Riley: Rhode Island to Contribute More to Pensions, Providence Still in Fantasy Land
Wednesday, January 03, 2018
As a result, the State intends to add to the current fiscal year 2019 budget allocation of $442 million increasing to $465 million for the Fiscal Year 2020.
This change is a result of a Gabriel Roder-suggested lowering of the Rhode Island expected rate of return or “discount rate” to 7%. Without increasing contributions, it would be even more unlikely that the state pension fund could achieve and 80% funded ratio necessary to return some colas taken away in 2011.
It appears that State pension investment returns have significantly underperformed expectations relative to the growth in liabilities. It also appears the State continued its long-standing strategy of purposely underfunding the pension system in order to produce “balanced” budgets. Very few states actually have balanced budgets despite constitutional requirements. Rhode Island does not have a balanced budget and is ranked “D” by Truth in Accounting.
Providence? Even Worse
Providence's expected investment rate of return is an unheard of 8% and Elorza continues to purposely underfund pensions using delayed payment schemes, inflated assets, and elevated return assumptions.
In the corporate world, these are violations and in the municipal world, it is considered fraud to mislead municipal bond investors. Elorza has openly laughed at bankruptcy worries in order to assure investors and keep borrowing money. Truth in Accounting shows that Providence citizens, as a result of poor financial management, are among the most tax-burdened citizens in America. Providence received an “F” in a recent report.
If Providence matched the State actuary suggestion of 7% returns, instead of the Elorza chosen rate of 8%, then Providence unfunded liabilities would increase by over $200 million and the reported funded ratio would be under 20%. Elorza has not and will not accept reality. On the other hand, despite reversing campaign his promises of raising the State's discount rate, Treasurer Magaziner has behaved responsibly by using more realistic assumptions, knowing this causes an increase in budgeted pension contributions.
Providence needs to contribute more to pensions and needs to contribute them on time. Jorge Elorza has improved on the extremely poor records of those before him but continues to mislead taxpayers and retirees.
Related Slideshow: GoLocal: Benchmark Poll, October 2017
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%
What would you say is the number one problem facing Rhode Island that you would like the Governor to address?
Jobs and economy: 21%
State budget: 9%
Corruption/Public integrity: .8%
Don’t know: .9%
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%
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%
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?
Black or African American: 6%
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