How hard will it be to fix Rhode Island’s locally run pension mess? Really, really, really hard, apparently.
“I know this is going to be hard,” Treasurer Gina Raimondo told a roomful of local officials Tuesday as she opened a workshop to help them attack their pension problems. “I’ve got a few scars to show for it. But I also know we’re going to do it.”
“This is hard,” echoed Deputy Treasurer Mark Dingley, one of Raimondo’s closest advisers, as he walked the 50 or so officials through their legal responsibilities as fiduciaries.
“You have one of the toughest challenges of all, because you don’t have to be a rocket scientist to know how badly the economy has treated the state of Rhode Island,” agreed former New York Lt. Gov. Richard Ravitch, an invited guest who helped save New York City from bankruptcy in the 1970s.
“I don’t know what to say except I admire you for talking about this and dealing with it in an intellectually honest way,” Ravitch said. “Godspeed.”
All 24 cities and towns with a locally run pension plan except Providence sent someone to the event at CCRI’s Warwick campus, though Warwick’s own Scott Avedisian was the only mayor who attended. But if any of them expected to hear a simple roadmap for fixing their problems, they likely left disappointed.
For those who tracked Rhode Island’s state-level pension debate last year, Tuesday’s event caused some déjà vu. Raimondo used the opportunity to hammer home her major point: that cities and towns must first nail down their pension liabilities using reasonable assumptions before they move on to finding a solution.
“The lesson I really learned is that I don’t believe we would have gotten done what we did if we didn’t spend enough time focusing on the problem,” she said. “I cannot emphasize that enough.”
“Take the time to diagnose the size and magnitude of your pension problem,” Raimondo said. “Everyone wants to rush to an answer.” All the municipalities must submit by April 1 two actuarial studies of their pension plans to a new commission created by the General Assembly that meets for the first time Wednesday. If the pension plan is in trouble, a recovery proposal must be submitted by Nov. 1.
The workshop was mostly a crash course in basic pension accounting. Dingley explained how the officials’ duties as plan fiduciaries are separate from their duties as local budget officers; actuary Joe Newton explained how they should evaluate their plans’ situations; and asset manager Allan Emkin grimly warned them not to expect 8% returns on their investments going forward.
“Volatility is the enemy of pension plans, and we now have more volatility than we can deal with,” Emkin said. He called the state’s new 7.5% return forecast “reasonable but … slightly optimistic” – a troubling idea considering most of the cities and towns are banking on earning more than that annually.
Dan Beardsley of the Rhode Island League of Cities and Towns, a member of the state Retirement Board, called the workshop “a good first step” but said it didn’t touch on what he sees as the municipalities’ core challenge – the fact that they have no way to force retirees to negotiate concessions in their pension benefits.
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. She is also a member of the new pension commission that starts its work Wednesday.
Tuesday’s workshop appeared to be evidence that Raimondo was being honest when she pledged last fall to work with the cities and towns on their locally run pension plans even though her office does not have direct responsibility for them. She told reporters after the meeting that it left her “incredibly optimistic” about the chances of fixing them.
“The future of our country very definitely lies in your hands,” Raimondo told the municipal officials. “This is not glamorous work – you have just sat through three hours of fiduciary training and pension math – and your union membership is better off because you did. You took the time to do it and I appreciate you being here, and your constituents are better off because you did.”
“It’s hard work,” she added (again), “but I can’t thank you enough for doing the work.”
• Related: Providence is only no-show at Raimondo’s local pension event (Jan. 24)
(photo: Ted Nesi/WPRI)