By Ted Nesi
PROVIDENCE, R.I. (WPRI) – There’s growing anxiety among Rhode Island lawmakers about secret court-ordered talks between state leaders and public-sector unions, who appear to be closing in on a deal that will change the state’s landmark 2011 pension law significantly.
The uncertainty emerged last week after House Democrats discussed the pension talks at a closed-door caucus in West Greenwich. Rank-and-file lawmakers were addressed separately by Gov. Lincoln Chafee and Treasurer Gina Raimondo, who were ordered into mediation by Superior Court Judge Sarah Taft-Carter in a bid to settle the unions’ suit challenging the law.
“I’m very concerned with opening that whole debate again because it’s already been debated,” Rep. Jared Nunes, D-Coventry, told WPRI.com. “No matter where you stood on that, as far as a legislator is concerned, whether you stood on the side of the state employees or stood on the side of the taxpayers, you got that thing jammed down your throat.”
“They’re out of their minds,” added Nunes, who did not attend the caucus himself.
Taft-Carter has imposed a gag order on Chafee, Raimondo and everyone else directly involved in the pension negotiations. But members of the General Assembly are not party to the talks.
Multiple lawmakers who attended the caucus refused to say if Chafee told them he will need to ask for extra money in his proposed 2014-15 state budget next January to cover increased spending on pensions. State leaders are already facing a projected shortfall of roughly $170 million in the budget.
“It was a closed meeting and the things that they discussed are best kept in that room,” Chafee spokeswoman Christine Hunsinger told WPRI.com. “It’s way too early to know exactly what form the budget will take. Obviously, there are many decisions that will need to be made.”
The final version of the pension law, known as the Rhode Island Retirement Security Act, suspended benefit increases for roughly two decades and transitioned employees into a hybrid plan that includes a 401k-style defined-contribution account. The changes slashed the state’s long-term unfunded pension liability from $7.3 billion to $4.3 billion, and lowered the state’s last annual pension contribution from roughly $400 million to $242 million, according to Raimondo’s office.
Rep. Michael Marcello, D-Scituate, acknowledged the proposed pension deal may raise costs for taxpayers starting next year. “It is clear that negotiations are continuing and that there is a potential that any settlement may have an increased cost from a budgetary perspective,” he told WPRI.com.
Marcello said lawmakers were not given any timeline of when a possible settlement is expected to be finalized, and expressed frustration about the lack of information being shared with lawmakers.
“We’re all in the dark, and from my perspective I am concerned – from an institutional perspective – about a court kind of bootstrapping or telling the legislature what to do,” he said. “To me, there’s a huge separation-of-powers issue. … I’m not happy about the fact that the settlement is being done behind closed doors after having sat through all those previous [pension] hearings.”
“There’s no question in my mind we don’t have to approve any settlement,” he added. “We do not have to do it.”
Rep. Arthur Handy, D-Cranston, said the discussion of the settlement at the caucus was “very thin on details,” which left a number of his colleagues “anxious” about what’s coming down the pike.
“The fact that people are so unable to tell us anything makes you – it’s like the thing where somebody says, ‘I can’t tell you about it now’ – you really start to worry that there’s something there,” Handy told WPRI.com.
There are signs a settlement may be coming together.
Lawyers are scheduled to brief Taft-Carter on the progress of their talks for a ninth time later this month, and in August a union leader revealed that the plaintiffs have formed a subcommittee to communicate with workers and retirees about the terms of a settlement. Raimondo, meanwhile, is expected to run for governor next year.
Handy said a key question is how legislators would be expected to handle a draft settlement once it was given to them for their approval by Chafee, Raimondo and the unions. “The struggle would be, can we make changes?” he said. “If a judge says, ‘This is what you need to do,’ obviously we’re still the legislature. We still have that power to do what we need to do.”
“But on the other hand, does it completely upend and start everything over again if we don’t do exactly word for word?” Handy continued. “That’s where my uncertainty is right now.”
House Minority Leader Brian Newberry, R-North Smithfield, who is a lawyer, questioned why Taft-Carter ordered the executive branch to negotiate a settlement that needs the legislative branch’s approval.
“The first and most fundamental condition to a successful mediation is that the people with the power to decide the issue and agree to a binding arrangement be in the room and central to the negotiations,” Newberry told Anchor Rising last month. “That is clearly not happening with this ongoing mediation process.”
