Welcome to another edition of my weekend column – as always, send your takes, tips and trial balloons to tnesi@wpri.com. For quick hits all week long, follow me on Twitter: @tednesi.

1. When the Rhode Island Senate backed same-sex marriage, the biggest winners included two people who voted no: Senate President Teresa Paiva Weed and Senate Judiciary Chairman Mike McCaffrey. Gay marriage was a rare issue that not only split the Senate Democrats’ ruling coalition but represented a real political liability for its socially conservative incumbents, McCaffrey foremost among them. While most people aren’t experts on the General Assembly, it wouldn’t have been hard for Ray Sullivan to educate Democratic primary electorates next year if their local senators were blocking same-sex marriage – and to recruit activists to make that case at voters’ doorsteps. (Think about it: How many Warwick voters tick off McCaffey’s name every two years assuming they’re getting someone with relatively Obama-ish views?) Paiva Weed – one of the shrewdest political minds on Smith Hill – has deftly removed the biggest electoral threat facing men like McCaffrey, Dominick Ruggerio and Frank Ciccone, all without any apparent damage to her authority as leader of the upper chamber. She also cleared the path for McCaffrey, a labor ally, to succeed her as Senate president – while simultaneously earning plenty of goodwill from liberals in her caucus, not to mention Speaker Fox. Well played, Madame President, well played.

2. How’s the 2014 race for governor shaping up? Read my new Bloomberg View op-ed and find out.

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After reading this story by Dan McGowan and yours truly about why the Rhode Island Senate shifted on same-sex marriage, Bloomberg View’s Josh Barro sees a lesson for proponents in other states (my emphasis):

This is similar to what happened in New York in 2011: passing gay marriage depended not only on four Republican state senators voting yes but also on Dean Skelos, the Senate’s Republican presiding officer, agreeing to let gay marriage come to the floor even though he opposed it. Rhode Island and New York are both examples of the “no fingerprints” strategy for gay-marriage opponents: letting it become law while taking as little credit or blame as possible.

If the Supreme Court doesn’t intervene, this will be a key political theme over the next 20 years: gay marriage opponents strategically acquiescing so they can stop fighting a fight they know is doomed and electorally costly. Rhode Island’s topsy-turvy politics mean that the officials making that calculation today are Democrats (all five Republicans in Rhode Island’s state Senate support marriage equality), but in most states, it will be Republicans who search for ways to lose gracefully on the issue.

Felix Rohatyn, the banker who famously helped save New York City from bankruptcy in 1975 as chairman of New York’s Municipal Assistance Corporation, has an interesting op-ed in today’s FT arguing political and labor leaders should negotiate solutions to thorny fiscal problems, notably underfunded pension plans – a timely take in light of Rhode Island’s debate over the Raimondo and Taveras approaches:

Once again, business and labour share a huge stake in our cities’ fortunes, and the consequences for both if we fail to stabilise our finances and set a course for growth will be devastating. Yet amid the solutions proposed, no one argues that the two sides must work together to restructure the finances of troubled states and cities. …

If the nation is to enter a new era of opportunity and growth, our government, company executives, labour leaders and employees have to co-operate on matters of common interest. They need not abandon their principles, but they must create a climate where dialogue and compromise are possible, and mutual sacrifice may be negotiated. One thing is certain: the path of stalemate leads nowhere. We need to take a new direction now.

I’ll have my own story on all this soon, but for now check out Mike Stanton’s piece in today’s Projo about yesterday’s fight at the State Investment Commission over Treasurer Raimondo’s use of hedge funds:

Rhode Island has moved about $1 billion of its $7.6-billion state pension fund into hedge funds over the past 18 months, a move that General Treasurer Gina M. Raimondo defended against critics Wednesday during a meeting of the state Investment Commission. …

On Tuesday, Raimondo’s office provided The Providence Journal with records showing that the state paid $15.8 million in fees to 19 hedge funds for the eight months ending June 30, 2012. But the office could not immediately produce how much has been paid since then, given how the records are kept. Those fees aren’t in the detailed monthly investment reports produced for Investment Commission meetings, because they are not directly billed to the state. …

Raimondo, in an interview, said that hedges in such investments as currencies, agricultural commodities and precious metals are designed to move against the stock market, and provide a better alternative to lower-yielding Treasury notes that reaped more years ago. Noting that the pension fund lost $2 billion in the ’08 crash, Raimondo said an analysis showed the loss would have been $1.5 billion with hedge funds in the portfolio.

• Related: Chart: How Raimondo has changed RI’s pension investments (April 4)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Rhode Island moved another step closer to legalizing same-sex marriage on Tuesday after a key legislative panel approved a bill that would allow gays and lesbians to wed in the state, setting up another crucial vote for Wednesday.

