunding the pension plan in order to spend money elsewhere.

From NASRA (National Association of State Retirement Administrators):

“The investment return assumption is the single most consequential of all actuarial assumptions in terms of its effect on a pension plan’s finances. The sustained period of low-interest rates since 2009 has caused many public pension plans to re-evaluate their long-term expected investment returns, leading to an unprecedented number of reductions in plan investment return assumptions. Absent other changes, a lower investment return assumption increases both the plan’s unfunded liabilities and cost. The process for evaluating a pension plan’s investment return assumption should include abundant input and feedback from professional experts and actuaries and should reflect consideration of the factors prescribed in actuarial standards of practice.”

There have been multiple warnings on this same issue that Mayor Elorza ignores and violates. Here is Gates once again explaining basic economics and investment return expectations yesterday morning May 7, 2018, with both Warren Buffett and Charlie Munger agreeing.

Raimondo Refuses to Audit Providence

It is clear that even in “Elorza world”, located somewhere outside “delusionville,” Elorza is well aware that his investment return assumptions for the last 4 years have systematically and purposely underfunded Providence which has gained the dubious distinction of the worst-funded municipal pension system of any state capital in the United States. It has taken place all under his watch and he has done it on purpose. If he knows that is the case, the question is why does he do it? It would be nice if he was ever asked that question by the media because according to him, finances are fine and there is no cash flow problem. 

This complete disconnect from the reality of Providence's Mayor is why many think Governor Raimondo should demand an independent forensic accounting of Providence and the pension system. I suspect hundreds of millions of dollars of shady accounting, misleading reporting and misappropriated public funds over the last 12 years by Cicilline, Taveras and now Elorza. We know Elorza is a selfish politician interested only in survival, but Gina Raimondo has Presidential aspirations and for her to ignore the bankrupt state capital shows a lack of leadership and diligence that only adds to her poor record on 38 Studios.

View Larger +

Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC. 

 

Related Slideshow: GoLocal: Benchmark Poll, October 2017

View Larger +
Prev Next

Sponsor: GoLocalProv

Sample: N=403

Rhode Island General Election Voters Margin of Error: +/- 4.9% at 95% Confidence Level

Interviewing Period: October 9-11, 2017

Mode: Landline (61%) and Mobile (39%)

Telephone Directed by: John Della Volpe, SocialSphere, Inc.

View Larger +
Prev Next

Are you registered to vote at this address?

Yes: 100%

View Larger +
Prev Next

When it comes to voting, do you consider yourself to be affiliated with the Democratic Party, the Republican Party, Moderate, or Unaffiliated with a major party?

Unaffiliated: 49%

Democrat: 32%

Republican: 15%

Moderate: .4%

View Larger +
Prev Next

Next year, in November of 2018, there will be a statewide general election for Governor and many other state offices. How likely is it that you will vote in this election?

Will you definitely be voting, will you probably be voting, are you 50-50...

Definitely be voting: 78%

Probably be voting: 13%

50-50: 9%

View Larger +
Prev Next

In general, would you say things in Rhode Island are headed in the right direction or are they off on the wrong track?

Right track: 39%

Wrong track: 45%

Mixed: 10%

Don't know/Refused: .6%

View Larger +
Prev Next

What would you say is the number one problem facing Rhode Island that you would like the Governor to address?

Jobs and economy:  21%

Education: 12%

Taxes: 12%

Roads: 12%

State budget: 9%

Corruption/Public integrity: .8%

Healthcare: 3%

Governor: 3%

Homelessness: 2%

Immigration: 2%

Other: 7%

Don’t know: .9%

View Larger +
Prev Next

Over the past three years or so, would you say the economy in Rhode Island has improved, gotten worse, or not changed at all?

Changed for the better: 35%

Changed for the worse: 16%

Not changed at all: 43%

Don't know/Refused: 5%

View Larger +
Prev Next

Over the same time, has your family's financial situation improved, gotten worse, or not changed at all?

Changed for the better: 26%

Changed for the worse: 19%

Not changed at all: 54%

Don't know/Refused: 1%

View Larger +
Prev Next

Recently, a proposal has been made to permit the issuance of $81 million in bonds by the State to build a new stadium for the Pawtucket Red Sox. If there was an election today on this issue, would you vote to approve or reject issuing $81 million in financing supported moral obligation bonds to build the stadium?

