Providence is only no-show at Raimondo’s local pension eventJanuary 24th, 2012 at 11:39 am by Ted Nesi under Nesi's Notes, On the Main Site
According to the attendee sign-in list, Providence was the only one of Rhode Island’s 24 cities and towns with a locally run pension plan which didn’t send anyone to hear the presentations from Raimondo, former New York Lt. Gov. Richard Ravitch, Deputy Treasurer Mark Dingley, and asset consultant Allan Emkin.
Among the discussions they missed was Emkin’s detailed and bleak explanation of why it will be nearly impossible for pension funds to achieve the 8.5% average rate of return that Providence is expecting to earn year in and year out going forward. The city has defended that 8.5% target, saying it will be able to earn more than the state.
“The number that the state is using – 7.5% – we believe is reasonable, but it’s slightly optimistic,” Emkin said. He suggested the municipalities should use the state’s assumptions, and added: “Even the most aggressive public pension plan won’t get 8%.”
“At the end of the day,” Raimondo said, “maintaining an artificially high rate of return is bad for your [pension] beneficiaries, because what the result will be is not enough money put into the pension fund – and at some point down the road, the cash flow doesn’t lie.”
Providence Mayor Angel Taveras has led the campaign for state lawmakers to give his city the legal power to suspend 6% and 5% cost-of-living adjustments awarded to city pensioners back in 1989. He and Raimondo clashed last fall as they battled over whether such a provision should be included in the new pension law.
Taveras spokesman David Ortiz said two officials from Providence were planning to attend “but had a change of plans.” Providence’s pension system was 32% funded as of June 30, 2010, with an unfunded liability of $903 million, city documents show. The state’s system was 48% funded before the changes made last November.
“Mayor Taveras looks forward to tomorrow’s first meeting of the pension study commission,” Ortiz told WPRI.com, referring to a new 14-member panel that includes both Taveras and Raimondo. “We understand the local pension crisis very well in Providence and we know what needs to be done to fix the problem in our city.”
One person from the capital did show up to the workshop: Paul Doughty, president of Providence firefighters union Local 799. The Chafee administration sent Department of Revenue Director Rosemary Booth Gallogly and Susanne Greschner, chief of the Division of Municipal Finance.
Raimondo’s office has posted the PowerPoint presentations from Tuesday’s workshop in four PDFs on her website. The treasurer said she plans to hold another workshop, likely in March, to discuss next steps for the communities after they put together new estimates of their pension liabilities.
Update: Asked by Rhode Island Public Radio’s Ian Donnis what she thought of Providence going MIA at the workshop, Raimondo said, “I think it’s unfortunate that they weren’t here.” Nearly half of the $2.1 billion unfunded liability for the 36 locally run pension plans is in Providence, she said, adding that the city “can suspend COLAs right now should they decide to do so.”
• Related: ‘Godspeed,’ cities told as Raimondo dives in on local pensions (Jan. 24)
(photo: Ted Nesi/WPRI)