Read the rest of this story »

Back in January U.S. Sen. Sheldon Whitehouse told WPRI.com one of the most important ways for a U.S. senator to be effective is basically out of his control: seniority.

If that’s the case, Whitehouse’s senior colleague Jack Reed is about to get significantly more effective.

U.S. Sen. Max Baucus of Montana on Tuesday became the sixth Senate Democrat to announce he will retire rather than seek re-election next year. All but one of those six lawmakers – New Jersey’s Frank Lautenberg – have served in the Senate longer than Reed, who was first elected in 1996.

The departures of those five – Baucus, Carl Levin, Tom Harkin, Jack Rockefeller and Tim Johnson – will vault Reed from 14th to 9th on the list of the U.S. Senate’s most senior Democrats. Of course, that assumes Reed himself will win re-election next year – about as safe an assumption as there is in politics.

• Related: Levin retirement sets up Jack Reed for powerful chairmanship (March 7)

The fine folks over at Bloomberg View asked me to write a short op-ed for them about the outlook for Rhode Island’s 2014 gubernatorial race, focusing on Treasurer Gina Raimondo’s high profile after the pension fight and how it will impact the campaign. Here’s how I kicked off the piece:

Rhode Island General Treasurer Gina Raimondo has experienced a meteoric rise to fame that most politicians can only envy.

Raimondo, a 41-year-old former venture capitalist, was virtually unknown in 2010 when she coasted to victory as a Democratic candidate in a deep-blue state. Soon the new treasurer surprised almost everyone by engineering the most sweeping overhaul of a public-pension system ever enacted. By the time her reforms became law in November 2011 she was one of the most popular politicians in Rhode Island, and the subject of adulatory coverage in both the New York Times and the Wall Street Journal.

Even before the pension process was over, there was growing speculation that Raimondo might run for governor in 2014, in no small part because the incumbent who signed the pension law — independent ex-Republican Lincoln Chafee — has had an approval rating in the 20s for most of his term in office. It has become clear in recent months that the treasurer is likely to throw her hat into the ring.

Read the rest on Bloomberg.com.

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – R.I. Democratic Party Chairman Edwin Pacheco said Monday he’s resigning as head of the party to run for secretary of state, becoming the second Democrat to jump into the race.

Read the rest of this story »

• Related: Newport Dem Guillaume de Ramel will run for secretary of state (Jan. 24)

By Dan McGowan

PROVIDENCE, R.I. (WPRI) – Providence Mayor Angel Taveras on Monday said he still plans to include a seven-year commercial tax freeze in his 2013-14 budget proposal despite a 13.2% citywide decrease in residential property values that has some city council members concerned a tax increase for homeowners is on the horizon.

Read the rest of this story »

Lawyers for the state and public-sector labor unions are apparently still talking behind closed doors in an effort to resolve the fight over Rhode Island’s landmark 2011 pension law without going to trial.

Lawyers on both sides of the case met Monday afternoon with R.I. Superior Court Judge Sarah Taft-Carter, who is handling the suit. In December, she ordered the state and the unions into a formal mediation process overseen by the Federal Mediation and Conciliation Service.

The lawyers met with Taft-Carter in her chambers for about 45 minutes and updated her on the mediation process’s progress, court spokesman Craig Berke told WPRI.com. The parties have said they aren’t allowed to detail their discussions publicly. This was the fourth status conference on the pension talks since February.

Taft-Carter has scheduled the next status conference for May 17 at 2 p.m., Berke said.

• Related: EngageRI: Why the law is OK (March 18) | Prof: Law may be unconstitutional (Dec. 24)

Treasurer Gina Raimondo has a message for members of Congress: don’t tax municipal bonds.

Raimondo and 41 of her fellow state treasurers sent a letter [pdf] last week to the top Republican and Democrat on the U.S. House Ways and Means Committee, emphasizing “the importance of maintaining the current tax exemption for municipal bond interest” as they consider plans to overhaul the U.S. tax code.

The letter was organized by the National Association of State Treasurers, which describes itself as “a bipartisan organization of state treasurers and other finance officials with similar duties.” The group said tax-free municipal bonds save states and municipalities an average of 25% to 30% on interest costs.

“The tax-exempt bond market has worked effectively for over a century,” Virginia State Treasurer Manju Ganeriwala, the association’s president, said in a statement. “Let’s not dismantle something that works.”

Raimondo, a Democrat, is considering a run for governor in 2014. Here’s her signature on the letter:

What a week.