Net: Approve: 28%

Definitely approve: 15%

Probably approve: 14%

Net: Reject: 67%

Probably reject: 19%

Definitely reject: 48%

Don't know: 4%

View Larger +
Prev Next

Could you please tell me your age?

18-24: 7%

25-34: 15%

35-44: 15%

45-54: 20%

55-64: 17%

65+: 25%

Don't know/refused: 1%

View Larger +
Prev Next

What was the last grade you completed in school?

0-11: 2%

High school grad: 16%

Technical/Vocational school: 1%

Some college: 23%

College grad: 34%

Graduate degree: 24%

Don't know/refused: 1%

View Larger +
Prev Next

The next question is about the total income of YOUR HOUSEHOLD for the PAST 12 MONTHS. Please include your income PLUS the income of all members living in your household (including cohabiting partners and armed forces members living at home).

$50,000 or less: 27%

More $50,000 but less than $75,000: 13%

More $75,000 but less than $100,000: 13%

More $100,000 but less than $150,000: 17%

$150,000 or more: 13%

Don't know/refused: 17%

View Larger +
Prev Next

What particular ethnic group or nationality - such as English, French, Italian, Irish, Latino, Jewish, African American, and so forth - do you consider yourself a part of or feel closest to?

American/None: 21%

English: 13%

Italian: 13%

Irish: 12%

Black or African American: 6%

Latino/Hispanic: 6%

French: 6%

Portuguese: 3%

Jewish: 3%

German: 1%

View Larger +
Prev Next

Would you say that Donald Trump has done an excellent good, fair or poor job as President?


Excellent: 13%
Good: 12%
Fair: 14%
Poor: 57%
Never heard of:  0%
Cannot rate: 3%

View Larger +
Prev Next

Would you say that Jack Reed has done an excellent good, fair or poor job as a United States Senator?

Excellent: 22%
Good: 29%
Fair: 23%
Poor: 15%
Never heard of: 6%
Cannot rate: 6%

View Larger +
Prev Next

Would you say that Sheldon Whitehouse has done an excellent good, fair or poor job as a United States Senator?

Excellent: 17%
Good: 22%
Fair: 21%
Poor: 28%
Never heard of: 6%
Cannot rate: 7%

View Larger +
Prev Next

Would you say that David Cicilline has done an excellent good, fair or poor job as a Member of Congress?

Excellent: 9%
Good: 29%
Fair: 21%
Poor: 27%
Never heard of: 6%
Cannot rate:  8%

View Larger +
Prev Next

Would you say that James Langevin has done an excellent good, fair or poor job as a Member of Congress?

Excellent: 7%
Good: 30%
Fair: 20%
Poor: 18%
Never heard of: 13%
Cannot rate: 11%

View Larger +
Prev Next

Would you say that Gina Raimondo has done an excellent good, fair or poor job as Governor?

Excellent: 6%
Good: 28%
Fair: 30%
Poor: 31%
Never heard of: 1%
Cannot rate: 3%

View Larger +
Prev Next

Would you say that Daniel McKee has done an excellent good, fair or poor job as Lieutenant Governor?


Excellent: 3%
Good: 16%
Fair: 21%
Poor: 8%
Never heard of: 26%
Cannot rate: 25%

View Larger +
Prev Next

Would you say that Peter Kilmartin has done an excellent good, fair or poor job as Attorney General?


Excellent: 3%
Good: 20%
Fair: 28%
Poor: 17%
Never heard of: 13%
Cannot rate: 19%

View Larger +
Prev Next

Would you say that Seth Magaziner has done an excellent good, fair or poor job as General Treasurer?

Excellent: 4%
Good: 18%
Fair: 24%
Poor: 13%
Never heard of: 21%
Cannot rate: 21%

View Larger +
Prev Next

Would you say that Nellie Gorbea has done an excellent good, fair or poor job as Secretary of State?

Excellent: 5%
Good: 21%
Fair: 21%
Poor: 10%
Never heard of: 20%
Cannot rate: 23%

View Larger +
Prev Next

Would you say that Jorge Elorza has done an excellent good, fair or poor job as Mayor of Providence?

Excellent: 4%
Good: 24%
Fair: 24%
Poor: 22%
Never heard of: 9%
Cannot rate: 15%

 
 

Enjoy this post? Share it with others.

 
 

Sign Up for the Daily Eblast

I want to follow on Twitter

I want to Like on Facebook

X

Stay Connected — Free
Daily Email