fact check

Who knew? 80% target for pension funds just an urban legend

January 10th, 2012 at 6:00 am by under Nesi's Notes, On the Main Site

All through Rhode Island’s pension debate, a generally accepted idea was that experts agree public pension systems should be at least 80% funded to be considered healthy. I’ve said so at least four times. The Projo’s Mike Stanton and John Kostrzewa both said so recently. Treasurer Gina Raimondo made that the magic level where COLAs come back.

The only problem? The idea that experts agree on 80% is, apparently, an urban legend.

That surprising revelation comes from Governing magazine’s Girard Miller, a veteran pension analyst and a former fellow of the National Academy of Public Administration: (more…)

Jon Stewart (and “Ben Franklin”) respond to PolitiFactRI

December 13th, 2011 at 12:29 pm by under Nesi's Notes, On the Main Site

After getting slapped with a Pants on Fire rating from the Projo’s PolitiFact operation, “Daily Show” host Jon Stewart acknowledged his error (“Of course, it’s my fault for trusting something called ‘The History Channel’ with facts about things that happened in the past”) and tried to make amends last night.

Not safe for work or younguns:

On a more elevated note, media critic Dan Kennedy has an interesting critique of PolitiFact and other fact-checking outfits on HuffPo, following up on Ben Smith’s recent examination of them.

Fact check: ’91 crisis caused just 0.82% of RI pension shortfall

November 8th, 2011 at 10:17 am by under Nesi's Notes

It’s among the most common talking points used by opponents of the Raimondo-Chafee pension bill: Why should retirees suffer cuts in their benefits when so much of the problem was caused by the General Assembly raiding the pension fund during the credit union crisis?

It’s also pretty much a sideshow. The underfunding in the DEPCO era is responsible for about $60 million of the state’s $7.3 billion pension shortfall, according to the state’s actuary. Here’s a chart:

So what actually happened here?


Fact check: Almond did say Local 1033′s ‘pension is in default’

November 3rd, 2011 at 10:37 am by under Nesi's Notes

There seems to be some question about whether Lincoln Town Administrator Joe Almond’s description of the Laborers union’s taxpayer-funded pension plan was reported accurately Tuesday when Tim White and I broke the story on WPRI.com. Luckily, the evidence to back us up is available online.

Here is what Almond told lawmakers and the rest of us who attended his testimony at Tuesday’s joint finance committee hearing (emphasis mine; the video is posted after the jump):

Our municipal employees, believe it or not, are in [Local] 1033 and get none of these benefits whatsoever. As a matter of fact, their pension is in default and subject to a federal intervention, of which the town has stepped up, opened that contract, and we are trying to help them into a recovery plan. Those employees lost – had a 50% reduction going forward in their benefits.

Almond repeated his “default” comment in a follow-up interview after his testimony with a Projo reporter and me. But after speaking with Don Iannazzi, Local 1033′s business manager, Almond called on Wednesday to say the term “default” isn’t technically correct. Iannazzi did not return our phone calls on Tuesday, but on Wednesday he acknowledged the plan had run into financial trouble.


Raimondomania hits Sunday NYT as paper lionizes treasurer

October 22nd, 2011 at 1:35 pm by under Nesi's Notes

It’s all about Gina.

Or at least The New York Times’ Sunday Business cover piece on Rhode Island’s finances sure is. The glowing 2,500-word profile of the state treasurer and her one-woman crusade to overhaul the state pension system never mentions Gov. Lincoln Chafee’s name, let alone those of the House speaker and Senate president.

Times reporter Mary Williams Walsh’s contribution to the rising tide of Raimondomania forges no new ground when it comes to Rhode Island’s intertwined public-finance crises, though she makes a good analogy between the state and General Motors, noting both strained their pension systems with rounds of layoffs.

Here’s Walsh’s thesis, in a nutshell:

All of this might seem small in the scheme of national affairs. After all, this is Little Rhody (population: 1,052,567). But the nightmare scenario is that Ms. Raimondo has seen the future of America, and it is Rhode Island. As Wall Street fixates on the financial disaster in Greece, a fiscal wreck is playing out right here. And the odds are that it won’t be the last. Before this is over, many Americans may be forced to rethink what government means at the state and local level.

The Times piece includes a few minor points worth correcting for the sake of the historical record:


No, really – RI’s economy boomed in John Chafee’s day

November 29th, 2010 at 1:01 pm by under General Talk

At his press conference the day after the election, I asked Lincoln Chafee whether he had considered how different his governorship will be from his father’s, considering that John Chafee governed during the economic boom of the 1960s. Chafee paused briefly and said he didn’t remember the economy being particularly great when his dad was governor, then went on to say Rhode Island’s current situation is the worst since the Great Depression.

I found Chafee’s statement a little odd – the U.S. economy expanded continuously all the way from early 1961 to late 1969, a nearly nine-year streak that wasn’t matched until the 10-year expansion of the 1990s. Chafee was only 10 years old when his dad took office, though, so it was hard to fault him if he didn’t remember the time that well.

But then I read this in yesterday’s Providence Journal (emphasis mine):

John Chafee dealt with a tough economy in the 1960s, said [former Democratic Gov. Philip W. Noel], but not with the kind of jarring blow to local prosperity that Noel faced as governor when much of the Navy establishment departed in the 1970s.