Nunes recalled that he drafted three possible amendments to the original 2011 pension bill but was told not to introduce them because “we can’t change this – we already had negotiations, we’ve already done due diligence, this is the way it has to be.”
“Don’t come back a year later or two years later and say, no, we had second thoughts, now we’re going to renegotiate this,” he said. “Don’t tell me we can’t change it and then come back two years later and tell us, no, we can’t change it again.”
“This is why we have separation of powers,” Nunes said. “The judiciary cannot force the legislative branch to change a law that was already enacted. Unless it was unconstitutional and has already been ruled, the judiciary cannot force us to change a law. … The judiciary, short of ruling the thing unconstitutional and striking down the entire law, can’t force us to change a law through negotiations.”
Despite his own concerns, Nunes said he expects House Speaker Gordon Fox and Senate President M. Teresa Paiva Weed will be able to cobble together enough votes to win approval of any pension settlement reached by Chafee, Raimondo and the unions. But Fox himself has expressed concerns about reopening the debate.
“If there’s changes, to what degree and and what [do] the variables look like, and what does it do to erode those savings, and who pays the price?” Fox said on WPRI 12′s Newsmakers last month. “If it comes back to the House and the Senate it’s not going to be about, ‘Let’s review what their settlement might be’ – you reopen the whole pension. It’s a law.”
“We’re not at the table negotiating this, nor should we be, but once you reopen the pension, you reopen it all,” he said.
Fox, D-Providence, emphasized that any settlement which comes out of the mediation process would be subject to change by the 113 elected lawmakers.
“Every representative has a right to put an amendment in,” Fox said. “Every representative has a right to demand that we do anything. And how do you stop them without me looking like the imperial speaker who says, ‘All we can vote on is this’? How do you control that? Nor should you control it, because that’s what democracy details.”
“So there’s a lot of anxiety over it, and we’re not part of it,” he said. “There’s a gag order, so I don’t know what terms they’re talking about.” Legislators would need to review the financial impact of the changes, as well, he said, adding that it “is not a simple exercise.”
Other lawmakers said the debate over any proposed settlement would give the General Assembly an opportunity to revisit the pension changes made in 2011, and potentially craft a better law.
“I think those of us who were there when it passed, that immediate feeling of ‘I hope I never have to go through that again’ is the preeminent one,” Rep. Teresa Tanzi, D-Narragansett, told WPRI.com. “But I think the reality is there are some improvements, if there are settlements to be had, that I would like to see included.”
Tanzi said she hoped lawmakers would “look for opportunities to kind of bring those lower-end individuals to be able to receive their COLA [cost-of-living adjustment] benefits earlier than those who were the higher earners,” suggesting pensions worth less than $35,000 annually as a possible cutoff.
At the same time, Tanzi also expressed uncertainty about how much scope there will be for lawmakers to make changes once a settlement is reached. “If this is a negotiated settlement then the two sides have come together, so how much leeway do we really have and how much is justifiable to advocate for beyond that?” she asked.
Rep. Spencer Dickinson, D-South Kingstown, said among his Democratic colleagues at last week’s caucus, “the sentiment was, we’ve dealt with this, we hope we don’t see it again on the floor.” But, he said, “That wouldn’t necessarily be my sentiment.”
Dickinson suggested a compromise could be to adjust the size of pension benefits based on the measured increase in the cost-of-living since the year a retiree stopped working, with a focus on pensions worth up to somewhere between $30,000 and $50,000 a year.
“If you retired in 1990, look at year 2013, see what in 23 years has changed, the value of the dollar in 1990, and get [the same purchasing power] 23 years later in 2013,” he said.
Lawyers briefed the Rhode Island judge overseeing a union lawsuit challenging the state’s 2011 pension overhaul for an eighth time Monday about the progress of their court-ordered mediation to settle the suit.
Attorneys on both sides of the case met Monday morning at Kent County Superior Court in Warwick with R.I. Superior Court Judge Sarah Taft-Carter, who is handling the suit, court spokesman Craig Berke said. Last December, Taft-Carter ordered the state and the unions into a formal mediation process overseen by the Federal Mediation and Conciliation Service behind closed doors.
The latest update happened amid growing signs that the two sides are getting closer to reaching a settlement.
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – State and local government unions hope to start spreading the word this fall about a successful settlement to end their lawsuit challenging Rhode Island’s landmark 2011 pension law without a trial, a labor leader has revealed.