For reasons I’m sure you’ll understand I ran out of time to do a full column, so this is going to be an abbreviated edition. As always, though, send your takes, tips and trial balloons to tnesi@wpri.com. For quick hits all week long, follow me on Twitter: @tednesi.

1. Is Providence ready? That question lingered all week as alarmed Rhode Islanders watched Boston deal with a serious terrorist attack followed by a massive manhunt that shut down America’s Athens. The incident offers an opportunity for officials, organizations and individuals in Providence to double-check their own preparedness for a major catastrophe. To understand how much that could matter – particularly for employees at Lifespan and Care New England – read The New Yorker’s Atul Gawande explain “Why Boston’s Hospitals Were Ready.” Also read Harold Pollack on why all of us should learn first aid.

2. Rhode Island is back on the national radar screen this week. The state’s 2014 governor’s race is already attracting significant attention, with National Journal and National Review both hyping it up in recent days and The Fix moving it to #2 on its list of the most competitive races. (I’ll have my own take on the 2014 state-of-play next week in a new op-ed for Bloomberg View.) And that’s not all. I’m told The New York Times’ Matt Bai will publish a major examination of the 38 Studios debacle in this Sunday’s newspaper – check the business section tomorrow.

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By Dan McGowan

PROVIDENCE, R.I. (WPRI) – A local legal-aid group is accusing Moody’s Investors Service of failing to properly analyze the potential scenarios if state officials decide not to pay bondholders $75 million following the collapse of former Red Sox pitcher Curt Schilling’s video game company 38 Studios.

Read the rest of this story »

• Related: Target 12: USAA, Transamerica are top 38 Studios bondholders (April 17)

By Ted Nesi and Tim White

PROVIDENCE, R.I. (WPRI) – A prominent financial firm that caters to U.S. military personnel bought nearly half the $75 million in bonds that Rhode Island taxpayers backed on behalf of Curt Schilling’s game company 38 Studios, the Target 12 Investigators have learned.

Read the rest of this story »

By Dan McGowan

R.I. Education Commissioner Deborah Gist is not expected to testify in front of the Washington D.C. City Council during a public oversight hearing on school testing integrity, according to a spokesman for Education Committee Chairman David Catania.

“We have not requested Ms. Gist’s testimony,” Ben Young, Catania’s chief of staff, told WPRI.com.

The Thursday hearing was called to review a report that found teachers in 18 classrooms in 11 D.C. schools may have cheated on standardized tests during the 2011-12 school year. The committee will also discuss cheating allegations that date back to 2008 when controversial education reformer Michelle Rhee served as chancellor of D.C. schools and Gist served as the District’s superintendent of education. (more…)

It’s a tale of two states.

Massachusetts achieved a happy milestone in January, as employment in the Bay State reached 3.31 million jobs – passing the pre-recession peak of 3.3 million reached in April 2008, and meaning Massachusetts has regained all the jobs the state lost during the Great Recession.

“The numbers are really pretty remarkable,” one private-sector researcher marveled to The Boston Globe.

They also offer a grim contrast with the numbers in Rhode Island, which has only regained 8,700 of the 39,600 jobs it lost during the downturn. Put another way, Massachusetts has recovered 110% of the jobs it lost during the recession; Rhode Island has recovered just 22%.

Here’s a chart – Rhode Island is blue, Massachusetts is red, and 100 equals previous peak employment:

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Click here for the video on CBSNews.com. (The embed code isn’t working.) Elizabeth Warren makes a cameo.

By Dan McGowan

Cranston, R.I. (WPRI) – Cranston Mayor Allan Fung has hired a veteran Republican political operative to help craft a likely campaign for governor in 2014, WPRI.com has confirmed.

Patrick Sweeney, who ran Republican Barry Hinckley’s unsuccessful bid for U.S. Senate in 2012 and previously served as executive director of the Rhode Island GOP, was brought in on Apr. 1 as a consultant for the mayor of Rhode Island’s third-largest city.

Read the rest of this story »

U.S. Sen. Jack Reed doesn’t just debate taxes. He pays them, too.

Reed and his wife, Julia Hart Reed, paid $39,326 in federal income taxes and $12,565 in state income taxes on their 2012 adjusted gross income of $249,700, Reed spokesman Chip Unruh told WPRI.com on Monday.

Reed earned a gross salary of $174,000 as a U.S. senator, while Mrs. Reed earned $110,305 working for the Secretary of the State as an Interparliamentary Services Coordinator. Federal taxes are due Monday.

The Reeds filed a joint income tax return, paying 15.8% to the federal government and 5% to the state government. They took $61,150 in itemized deductions on their federal return and reported $3,000 in capital losses. The pair’s federal tax rate was calculated using the alternative minimum tax, or AMT.

