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Riley: Rhode Island to Contribute More to Pensions, Providence Still in Fantasy Land

Wednesday, January 03, 2018

 

Seth Magaziner

Recent public reporting citing the Rhode Island Treasurer’s Office announcement of an actuarial valuation report of the state pension system shows significant deterioration in the state-funded ratio to approximately 54%. Rhode Island now has only 54% of the funds necessary to fund pension benefit payment to state retirees and their families.

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.

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. 

 

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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.

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Are you registered to vote at this address?

Yes: 100%

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Unaffiliated: 49%

Democrat: 32%

Republican: 15%

Moderate: .4%

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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%

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Right track: 39%

Wrong track: 45%

Mixed: 10%

Don't know/Refused: .6%

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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%

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Changed for the better: 35%

Changed for the worse: 16%

Not changed at all: 43%

Don't know/Refused: 5%

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Changed for the better: 26%

Changed for the worse: 19%

Not changed at all: 54%

Don't know/Refused: 1%

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Net: Approve: 28%

Definitely approve: 15%

Probably approve: 14%

Net: Reject: 67%

Probably reject: 19%

Definitely reject: 48%

Don't know: 4%

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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%

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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%

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$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%

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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%

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Excellent: 13%
Good: 12%
Fair: 14%
Poor: 57%
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Cannot rate: 3%

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Excellent: 22%
Good: 29%
Fair: 23%
Poor: 15%
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Cannot rate: 6%

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

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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%

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

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Fair: 30%
Poor: 31%
Never heard of: 1%
Cannot rate: 3%

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

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

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

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

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

 
 

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