“A subcommittee of the plaintiff groups has been formed to begin to discuss member communications with the expectation that a successful conclusion to negotiations, if achieved, will allow us to begin to inform our members,” Roger Boudreau, president of the Rhode Island American Federation of Teachers’ retirees chapter and a member of the state Retirement Board, wrote in a member newsletter.
• Related: Lawyers brief judge for 7th time on RI pension lawsuit talks (Sept. 5)
Lawyers briefed the Rhode Island judge overseeing a union lawsuit challenging the state’s 2011 pension overhaul for a seventh time Thursday about the progress of their court-ordered mediation to settle the suit.
Attorneys on both sides of the case met Thursday afternoon with R.I. Superior Court Judge Sarah Taft-Carter, who is handling the suit, court spokesman Craig Berke said. Last December, Taft-Carter ordered the state and the unions into a formal mediation process overseen by the Federal Mediation and Conciliation Service.
The status conference took place amid growing buzz in State House circles that Gov. Lincoln Chafee and Treasurer Gina Raimondo are moving toward a negotiated settlement of the pension suit, despite concerns expressed by Senate President M. Teresa Paiva Weed about whether a deal is the right move.
“We’re making progress on our pension negotiations, so we can stay out of litigation – expensive litigation – and [not] risk the possibility of losing a court case, which none of us want to do,” Chafee said Wednesday at the news conference where he announced he won’t seek a second term. “We’re making progress there.”
Taft-Carter has scheduled the next status conference for later this month, on Sept. 30 at 9 a.m. The previous six status conferences were held on Aug. 6, May 17, April 22, March 25, Feb. 28 and Feb. 1.
Providence is significantly outpacing the state of Rhode Island in the battle of the pension plans.
Providence’s $247-million pension fund, the second-largest in Rhode Island, earned a return of 13.4% during the 12 months ended June 30 – more than two percentage points better than the 11.1% earned by the $7.55-billion state fund over the same period, according to data obtained from the city by WPRI.com.
In fact, Providence’s pension investments have consistently performed better than Rhode Island’s over the last decade, a period during which Providence’s Board of Investment Commissioners has been chaired by Mayors Angel Taveras and David Cicilline, as this chart comparing their returns shows:
A new study out Tuesday offers more praise for Treasurer Gina Raimondo’s approach to pension changes, though it may also offer new fodder for her political opponents.
The study by Dan Liljenquist, a former Utah state senator who unsuccessfully challenged Orrin Hatch for the Republican U.S. Senate nomination last year, was released by the American Legislative Exchange Council (ALEC), a right-leaning group which has drawn criticism from Rhode Island liberals in the past.
The study, “Keeping the Promise: State Solutions for Government Pension Reform,” paints a bleak picture of pension systems’ current funding levels nationwide, and argues lawmakers should look to Rhode Island as one example of how they can reduce the costs to taxpayers.
“Rhode Island has gained both notoriety and praise for its pension reforms,” Liljenquist writes. “Although some legislators launch study groups or hold hearings but do not change anything, Rhode Island made some significant changes in just 11 months.”
Liljenquist writes that “Raimondo was rewarded for her work” reaching out to unions and workers. But he also says lawmakers could “easily and quietly” boost benefits in the future, and suggests that failing to eliminate defined-benefit plans for all retirees “means maintaining some further exposure to bankruptcy risk.”
The full study is available on ALEC’s website. Its praise for Raimondo contrasts with the criticism the pension law received in June in a study released by the left-leaning Economic Policy Institute, another national group.
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – Rhode Island’s state pension fund earned 11.1% in the 2012-13 fiscal year, a big improvement over its 1.4% rise the prior year as a worldwide market rebound boosted returns, Treasurer Gina Raimondo’s office announced Wednesday. The fund’s assets totaled $7.55 billion as of June 30.
The 11.1% return came in below the 11.3% return of the fund’s benchmark over the same period. It was also less than the Massachusetts fund’s 12.7% return or CalPERS’ 12.5% increase. Meanwhile, a status conference on progress in mediating the union lawsuit challenging the state’s 2011 pension law is set for Aug. 6.
• Related: Chart: How Raimondo has changed RI’s pension investments (April 4)
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – The Securities and Exchange Commission has closed its investigation into Rhode Island’s pension disclosures and won’t pursue charges against the state for failing to provide accurate information to investors, Treasurer Gina Raimondo office announced Tuesday.
• Related: SEC settles with Illinois over pensions as RI probe continues (March 13)
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – Wall Street is smiling on Rhode Island lawmakers after they agreed to include a controversial $2.5-million payment on the 38 Studios bonds in the 2013-14 state budget.