The Reeds’ tax bill was cut $27,503 by the home mortgage interest deduction and $5,660 by charitable contributions. Uhruh said they deducted an additional $4,947 for miscellaneous items including non-reimbursed Washington living expenses for members of Congress; professional dues and expenses including the Rhode Island and D.C. bar associations and the Council on Foreign Relations; tax preparation fees; and investment advisory fees.

Progressive favorite U.S. Sen. Elizabeth Warren of Massachusetts is coming to Rhode Island later this month to raise money for the re-election campaign of her fellow Democrat Jack Reed.

Warren will be the special guest at a fundraiser on April 29 from 5:30 to 7 p.m. in the Rotunda Room at the Rhode Island Convention Center in Providence, according to an invitation sent Monday. Suggested contributions range from $100 for individuals to $1,000 for hosts.

The fundraiser sports an all-female host committee co-chaired by Lt. Gov. Elizabeth Roberts, Treasurer Gina Raimondo and Senate President M. Teresa Paiva Weed. Maryellen Butke, Helena Foulkes, Sandra Whitehouse and Myrth York are among the hosts.

Warren and Reed have a bit of a mutual admiration society. Reed successfully pushed to get Warren, a vocal Wall Street critic, appointed to serve with him on the Senate Banking Committee, while Warren has praised his work on financial issues. Reed is up for re-election next year.

Warren defeated Republican U.S. Sen. Scott Brown just last November, but she’s already Massachusetts’ senior senator now that John Kerry has resigned to serve as President Obama’s secretary of state. Democratic Congressman Ed Markey is the frontrunner in the campaign to succeed Kerry.

(photo: Warren’s office)

Welcome to another edition of my weekend column – as always, send your takes, tips and trial balloons to tnesi@wpri.com. For quick hits all week long, follow me on Twitter: @tednesi.

1. The conventional wisdom about same-sex marriage has changed jarringly fast. Just last month many questioned whether the measure could pass the Rhode Island Senate; this week I talked to a State House veteran who predicted a signing ceremony by mid-May. The strongest sign came when Senate President Teresa Paiva Weed announced there will be a floor debate on the topic this month – signaling the bill will pass the Senate Judiciary Committee soon. Ray Sullivan, who’s leading the legalization campaign, is cautiously optimistic, telling me: “We think when a vote is called, we can win – in the committee and on the floor.” If so, it’s a credit to the big grass-roots campaign Sullivan and his team have run over the past two-plus years and particularly the last six months, which has convinced many lawmakers that their constituents want them to vote yes – and will remember if they don’t. Supporters have also played a shrewd inside game by not demonizing Paiva Weed, a decision that was clearly already paying dividends when she appointed the new Judiciary Committee. (“We respect the process in the Senate and look forward to continuing to make our case,” Sullivan says.) No doubt the local activists have also gotten a boost from a shift in the national conversation, with figures including Barack Obama and Rob Portman coming out in support of gay marriage rather dramatically over the last 12 months. It seems Rhode Island could be the “hip, happenin’ place” of Lincoln Chafee’s dreams sooner than anyone expected.

2. Whither the “Knowledge District”? Just two days after Chafee and other leaders broke ground on the old 195 land, Brown University revealed its engineering school won’t be moving to the Jewelry District after all – despite school officials’ past suggestions to the contrary. Brown’s reasons for keeping engineering on College Hill make sense, but the decision means the district still lacks a major anchor. One option would be a URI-RIC nursing school at Dynamo House, but it’s not clear that will come to fruition – or how soon it will if it does. These questions will top the agenda for two new executive directors: Marcel Valois at EDC and Jan Brodie at the 195 Commission. Valois is a known quantity; does Brodie have what it takes?

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Providence Mayor Angel Taveras won a historic court victory on Friday, as a Superior Court judge approved the first-term Democrat’s landmark settlement with retirees, immediately reducing the city’s long-term liabilities for pension and health benefits. Bloomberg News has described the outcome as “practically unheard of.”

But for a city that was openly considering bankruptcy just 14 months ago, does the deal save enough money?

Privately, Taveras aides don’t dispute that Providence will still be spending a lot of money on retirement benefits after the settlement. What they argue, however, is that they got just about everything they could outside Chapter 9 – and the long-term economic consequences of having Rhode Island’s capital city file for bankruptcy might have dwarfed any additional savings on retirement costs allowed by a judge.

There’s no doubt the settlement already saves quite a bit of money. According to the Taveras administration, the deal shaves Providence’s unfunded pension liability by $170 million, a roughly 20% decrease, and cuts its retiree health costs by $40 million over the next 10 years.

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