Riley: No Need for Commission
Tuesday, June 14, 2016
A recent bill in the RI Senate - 2016: S 2872 SUBSTITUTE A - was introduced by Lincoln State Senator Ryan Pearson to establish an advisory council to monitor cities and towns pension pension plans. The wording is as follows:
45-65-10. Oversight and report on the status of locally administered pension plans. - - (a) An advisory council regarding locally administered pension plans shall be established and consist of:
(1) The general treasurer, who shall serve as a chairperson;
(2) The auditor general;
(3) A representative of organized labor appointed by the governor;
(4) A representative of the Rhode Island league of cities and towns; and
(5) The director of revenue or designee who shall be from the office of municipal finance. (b) On or before April 30 of each year, the advisory council shall provide to the governor's office and to both chambers of the general assembly an annual report that shall include a "performance dashboard" of all pension plans used by either the state and/or any municipality or municipal employees, that sets forth for each plan;
(1) Fund performance for each plan's most recently completed and previous five (5) and ten (10) fiscal years;
(2) The total percentage of the plan that is funded;
(3) The percentage of administrative costs of the fund as measured against the fund’s assets;
(4) Assumed and projected rates of return for the funds; and
(5) The municipality's or community's capacity to pay the municipality's required funding payment as a percentage of their tax levy ratio.
(c) Cities and towns shall supply the information requested by the advisory council to furnish this report.
(d) The report shall be accompanied by an opinion prepared by the general treasurer regarding the sustainability of each plan and any potential areas of concern.
SECTION 2. This act shall take effect upon passage.
======== LC005512/SUB A ========
No teeth, No Point
This is not the first attempt to address the many underfunded municipal pension plans in Rhode Island. It is a fact Rhode Island is particularly bad at managing defined benefit pension plans. As far as I know in the last 15 years there have been have a dozen Senate and House pension study commissions that have accomplished very little and in fact served to kick the can down the road. The Auditor General, who reports to the House Speaker, has no punitive powers. Several cities have ignored warnings and continuously broken laws such as Section 45-10-15 of the Rhode Island General Laws requires a municipality to submit certain information when they have not contributed 100% of the annual required contribution. This law was laughed at because there were no penalties. Here is Auditor Almonte’s report from 2007.
As far as I know none of those cities ever paid a fine or had any one fired or in any way was reprimanded. No teeth, no point.
Let’s suppose that this Pearson proposed commission identifies Providence as violating federal securities law, like they are right now. Would they have a duty to notify regulators? Let’s say they know that Providence has violated securities law by misleading municipal bond holders and they don’t do anything about it. What then?
Mr. Pearson Call Mr. Neronha
I applaud Mr. Pearson’s concern over the looming Municipal Pension nightmare because it is real, but I suggest an easier and healthier path to get cities and towns to comply with already existing pension reporting and funding laws laws. Bring US attorney or FBI to investigate Providence because Providence has done so much wrong and already threatens the economic viability of the State as a whole, we saw Karen Macbeth and her courageous efforts to do what’s right and question the cover-up of 38 Studios dishonesty. It would be great to have another legislator stand up for the State Taxpayer and her exposure to a mismanaged and fraudulent Providence. That investigation would quickly get other underfunded and less than honest cities and towns like Johnston into compliance with existing law without having to form a toothless commission.
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: 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.
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