• Related: Moody’s downgrades 38 Studios bonds as lawmakers waver (June 17)
Rhode Island’s budget is done. The House has voted. All that’s left is quick Senate passage Thursday and then Gov. Lincoln Chafee’s likely signature.
But it’s worth pausing to take stock of the House of Representatives’ remarkable vote Tuesday at 11:47 p.m. to buck the chamber’s Democratic leadership and restore a supplemental $12.9-million payment into the state pension system. One State House veteran said it had been years since a budget article failed to win passage.
Regardless of what you think about the merits of the move, it was a rare example of Rhode Island legislators thinking for themselves on the biggest vote of the year instead of going along with an untouchable budget blueprint handed down by leadership.
There were 39 votes to make the pension payment and 36 votes against doing so. After the jump, the full list of 39 rebels who voted to put the $12.9 million into the pension fund, which includes all six Republicans and some Democrats who aren’t usually troublemakers. It’s quite a unique coalition.
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – Rhode Island lawmakers approved an $8.2-billion state budget for 2013-14 on Wednesday night that includes $2.5 million to pay the 38 Studios bonds and a $12.9 million pension payment. It passed less than 24 hours after House Speaker Gordon Fox’s initial tax-and-spending plan got torpedoed.
• Related: Fox forced to postpone budget debate after pension rebellion (June 26)
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – House Speaker Gordon Fox abruptly suspended Rhode Island lawmakers’ biggest debate of the year at 1:30 a.m. Wednesday after rank-and-file legislators rebelled and rejected his team’s plan to cancel a bonus payment into the state pension fund.
Fox was forced to recess the House in the early hours of Wednesday morning to determine how to deal with the sudden budget shortfall of nearly $13 million; lawmakers may be asked to reconsider the issue when they reconvene Wednesday at 2 p.m.
Governor Chafee and Democratic legislative leaders have ignored Treasurer Gina Raimondo’s argument that they should make a $12.9 million payment into the state pension system as part of the 2013-14 state budget.
The House Finance Committee voted Tuesday to repeal a provision of state law that requires Rhode Island to put surplus tax revenue into the underfunded pension system for state employees and teachers. By repealing the law as part of the budget, taxpayers can put $12.9 million less toward pensions next year alone.
In a Feb. 6 letter to House Finance Chairman Helio Melo, Raimondo said she opposed ending the requirement that surplus tax revenue goes to the pension fund “because providing retirement security is a top priority for me.” Raimondo’s office said Thursday her position on the issue hasn’t changed.
They didn’t put out a press release, but Treasurer Gina Raimondo’s staff added more information about Rhode Island’s pension investments and expenses to the state government’s website on Wednesday.
The new Pension Investments site includes the portfolio’s investment returns over multiple time periods, its current asset allocation, its total hedge-fund fees in 2011-12 and the State Investment Commission’s monthly meeting reports, as well as an FAQ about expenses.
The information on hedge-fund fees will be closely scrutinized after Raimondo came under harsh criticism from a Forbes.com blogger for her decision to use the alternative investment vehicles. The data shows the pension fund spend $16 million on investment expenses in 2011-12, an amount that will presumably rise significantly this fiscal year because many of the hedge funds weren’t part of the portfolio for all of 2011-12, limiting fees.
In 2011-12, the costliest hedge funds were Och-Ziff Capital Management Group’s OZ Domestic Fund II LP, which got $1.9 million in fees, and the D.E. Shaw Group’s D.E. Shaw Composite International Fund, which got $1.81 million. All of the pension fund’s initial commitments to 20 hedge funds totaled between $20 million and $75 million, with the two largest commitments going to OZ Domestic and Brevan Howard LP.
The hedge-fund portfolio earned a 9.36% return during the year ended April 30, beating its benchmark but trailing the entire pension fund’s 13.38% return over the same period, according to Treasury data compiled by Bank of New York Mellon, its custodial bank, and Cliffwater LLC, its hedge-fund advisor.
• Related: Chart: How Raimondo has changed RI’s pension investments (April 4)
Houston hedge-fund billionaire and former Enron trader John Arnold has become a surprisingly famous figure in Rhode Island politics since it emerged that he donated more than $100,000 to Engage Rhode Island, the advocacy group that helped Gina Raimondo pass the pension law. Her opponents have seized on Arnold’s ties to high finance and the ill-fated energy firm to cast doubt on EngageRI’s motivations.
