Local RI pension commission’s first meeting raises red flagsJanuary 25th, 2012 at 5:57 pm by Ted Nesi under Nesi's Notes, On the Main Site
The 14-person panel – which counts among its members Providence Mayor Angel Taveras, Treasurer Gina Raimondo, Department of Administration Director Richard Licht, RIPEC chief John Simmons and Cranston Mayor Allan Fung – spent the bulk of the meeting getting an overview of how pensions work from Joe Newton, the state’s actuary.
But it soon became clear just how much divides the group, and just what a struggle it’s going to be to reach agreement on different solutions for 36 different pension plans in various states of duress.
The problem starts with the basic question of what the commission is even supposed to do. The law creating it defines its mission only in general terms. Fung said he was “concerned” that the panel might push local pension funds to adopt the 7.5% rate of return forecast the state is now using, which could balloon their liabilities.
Raimondo, the architect of the law that created the commission, emphasized her belief that the panel shouldn’t move aggressively to force cities and towns to change their pension plans’ accounting. Local retirement boards, she said, “are the fiduciaries.”
The commission’s chair, Department of Revenue Director Rosemary Booth Gallogly, didn’t dispute that. But she expressed concern about whether all the local officials in charge of the 36 plans are equipped to make those decisions, particularly after the paperwork nightmare her office discovered in Central Falls once it filed for receivership.
Licht tried to find common ground. ”There’s no way that we substitute our judgment for the judgment of the fiduciaries,” he said. “But we do need to know what they did and if we think there’s something aberrant about that, we have to say something.”
At one point, Johnston Mayor Joseph Polisena broke in to deliver a stemwinder lambasting former Gov. Donald Carcieri for the deep cuts to local aid made to balance the state budget in Carcieri’s second term.
“We inherited a lot of bad decisions in the past. We have to live with it,” Polisena said. But Carcieri “did not help.” The mayor suggested Central Falls and East Providence might not have their finances under state oversight today if the cuts hadn’t been made.
Fung later aired his concern about an arcane but potentially consequential issue – if the cities and towns are ordering new pension studies for April 1, will they get in trouble for using older studies’ numbers in their budgets for the fiscal year starting July 1? What will Moody’s and the other rating agencies think?
Simmons, Gallogly and Deputy Treasurer Mark Dingley tried to allay Fung’s concerns, but he didn’t seem convinced. All of this was watched closely by the lobbyists in the room, including J. Michael Downey and Jim Cenerini of AFSCME Council 94 and Paul Valletta of the Cranston firefighters union.
After the meeting, Taveras said he was somewhat less concerned than Fung about meeting the state’s demands for new information because Providence conducts an experience study of its pension fund every five years. The last two were conducted in 1999 and 2004, however; no study was done in 2009. But the mayor said it’s being done now.
The commission did agree on one thing: when to meet. Its next gathering will be held Monday, Feb. 13 at 1 p.m., with meetings to follow on a biweekly schedule after that. It’s possible it will pick up steam then. In the meantime, documents from Wednesday’s meeting will be posted on the Division of Municipal Finances’ website, Gallogly said.
• Related: ‘Godspeed,’ cities told as Raimondo dives in on local pensions (Jan. 24)
An earlier version of this story incorrectly said Rhode Island AFL-CIO George Nee attended the meeting.
(photo: Ted Nesi/WPRI)