Riley: Governor Raimondo Aware of Providence Lies
Tuesday, January 26, 2016
There currently exists on the city balance sheet a liability known as “owed to the pension plan." It is listed under “current Liabilities”, which are meant to be paid within one year. Yet this same item appears every year. This liability (loan) was not approved by the Pension Investment Commission or anyone involved in the pension plan. Yet it’s there every year. Last year, after I pointed out that the asset claimed by the pension Plan (due from city) did not exist, Segal Co investigated the value of the stated assets of the plan and agreed with me and against the City and unilaterally (for proper accounting reasons) wrote the asset down removing nearly 15% (tens of millions) of the stated assets of the Pension plan. Poof $53 million in claimed pension assets gone. What did the unions do about it? Nothing, because they don’t want to trip bankruptcy. Nevertheless, the practice of “kiting” the pension contributions still exists today and Providence does not forward the contributions that employees make every paycheck along with ACR to the pension plan.
Instead they promise payment of a lump sum at year end. “Cash flow” they say. More like borrowing from Peter to pay Paul. But what about the returns that could have been received all year long on those contributions? Isn’t Providence borrowing pension money without authorization and without compensating the Pension plan? I think that they are! To dig deeper, I have submitted the letter below to the Auditor General in order to get to the bottom of this. I also believe that Governor Raimondo has known about this for at least 5 years and is complicit in misleading City and State municipal bondholders as to the true Financial Condition of Providence. She led and formed a Municipal Crisis Pension Commission and all the information I have used to figure out this scam comes from the reports presented to that commission. To ignore this scam or mislead bondholders about Providence Financial condition is inexcusable and in fact illegal. This violates Federal Securities Law.
Here is the Letter to the Auditor General:
Dear Mr Hoyle,
On the Rhode Island Treasurer’s website, there is a schedule of Employer Allocations and schedule of pension amounts by employer. Among the many employers in the State Pension System are every city and town including Providence. Are the contributions to the State Pension Plan by these employers received as the year progresses or at the end of the year? Which entities do not pay on time and what is the penalty?
Mr. Hoyle, you and Ernie Almonte before you, have monitored every local pension plan for every community in the State of Rhode Island for years. Please answer the following questions.
1) Which Cities and towns do not pay contributions to the plan as the year progresses and instead pay at year end?
2) Is it legal for Cities and towns to collect pension contributions from employees but withhold dollars from the pension plan?
Michael G Riley
Related Slideshow: Timeline - Rhode Island Pension Reform
GoLocalProv breaks down the sequence of events that have played out during Rhode Island's State Employee Pension Fund reform.
Governor Don Carcieri makes pension reform a top priority in his emergency budget plan. His three-point plan included:
1. An established minimum retirment age of 59 for all state and municipal employees.
2. Elimination of cost-of-living increases.
3. Conversion of new hires into a 401(k) style plan.
See WPRI's coverage of Carcieri's proposal here.
Rhode Island increased mandatory employee contributions for new and current employees. New Mexico was the only other state to mandate current employees to increase their contributions.
Read the NCSL report here
(Photo: FutUndBeidl, Flickr)
Rhode Island's state administered public employee pension system only held 48% of the assets to cover future payments to its emplyees.
"This system as designed today is fundamentally unsustainable, and it is in your best interest to fix it" - Gina Raimondo
Check out Wall Street Journal's coverage here.
Gina Raimondo defeats opponent Kernan King in the election for General Treasurer of Rhode Island using her platform to reform the structure of Rhode Island's public employee pension system. She received 201,625 votes, more than any other politician on the 2010 Rhode Island ballot.
Raimondo leads effort to reduce the state’s assumed rate of return on pension investments from 8.25 to 7.5%.
Her proposal includes plans to suspend the Cost of Living Adjustment (which allows for raises corresponding with rates of inflation for retirees), changing the retirement age to match Social Security ages, and adding a defined contribution plan.
Raimondo releases “Truth in Numbers”, a report detailing the pension crisis and offering possible solutions. She continues to work to raise public support for her proposal.
"Decades of ignoring actuarial assumptions led to lower taxpayer & employee contributions being made into the system." - Gina Raimondo (Truth in Numbers)
Read GoLocalProv's analysis of the report here.
Read the Truth in Numbers report here.
Governor Lincoln Chafee and General Treasurer Gina Raimondo present their pension reform legislation proposal before a joint session of the General Assembly.
“Our fundamental goal throughout this process has been to provide retirement security through reforms that are fair to the three main interested parties: retirees, current employees and the taxpayer…I join the General Treasurer in urging the General Assembly to take decisive action and adopt these reforms.”- Gov. Lincoln Chafee
Head of Rhode Island firefighters’ union accuses Raimondo of “cooking the books” to create a pension problem where one did not exist. Paul Valletta Jr. states that Raimondo raised Rhode Islanders’ assumed mortality rate to increase liability to the state, using data from 1994 instead of updated information from 2008, and lowered the anticipated rate of return on state investments.
