Riley: Rhode Island to Contribute More to Pensions, Providence Still in Fantasy Land
Wednesday, January 03, 2018
Michael G. Riley, GoLocalProv MINDSETTER™
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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.
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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.
Related Slideshow: GoLocal: Benchmark Poll, October 2017
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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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When it comes to voting, do you consider yourself to be affiliated with the Democratic Party, the Republican Party, Moderate, or Unaffiliated with a major party?
Unaffiliated: 49%
Democrat: 32%
Republican: 15%
Moderate: .4%
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Next year, in November of 2018, there will be a statewide general election for Governor and many other state offices. How likely is it that you will vote in this election?
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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In general, would you say things in Rhode Island are headed in the right direction or are they off on the wrong track?
Right track: 39%
Wrong track: 45%
Mixed: 10%
Don't know/Refused: .6%
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What would you say is the number one problem facing Rhode Island that you would like the Governor to address?
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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Over the past three years or so, would you say the economy in Rhode Island has improved, gotten worse, or not changed at all?
Changed for the better: 35%
Changed for the worse: 16%
Not changed at all: 43%
Don't know/Refused: 5%
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Over the same time, has your family's financial situation improved, gotten worse, or not changed at all?
Changed for the better: 26%
Changed for the worse: 19%
Not changed at all: 54%
Don't know/Refused: 1%
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Recently, a proposal has been made to permit the issuance of $81 million in bonds by the State to build a new stadium for the Pawtucket Red Sox. If there was an election today on this issue, would you vote to approve or reject issuing $81 million in financing supported moral obligation bonds to build the stadium?
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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The next question is about the total income of YOUR HOUSEHOLD for the PAST 12 MONTHS. Please include your income PLUS the income of all members living in your household (including cohabiting partners and armed forces members living at home).
$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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What particular ethnic group or nationality - such as English, French, Italian, Irish, Latino, Jewish, African American, and so forth - do you consider yourself a part of or feel closest to?
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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Would you say that Donald Trump has done an excellent good, fair or poor job as President?
Excellent: 13%
Good: 12%
Fair: 14%
Poor: 57%
Never heard of: 0%
Cannot rate: 3%
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Would you say that Jack Reed has done an excellent good, fair or poor job as a United States Senator?
Excellent: 22%
Good: 29%
Fair: 23%
Poor: 15%
Never heard of: 6%
Cannot rate: 6%
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Would you say that Sheldon Whitehouse has done an excellent good, fair or poor job as a United States Senator?
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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Would you say that James Langevin has done an excellent good, fair or poor job as a Member of Congress?
Excellent: 7%
Good: 30%
Fair: 20%
Poor: 18%
Never heard of: 13%
Cannot rate: 11%
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Would you say that Gina Raimondo has done an excellent good, fair or poor job as Governor?
Excellent: 6%
Good: 28%
Fair: 30%
Poor: 31%
Never heard of: 1%
Cannot rate: 3%
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Would you say that Daniel McKee has done an excellent good, fair or poor job as Lieutenant Governor?
Excellent: 3%
Good: 16%
Fair: 21%
Poor: 8%
Never heard of: 26%
Cannot rate: 25%
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Would you say that Peter Kilmartin has done an excellent good, fair or poor job as Attorney General?
Excellent: 3%
Good: 20%
Fair: 28%
Poor: 17%
Never heard of: 13%
Cannot rate: 19%
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Would you say that Seth Magaziner has done an excellent good, fair or poor job as General Treasurer?
Excellent: 4%
Good: 18%
Fair: 24%
Poor: 13%
Never heard of: 21%
Cannot rate: 21%
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Would you say that Nellie Gorbea has done an excellent good, fair or poor job as Secretary of State?
Excellent: 5%
Good: 21%
Fair: 21%
Poor: 10%
Never heard of: 20%
Cannot rate: 23%
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Would you say that Jorge Elorza has done an excellent good, fair or poor job as Mayor of Providence?
Excellent: 4%
Good: 24%
Fair: 24%
Poor: 22%
Never heard of: 9%
Cannot rate: 15%
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