Moore: RI Has Bigger Ethics Issues Than Lally’s Job

Monday, September 14, 2015

Russell J. Moore, GoLocalProv MINDSETTER™

There's always a quid pro quo in politics.

Politicians will deny it until they're blue in the face. But there's one thing I've learned after covering politics for a decade: nothing is ever done for free.

So Gina Raimondo came under fire last week for hiring Donald Lally, who stepped down as a state representative earlier this year. Raimondo insists that she didn't do anything for House Speaker Nicholas Mattiello in return. Lally will make $87,000 a year as part of the Governor's staff. But she has "loaned" out the former legislator to the Department of Business Regulations. That defies the spirit of the state's revolving door statute, enacted to prevent cronyism.

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Small and Big Infractions

The major concern is that while the media is busy reporting on and talking about a small issue, the massive expenditures are ignored.

For instance, the state Republican Party criticized the move. True to form, they did so awkwardly.

"It appears that we are going back to the good old days with old boy network politics under Raimondo. You can't move Rhode Island forward by going backwards on ethics."

Was there a time when Rhode Island wasn't operating under the good ole boy network politics? Did I miss that? As far as I can remember, that's always been the case. Rhode Island is not, nor has it ever been some bastion of ethics.

Demand Ethics

None of this is to say that the GOP's point wasn't correct. The backroom deals in this state have absolutely hurt the economy. The only businessmen and women who want to do business in state where you need to know somebody are corrupt themselves.

Let's not forget, Raimondo once criticized then-Governor Lincoln Chafee's appointment of Richard Licht to the Superior Court during a debate last June. That move also violated the spirit of the revolving door statute. And she was right to point that out. But now she's done the same thing.

Sure, that's bad. And it should be discussed. But, what about what we're not talking about?

The Republican Party, and other critics, should also criticize Raimondo's management of the Rhode Island Pension system instead. Since Raimondo became General Treasurer, the state has dramatically increased the amount of fees paid to financial money managers. In 2014, the state paid $70 million to money managers. The state was paying less than $30 million before Raimondo becoming Treasurer.

Pay More, Get Less

It's no secret the cost has increased due to the investments in hedge funds. Yet outside of Rhode Island, financial analysts realize that hedge funds aren't worth it. For instance, an article in Bloomberg this month stated that hedge funds “failed to beat a 60/40 [stock and bond index] mix every single year since 2002, and they’re on track to repeat this year.”

This year, the Rhode Island pension fund got a 2.2 return on investment - in a poor year for the broader financial markets. Hedge funds were supposed to protect the fund from poor markets. That hasn't happened considering so many other pension funds across the country faired better.

Yet what paying managers high fees does do is allow politicians to raise much more money from the finance industry. There are so many accountants, lawyers, and other professionals connected to hedge fund managers who can be tapped to raise money. In other words, they can't say "no" when they're asked. That’s why she’s a fundraising juggernaut. It doesn’t take much dot connecting to figure it out folks.

More Important Than Lally’s Job

Raimondo is no longer Treasurer, but her ties to the finance industry haven't weakened. Just last month she tapped several key finance industry experts, including Rhode Islander, Mark Gallogly, to fund a Brookings Institution study of the state's economy.

Former Rhode Island Director of Administration, Gary Sasse, called the study a farce on social media. Sasse tweeted, "If you don't believe the recommendations of Brookings economic development are already in the Gov's desk draw, I have a bridge to sell you," about a week ago.

So we have a farcical study funded by the finance industry. One of the funders, Mark Gallogly, profits from the state pension fund business.

No one is suggesting any of it is illegal. But while it's still important to know which connected people are getting the well paying state jobs, Rhode Islanders would do well to keep their eye on the millions of dollars handed over to the finance industry. That's something to talk about. It’s much more important than Lally’s new, cushy job.

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Russell Moore has worked on both sides of the desk in Rhode Island media, both for newspapers and on political campaigns. Send him email at [email protected]. Follow him on twitter @russmoore713.

Related Slideshow: Raimondo Policy Summit Suggestions

Governor-elect Gina Raimondo will be hosting a "transition policy summit" with 80 thought leaders throughout the state on Tuesday.

GoLocal crowdsourced input from those Rhode Islanders who are not attending the summit as to what their suggestions would be -- below are just some of the comments provided on the GoLocalProv Facebook page as to what they would like to see.

Moore: RI Has Bigger Ethics Issues Than Lally’s Job

Related Slideshow: Raimondo Policy Summit Suggestions

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