But Arnold’s actual story is actually more interesting than that, according to the summer issue of WSJ.Money magazine.
Arnold, 39, closed his hedge fund last year and retired to begin giving away his $2.8-billion fortune, mainly through the Laura and John Arnold Foundation he and his wife founded:
Arnold and his wife, Laura, have a somewhat unique approach to giving. Most billionaires tend to write checks to good causes they’re part of, hospitals where they were treated or universities they attended. … Or there are donors who make sizable gifts to meet an obvious need in a community, such as hunger or education. But at a time when charitable giving in the U.S. is still down from its peak in 2007, the Arnolds want to try something new and somewhat grander. John says the goal is to make “transformational” changes to society.
The Arnolds want to see if they can use their money to solve some of the country’s biggest problems through data analysis and science, with an unsentimental focus on results and an aversion to feel-good projects — the success of which can’t be quantified. No topic is too ambitious: Along with obesity, the Arnolds plan to dig into criminal justice and pension reform, among others.
There’s still no news about the status of talks happening behind closed doors between lawyers for for the state and public-sector labor unions who are working to resolve the fight over Rhode Island’s landmark 2011 pension law without going to trial.
Attorneys on both sides of the case met Friday afternoon with R.I. Superior Court Judge Sarah Taft-Carter, who is handling the suit, court spokesman Craig Berke told WPRI.com. 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 20 minutes to update her on the progress of the mediation process, Berke said. The parties have said they aren’t allowed to detail their discussions publicly. Friday’s meeting was the fifth status conference on the pension talks since February.
Taft-Carter has scheduled the next status conference for June 7, Berke said.
Update, July 24: The June 7 status conference was postponed until Aug. 6.
By Ted Nesi and Tim White
PROVIDENCE, R.I. (WPRI) - In his first TV interview since losing the 2010 governor’s race, former General Treasurer Frank Caprio told WPRI 12 he regrets his infamous comment that President Obama could take his endorsement and “shove it,” attributing the outburst to the frustrations of a losing campaign in its final weeks.
• Video: Watch the full Newsmakers with Frank Caprio (May 14)
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – Engage Rhode Island’s fundraising slowed significantly in 2012 compared with the prior year, when the advocacy group provided crucial support for the pension law pushed through by Treasurer Gina Raimondo, WPRI.com has confirmed. Its union opponents said they spent $80,000 in 2011.
Providence has invested 19.75% of its total pension assets in hedge funds, the Taveras administration disclosed Tuesday after WPRI.com requested a breakdown of its investment portfolio.
Rhode Island’s state pension system has invested somewhat less in hedge funds – 14.6% of assets as of April – under a new investment strategy implemented by Treasurer Gina Raimondo soon after she took office in 2011.
Providence’s Board of Investment Commissioners, which is chaired by the mayor and oversees the city’s pension portfolio, started investing in hedge funds on the advice of its longtime financial consultant, Boston-based Wainwright Investment Counsel, Taveras spokesman David Ortiz told WPRI.com. The investment board meets roughly once a month.
My friend Josh Barro of Bloomberg View, who spends a happily inordinate amount of time writing about Rhode Island, interviewed Governor Chafee this week during the governor’s media roadshow in Connecticut and New York City. Josh pressed the governor on why he’s flatly ruled out defaulting on the 38 Studios bonds yet signed a law that reneged on promises made to state retirees – and Chafee’s reply was not convincing:
That raises a question that many state residents – especially retired employees – would like to see answered: If Rhode Island can’t afford to keep its promises to retirees, how can it afford to keep its promise to the 38 Studios bondholders? Chafee isn’t prepared to answer. …
And when it came to 38 Studios, Chafee couldn’t even answer a simple question: Is it ever appropriate for the state to issue moral obligation bonds?
“I’m not an expert on that issue,” he responded. After a year of dealing with the fallout from 38 Studios’ collapse, you would think he would be.
As the interview ended, Chafee remarked, “I’ll have to think a little more about Josh’s question” — the one about why you can freeze COLAs but can’t default on 38 Studios.
Local officials are fearful that the bond market won’t differentiate between a default on the moral-obligation bonds issued for 38 Studios and the general-obligation bonds backed by the state’s full faith and credit, particularly since Rhode Island is a municipal minnow compared with, say, California. A top policymaker once asked me to imagine a Wall Street Journal headline the day after: “Rhode Island defaults on bonds.”
While that’s certainly possible, it’s worth scrutinizing.
