Riley: When Will Rhode Island Retirees Get Truth About COLAs?
Wednesday, September 06, 2017
In the 2010 race for Treasurer in Rhode Island, Gina Raimondo would often say that it's "just math" in describing how the State of Rhode Island and its 39 municipalities were headed into a disastrous outcome and failure. She made the case that politicians were not focused on the problems of underfunding caused almost entirely by politicians overpromising and under-delivering.
Raimondo's reform was widely praised by friends and donors across the country including the John Arnold Foundation, American Enterprise Institute, and her biggest booster, Michael Bloomberg.
Like many financially focused policy commentators, I agreed with the above-cited groups and most notably the work of Stanford professor Joshua Rauh. I supported State and municipal pension reform as critical to the survival of Rhode Island. Raimondo went on a one-year public speaking tour and made her case for reform.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTWe all know the story but what we forget is how bad a shape municipal pensions were and that Raimondo, Chafee, and the ill-fated Crisis Pension Commission dropped the ball. Mayors like Joseph Polisena, Angel Taveras, and others ignored the warnings and reports findings and ended up doing nothing. Taveras efforts led to lawsuits and re-configuring numbers and a $70 million addition to liabilities missed by all his experts.
So here we are in 2017 and after some very good returns in the market, it’s still just math.
The reformed pension Retirement Plan had $7.23 billion in assets on June 30, 2012, and was 59% funded. As of June 30, 2017, the plan had $8.04 billion in assets was 58% funded.
What happened?
Is Raimondo still of the opinion today that the current retirees will get their COLA back? COLAs for many are suspended until their plan reaches 80% funded.
This was a goal Raimondo thought easily achievable in 20 years or less. So, when does Ms. Raimondo or Mr. Magaziner expect that to be?
Rhode Islanders just saw another plan's fiduciaries leave their retirees uninformed about changes in the outlook for their benefits.
This was St. Joseph's pension collapse.
Their chance for receiving promises is near zero. Has the outlook for RI State teachers and retirees ever getting their COLA’s back dramatically changed in the six years since RIRSA?
If it has changed is it also near zero? If not, what is the likelihood of getting their COLAs back? These calculations are available and have been publicly made by Raimondo’s staff and should be easily calculated by Magaziner and staff.
Raimondo and Magaziner both made promises and are fiduciaries who need to better inform employees and retirees of changes in the outlook for their COLAs. It’s just math.
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: 10 Things to Know About One of Biggest Pension Failures in RI - St. Joseph Receivership
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