Riley: Why Does NY Have Funded and Honest Pension Plans?
Tuesday, February 23, 2016
There have been several efforts over the last few decades in Rhode Island to create an Office of Inspector General. Operation Clean Government introduced legislation in 2001 and nearly every year since them some version of that legislation has been introduced.
I am very interested in the idea because I believe our Government has stopped working and protecting taxpayers. Despite the very obvious corruption and abuse in elected officials no serious attempt like the OCG effort has even come close to happening. Massachusetts implemented an OIG in 1981 and in New York Comptroller Thomas P. DiNapoli established the Office of Inspector General by executive order in 2008. His OIG was specific to his office.
Treasurer Magaziner has an opportunity
My suggestion is that Treasurer Seth Magaziner can build on his transparency and accountability campaign by considering creating an Office of Inspector General within Treasury related to pension abuse by local public officials or public employees. As it stands now, the Attorney General has said that Public Pension Abuse is not within his jurisdiction and Auditor General Dennis Hoyle makes the same claim.
Therefore, it is open season on retirees and taxpayers to be swindled by elected officials and unscrupulous public employees alike. That is exactly what is happening in Providence right now. I have reported abuse to both offices with little satisfaction. There is zero incentive for these officials to investigate Providence for federal violations. Yet every taxpayer will lose due to Providence’s lies. Establishing this office will bring obvious scams to a halt. I believe the oversight that has been ignored and sidestepped by both the Speaker and the Governor could help improve overall performance.
Treasurer Raimondo’s efforts of the ill-fated Pension Crisis Commission of 2012 to 2015 was a hoax as Mayor Taveras refused to attend and Johnston’s hopelessly underfunded Mayor Polisena used the commission as a soap box. There is now reason to believe that a well-run and well-monitored pension system will produce better long-term investment results than a system with no rules or accountability. Providence has almost no rules regarding accountability for pension investments and returns. They have illegally loaned plan funds, they have consistently manufactured false returns and lied about their assets. The City has joined in with the investment Chair as always the current Mayor. Whether Cianci, Cicilline, Taveras or now Elorza, the City has issued false and misleading information about the pension plan and the financial condition of the city year after year.
Providence still lying
The recent Providence 2015 CAFR is no exception. Providence continues to mislead. Consider this, the Providence pension investment commission and Pension Plan has had only ONE investment adviser since 1995 and he was hired by the late Mayor Buddy Cianci. Why? Look at the returns in the table. They have been horrible. The adviser “Wainwright Investment Counsel” will no doubt say the City of Providence only gives them “some” of the assets that the city reports to the world in legal public documents. If that is really the case why is Providence the only city in America overstating and over-reporting its pension assets? Why is no one looking at this? Mr Kilmartin? Mr. Doyle?
The table below shows four different pension plans in the Northeast and their returns on reported assets.
I have provided evidence-made charges to Rhode Island officials regarding Providence pension accounting that are similar to Mr. Markopoulos (of Madoff fame) charges against MBTA pension accounting. In Massachusetts these charges are taken seriously because there is an inspector general. In Rhode Island charges like these are ignored and almost laughed at. Someday, maybe soon, local regulators or federal regulators will move into Providence. Either way taxpayers deserve and Inspector General who is concerned about pension fraud and corruption.
Photo courtesy of static/flickr.com
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.
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