First of all, if any state officials in the country should be able to go to Wall Street and soothingly explain why the 38 Studios case is a unique one and the default won’t set a precedent, wouldn’t they be Gina Raimondo – a former venture capitalist beloved by financiers who crafted a landmark law slashing pension liabilities – and Rosemary Booth Gallogly – a veteran policymaker who’s overseen the successful restructuring of municipal budgets in Central Falls and elsewhere, all while explicitly protecting bondholders?
Maybe, maybe not. (And maybe Raimondo and Gallogly aren’t interested in trying.) But if that’s the case, a moral-obligation bond is effectively a general-obligation bond in all but name, with full repayment by Rhode Island taxpayers promised no matter what. If so, shouldn’t voters have to approve moral-obligation bonds at the ballot box as they already do with general-obligation bonds – and shouldn’t Rhode Island be paying the lower interest rate investors get on a lower-risk general-obligation bond?
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)
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.
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.
Edward “Ted” Siedle launched a blistering attack on Treasurer Gina Raimondo in a Forbes.com post Thursday that suggested her changes to Rhode Island’s $7 billion pension system are leading to a “Wall Street feeding frenzy.” Raimondo’s critics seized on Siedle’s broadside immediately, while others wanted to know more about his charges.
Raimondo responded to the Forbes piece Friday in an interview with WPRI.com, defending the State Investment Commission she chairs for moving aggressively to create and expand a portfolio of hedge funds. This transcript has been lightly edited for length and clarity.
Let’s jump right to it. Did you read the article, and what was your reaction?
I did read it. It’s not an article – it’s an opinion blog, and obviously there’s a number of inaccuracies, and I disagree with the overall tone of the blog.
Did the author ever reach out to you or your office, do you know?
So there was no effort to discuss it?
Looking for a thesis in the article, Siedle writes: “There’s no prudent, disciplined investment program at work here – just a blatant Wall Street gorging, while simultaneously pruning state workers’ pension benefits.” I know you’ll disagree with that, but what’s your response?
The iconoclastic liberal economist Dean Baker is famous for discovering the housing bubble years before better-known economists did so. Baker is the co-director of the Center for Economic and Policy Research in Washington. He visited Rhode Island on Thursday to speak at the Economic Progress Institute’s annual budget conference.
Baker sat down with WPRI.com after the event for a wide-ranging interview about the economic issues facing Rhode Island. (A previous excerpt discussed the Superman building and vacant properties.) In this section, Baker discusses why he thinks Rhode Island’s pension return forecasts are reasonable.
The transcript has been lightly edited for length and clarity.
When you testified in New Mexico recently, you said it would be “nearly impossible” for the state’s pension fund not to achieve the 7.75% long-term investment return it’s projecting. Rhode Island’s pension projection is even more conservative at 7.5% – I presume you think that’s even more reasonable. Why?
What most people are doing when they say you can’t get 7.5% is they’re looking back over the past, say, 10 to 15 years, where we’ve had two big tumbles in the stock market, and they go, “See what happens?” But you don’t look at the past; what you look at is the current market valuation – you look at price-to-earnings ratios. And that’s what I’m focused on.
Lawyers for the state and public-sector labor unions continue to talk behind closed doors about whether they can resolve the fight over Rhode Island’s landmark 2011 pension law without going to trial.
Lawyers on both sides of the case met Monday morning 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 a half-hour and updated her on the mediation process’s progress, court spokesman Craig Berke told WPRI.com. The parties say they aren’t allowed to detail their discussions publicly.
Taft-Carter has scheduled the next status conference for April 22 at 2 p.m., Berke said.
Engage Rhode Island, the deep-pocketed advocacy group closely tied to Treasurer Gina Raimondo, released an unsigned three-page document [pdf] on Monday that makes the case for the legality of the 2011 pension law. Here’s the core of the argument:
If the Rhode Island Supreme Court affirms Judge Taft-Carter’s Decision, it will reverse its own precedent on the unmistakability doctrine, and create new constitutional law which will differ from federal court precedent and the precedent of the majority of state courts in this country. … If the judiciary can require a legislature to bind itself forever through one legislative act, which can never be revisited, the judiciary is thereby given too much power. Thus, it is important to hold from a separation of powers perspective that, unless the legislature’s intent to create contractual rights against the state is unmistakably clear, it should be free to amend its own legislation in the future.
• Related: Mediation to continue in RI pension suit after judge gets update (Feb. 28)