Young Lincoln Chafee faces an economic shambles, bigger than anything his father had to deal with, and probably bigger than I faced,” said Noel. …

John Chafee broke into elective politics in 1956 at age 34, winning the first of three terms in the Rhode Island House, where he rose to the post of minority leader. He was elected governor in 1962 and reelected in 1964 and 1966 –– different times than these.

Rhode Island’s economy was not good, but the state did not have anywhere near the accumulated challenges that we face today– the burden of pension debt, the reliance on gaming for revenues, and so on,” recalled Bruce M. Selya, a longtime political associate and fundraiser for Chafee.

With all due respect to Noel and Selya, I’m pretty sure their memories are failing them here. Let’s look at the evidence.


The Power of PolitiFact

October 1st, 2010 at 10:28 am by under News and Politics

The Projo’s new PolitiFact Rhode Island site started up only three months ago – a blink of the eye in the history of a newspaper founded in 1829. But the site (and its patented Truth-O-Meter) have already made an outsize impression on the state’s political class.

For the uninitiated, PolitiFact is a fact-checking initiative started by the St. Petersburg (Fla.) Times in 2008, during the heat of the presidential campaign. The site’s reporters examine the veracity of statements, claims and allegations made by candidates and officeholders, then rate them on a scale of “True” to “Pants on Fire!” The project won a Pulitzer Prize last year, and there are now local PolitiFacts up and running in seven states.

For a newspaper that has been struggling to find its footing in the Internet era, licensing PolitiFact and giving it a staff of three represented, as top editor Tom Heslin put it, an effort by The Journal to embrace “new journalistic forms that have value in the 21st century.”

We got the first taste of candidates’ wariness about the site during our WPRI congressional debate in July, when Democrat Anthony Gemma referenced PolitiFact on stage as he tried to answer one of Tim White’s questions. (Full disclosure: The Journal and WPRI are news partners, and sometimes we run segments based on PolitiFact articles.)

Since then, I’ve noticed PolitiFact referenced more and more in conversations, usually on background, with candidates and their campaign aides. “Don’t PolitiFact me!” a number of them have said to me, only half-jokingly, after I questioned a budget figure or some other statistic – not as an admission of lying, but just an acknowledgment that they weren’t 100% certain about the topic under discussion.

Those in the political arena also have honest concerns about the PolitiFact model – that some assertions aren’t black-and-white, and that candidates should not be held accountable if they cite an errant figure in off-the-cuff remarks. (PolitiFact says it only tackles statements made multiple times.) And it’s hard to judge whether the site is having any impact on the actual actions of candidates and campaigns.

Still, there’s no doubt PolitiFact’s impact is being felt after only three months on the scene. It will be interesting to see how it develops over time.

On tax cuts, let’s clarify one for the Gipper

September 5th, 2010 at 2:50 pm by under General Talk

PolitiFact Rhode Island has an item up about congressional candidate and state Rep. John Loughlin’s statement about President Reagan’s 1981 tax cut and the nation’s subsequent economic growth, judging the statement “barely true.”

PolitiFact does a decent job, but the explanation of tax policy during the Reagan years is a bit more muddled than it needs to be.

Luckily, Bruce Bartlett – the dissident Republican economist who served as a senior policy analyst in the Reagan White House – recently reproduced this handy chart showing all the tax cuts and tax increases Reagan signed into law during his two terms from 1981 to 1989. (The information came from the first President Bush’s 1990 budget.)

Basically, by 1988 the 15 tax laws signed by Reagan had reduced federal taxes by $275.3 billion on the one hand and raised them by $132.7 billion on the other – so combined, Reagan cut taxes by a net $142.6 billion.

In practice, that undid 46% of the original 1981 tax cut to which Loughlin referred. Still, a $142.6 billion reduction in federal taxation was nothing to sneeze it, regardless of how it stacked up compared with Reagan’s initial program. Among other things, the 1981 law lowered the top marginal income tax rate from 70% to 50%.

Later, PolitiFact notes that the country fell into a deep recession “immediately after the 1981 [tax] cuts.”

True, but that’s a bit like saying the country went to war in Afghanistan after a series of shark attacks – it’s not factually incorrect, but it leaves out a key piece of information. In this case, Federal Reserve Chairman Paul Volcker raised interest rates to a jaw-dropping 20% in June 1981 (compared with less than 0.25% currently), plunging the country into a painful recession that lasted from July 1981 to November 1982. After Volcker lowered rates again, the U.S. economy grew for almost eight straight years. (In fairness, PolitiFact alludes to this later on.)

Here’s a chart showing the annual percentage change in U.S. GDP from the start of the Eisenhower administration, in 1953, through the end of the first Bush administration, in early 1993. You can see Volcker’s monetary policy helped cause the sharpest contraction in GDP, and then one of the strongest rebounds, seen during the Cold War era:

Also, the chart shows economic growth was quite strong and sustained (though not “exponential”) after the other reduction mentioned by Loughlin, the Kennedy/Johnson tax cut enacted in 1964, though once again correlation does not mean causation. (Notably, Loughlin’s ad does not mention the tax cuts he might actually vote on if elected to Congress in November – the two rounds signed into law by the second President Bush in 2001 and 2003 that are soon to expire.)

(image credits: Ronald Reagan Presidential Library, St. Louis Fed)