“You’re going after the retirees! In this economic time, how could you possibly take a pension away?” Paul Valletta Jr (Head of RI Firefighters' Union)
Read more from the firefighters' battle with Raimondo here.
Check out the New York Times' take on RI's pension crisis here.
November 17, 2011
The Rhode Island Retirement Security Act (RIRSA) is enacted by the General Assembly with bipartisan support in both chambers. RIRSA’s passing is slated to reduce the unfunded liability of RI’s pension system and increase its funding status by $3 billion and 60% respectively, level contributions to the pension system by taxpayers, save municipalities $100 million through lessened contributions to teacher and MERS pension systems, and lower the cost of borrowing.
Read more from GoLocalProv here.
November 18, 2011
Governor Lincoln Chafee signs RIRSA into law. According to a December 2011 Brown University poll, 60% of Rhode Island residents support the reform. Following its enactment, Raimondo holds regional sessions to educate public employees on the effects of the legislation on their retirement benefits.
Read about how Rhode Islanders react to RIRSA here.
Raimondo hosts local workshops to explain the pension reforms across Rhode Island. She also receives national attention for her contributions to the state’s pension reforms. The reforms are given praise and many believe Rhode Island will serve as a template for other States’ future pension reforms.
Read about the pension workshop here.
Read Raimondo's feature in Institutional Investor here.
March - April 2012
Raimondo opposes Governor Chafee’s proposal to cut pension-funded deposits. She continued to provide workshops on the pension reforms.
December 5, 2012
Raimondo publicly opposes Governor Chafee’s meetings with union leaders in an effort to avoid judicial rulings on the pension reform package. In response, Chafee issues a statement supporting the negotiations.
Read more about Raimondo's opposition here.
Read about Chafee's statement https://www.golocalprov.com/news/new-chafee-issues-statement-supporting-pension-negotiations/">here.
Led by the Rhode Island State Association of Fire Fighters, unions protest the 2011 pension reform outside of the Omni Providence where Governor Lincoln Chafee and General Treasurer Gina Raimondo conduct a national conference of bond investors.
Read about Raimondo's discussion of distressed municipalities here.
The pension plan comes under increased scrutiny as a result of the involvement of hedge funds and private equity firms. Reports show that $200 million of the state pension fund was lost in 2012.
"In short, impressive educational credentials and limited knowledge of investment industry realities made Raimondo ideally suited to champion private equity’s public pension money grab." - Ted Seidle (Forbes)
Read GoLocalProv's coverage of the State Pension Fund's losses here.
Read Ted Seidle's criticism of Raimondo in Forbes.
Reports show that the State’s retirement system increased in 2013 by $20 million despite the reforms being put into effect the previous year.
Read GoLocalProv's investigation into the rising pension costs here.
Matt Taibbi publishes an article in Rolling Stone detailing Raimondo’s use of hedge funds as a questionably ethical tool to aid with pension reform.
Read Taibbi's article in Rolling Stone.
Read GoLocalProv's response to Taibbi here.
- Riley: Raimondo Strikes Out
- Riley: The Yates Doctrine
- Riley: Effect of Insider Politics on RI’s Pension Fund Under-Performance
- Riley: What Happened to Rhode Island’s Municipal Pension Crisis?
- Riley: RI Investment Adviser “Sell Providence RI Bonds”
- Riley: Rhode Island Pension Fund Meltdown in Full Force
- Riley: Amateur Hour in Providence Pensions
- Riley: Providence, Ken Lay and the Securities Exchange Commission
- Riley: Providence’s Cash Flow Problem
- Riley: Why is Governor Raimondo Misleading Bond Investors?
- Riley: Wild Week Exposes Risks in Rhode Island and Providence Portfolios
- Riley: I Reject the Findings of 38 Studios Hearings - Part 2
- Riley: AFSCME, Ted Siedle and Marcia Reback Hurt Rhode Island Retirees
- Riley: Spin Doctor Seth at it Again
- Riley: Junk Bond Collapse Hits RI Pension Fund
- Michael Riley: 15 Who Made a Difference in 2015
- Riley: RI Pensions Returns Raimondo Style 2011-2015
- Riley: Puerto Rico Hedge Fund “Bailout” to Follow Rhode Island Law
- Riley: Why Does Hoyle Allow Providence to Cheat Retirees and Other Cities Can’t?
- Riley: Warren Buffett, Jorge Elorza and Jack Bogle
- Forbes Columnist Siedle Responds to MINDSETTER™ Riley’s Charges
- Riley: Kushner and the “Hot Air Ball”
- Riley: MacBeth Has the Scent and Should Not Back Down
- Riley: GASB 68 is Here and Reports are Due
- RILEY: EXTREME Market Stress This Week