PROVIDENCE, R.I. (WPRI) – Treasurer Gina Raimondo thinks the best way to fix the state’s 36 locally run pension plans is to move them into the state-run system. But making that happen will be easier said than done.
“I believe that, ultimately, the long-run answer is get everybody in MERS,” Raimondo told WPRI.com last week during a half-hour interview in her State House office, using the acronym for the state-run Municipal Employees Retirement System. “The question is, how exactly do you that?”
The 36 local plans have a combined unfunded liability of $2.1 billion, but about 40% of that shortfall is in one city: Providence, where Mayor Angel Taveras has clashed with Raimondo over whether the General Assembly should pass legislation giving communities the green light to freeze pension cost-of-living adjustments (COLAs).
“I would be delighted to sit down with Providence if they would like any help,” Raimondo said. “I’ve offered. They say they have it under control. That’s great. I hope they do.”
Taveras spokesman David Ortiz said Raimondo and the mayor “had a brief conversation … at an informal event they both attended late last year,” and staff members in the treasurer’s office have contacted their colleagues at City Hall. “The administration will reach out to the general treasurer and her team should we need assistance,” Ortiz said.
Skeptical of local pension oversight
Raimondo and Taveras are on the new commission created to study the 36 local plans, and she wants to push the panel to explore “creative ways” to transition the plans into MERS, possibly through legislation. Finding a way to do so is “not easy or obvious,” particularly since they’re all in different situations, but “there’s an answer for every one,” she said.
Raimondo’s office organized a well-attended workshop last Tuesday to help municipal officials start tackling their pension problems, and the treasurer said the response was positive. Some cities and towns aren’t sure about who is on their pension boards or whether they’ve ever received fiduciary training, she said.
Suspending COLAs without taking other steps to change their pension systems could leave cities such as Providence more vulnerable to having their decisions overturned by the courts, Raimondo said. “It’s not a comprehensive solution, and it puts you on much shakier ground legally,” she said.
Asked whether there was any reason a city or town should run a pension plan on its own, Raimondo said: “It’s hard to figure out why they should. There are just so many economies of scale to having the assets managed centrally, to having a single pension system in the state,” including uniform benefits for public workers in all communities.
‘Keep elected officials accountable’
While the local pension plans’ problems are garnering most of the headlines this winter, Raimondo is spending much of her time implementing the sweeping state pension overhaul signed by Governor Chafee in November. She expressed confidence the law won’t be overturned in court, though she acknowledged: “I worry about it.”
“It’s a little early to say” how the implementation of the pension law is going, Raimondo said. “There’s still a certain amount of confusion and lack of information about what the law does.” Many employees incorrectly think they have to work until age 67, which is true only for those with fewer than five years of service.
Raimondo said her office plans to spend the next two months doing outreach to raise awareness about the details of the law among public employees, including regional education sessions, online information, tutorials and an updated pension system handbook.
The other big initiative is selecting a firm to create and manage the law’s new defined-contribution retirement plan, which will receive $100 million to $150 million in funds annually. Raimondo said a transparent process should allay any concerns among voters about whether her staff’s close ties to the finance industry could impact the bidding.
“We’re doing it all out in the open, and anyone that has any questions or wants to come to any meetings or go online and look at many of the information should go online and do that – and I encourage them to do so,” she said. “That’s what the job of the people is, to keep elected officials accountable and honest.”
Rhode Island ‘energized for change’
Pensions are probably Raimondo’s top concern, but they’re not her only one.
The treasurer said she is planning to spend “a lot of time” in February and March “selling Rhode Island” in meetings with institutional investors who buy the state’s bonds, in the hopes that doing so will raise demand for the bonds and reduce the state’s borrowing costs.
Raimondo is also looking for other ways to support the state’s 39 cities and towns, including by establishing the new Ocean State Investment Pool to centrally manage their cash and other liquid assets, and by having Deputy Treasurer Mark Dingley offer tips on how to improve their bond disclosures, which the state did last year in response to an ongoing SEC investigation.
“In some ways, they have the hardest job in government,” she said. “Running cities and towns in a time of economic slump, combined with these vestiges of pensions and health care, is really hard. … They’re also strapped. That’s what I’m realizing. They don’t have the resources. … I think we have to help cities and towns, no doubt about it.”
On a personal level, Raimondo said she’s gotten used to being recognized on the street over the past year, and often gets a thumbs-up from passers-by. “I just feel like Rhode Island is energized for change and for a brighter future, and that’s awesome,” she said.
(photo: Ted Nesi/WPRI)