gina raimondo | Pension360

Rhode Island Pension Reform Law Sits in Legal Limbo on Three Year Anniversary – But Raimondo, Other Lawmakers Open To Settlement

It’s been three years since Rhode Island passed into law a sweeping pension reform measure. But the law still sits in legal limbo after being challenged by labor groups.

A settlement has been hard to come by. But incoming Rhode Island governor Gina Raimondo said Monday she is open to a settlement. From WPRI:

Raimondo – who initially resisted efforts to mediate, but ended up supporting the failed settlement after a judge ordered talks – suggested Monday she remains open to settling but only if she can preserve the lion’s share of the savings from the original 2011 law. The previous settlement reduced the state’s pension shortfall by $3.86 billion, about 94% of the $4.09 billion the law saved.

“As I have said numerous times, I supported the settlement agreement,” Raimondo told WPRI.com in a statement. “I would like to see that back on the table and enacted to put the lawsuits behind us. I am open to making that happen.”

But Raimondo added: “What I am not interested in is going backwards from what was agreed upon in the settlement.” The state is already projecting a budget deficit of nearly $200 million next year; it would be more than twice as high if the old pension system were still in place.

She isn’t the only Rhode Island lawmaker eager to settle and put the legal challenge behind them. From WPRI:

Seth Magaziner – the Democrat newly elected to succeed Raimondo as treasurer, who will therefore become a lead defendant in the pension suit – has long backed seeking a deal.

“I continue to be supportive of renewing settlement talks, and am hopeful that a resolution can be reached that will keep the retirement system on a secure footing and avoid lengthy and expensive litigation,” Magaziner told WPRI.com in a statement Monday.

Legislative leaders are also open to the possibility.

House Speaker Nicholas Mattiello and Senate President M. Teresa Paiva Weed have both signaled in recent days they want to reduce or eliminate taxes on retirement income, such as Social Security and pension benefits – a new perk for older residents that could help smooth the way for settling the pension suit.

“The speaker will work with all parties to help facilitate a settlement of the pension lawsuit that is in the best interests of the citizens of our state,” Larry Berman, a spokesman for Mattiello, told WPRI.com in an email Monday.

Paiva Weed spokesman Greg Pare sounded a similar note. “The Senate worked closely with Treasurer Raimondo to develop the Rhode Island Retirement Security Act, and will continue to work with her as governor,” Pare told WPRI.com in an email Monday.

The pension reform law froze COLAs and moved most employees into a hybrid system with 401(k) qualities. An actuarial analysis stated the reforms improved the funding level of the state’s pension system from 42 percent to 56 percent.

Unions Expect Battle Over Pension Benefits to Intensify In Wake of Election

Unions and other labor groups say they expect the fight over retirement benefits, specifically public pensions, to intensify as the election saw Republican make gains in many state-level legislatures and governor’s offices.

From Reuters:

Defenders of public pensions say they will be particularly focused on Colorado, Florida and Nevada, where they expect moves to reform pensions will gain steam after Republican gains on Tuesday.

“This fight is not going away,” said Jordan Marks of the National Public Pension Coalition, a national union-funded group that seeks to protect public pensions. “There are a number of states, including Colorado and Nevada. We are looking at next year.”

[…]

In Nevada, Republicans wrested control of both the state assembly and senate from Democrats. Lawmakers reconvene in February.

A Republican bill to switch Nevada’s pensions to a hybrid system was killed by Democrats in 2013. Analysts expect Republicans to reintroduce the measure next year.

In Rhode Island, Gina Raimondo, the state treasurer who spearheaded pension reform measures in 2011, was elected governor despite union opposition. Wisconsin’s Governor Scott Walker, an avowed enemy of unions after taking them on in 2011, was re-elected.

In California, an effort to get a measure on the 2016 ballot that would give local governments more leeway to cut public pension plans will also be renewed, according to the outgoing mayor of San Jose, Chuck Reed, the measure’s main proponent and a rare Democratic advocate for pension reform.

Victory for Reed’s successor in San Jose, Democrat Sam Liccardo, another vocal pension reformer, means a fight between police and the city over retirement benefits will continue unabated.

Labor leaders identified Colorado as another key state in the battle over pensions. Democrats control the House, but control of the Senate is still up in the air.

Implications for Pension Investments As Elections Put Ex-Financial Firm Executives in Office

The results of several state-level elections could have implications for pension fund investments as three ex-financial firm executives became their states’ respective governors.

David Sirota writes:

Wall Street firms and executives have poured campaign contributions into states that have embraced the strategy, eager for expanded opportunities. Tuesday’s results affirmed that this money was well spent: More public pension money will now likely be entrusted to the financial services industry.

In Illinois, Democratic incumbent Pat Quinn was defeated by Republican challenger Bruce Rauner, who made his fortune as one of the namesakes of Golder, Thoma, Cressey & Rauner (GTCR) – a financial firm that manages more than $40 million of the state’s $50 billion pension system. Rauner — who retains an ownership stake in at least 15 separate GTCR entities, according to his financial disclosure forms— will now be fully in charge of the pension system.

In Rhode Island, venture capitalist Gina Raimondo, a Democrat, defeated Republican Allan Fung. Raimondo retains an ownership stake in a firm that manages funds from Rhode Island’s $7 billion pension system. Raimondo’s campaign received hundreds of thousands of dollars from financial industry donors. She was also aided by six-figure PAC donations from former Enron trader John Arnold, who has waged a national campaign to slash workers’ pensions. Fung slammed Raimondo as a tool of Wall Street, but she eked out a victory after a libertarian-leaning third party candidate, Robert Healy, unexpectedly siphoned votes away from Fung.

In New York, Gov. Andrew Cuomo, a Democrat, handily defeated his Republican opponent, Rob Astorino, after raising millions of dollars from the finance industry. The New York legislature is set to send Cuomo a bill that would permit the New York state and city pension funds to move an additional $7 billion into hedge funds, private equity, venture capital, real estate and other high-fee “alternative” investments. Assuming the standard 1 to 2 percent management fees applies, that could generate between $70 million and $150 million a year in fresh fees for Wall Street firms.

Cuomo has not taken a public position on the bill, but his party in the legislature passed it by a wide margin, and he is widely expected to sign it into law.

In Massachusetts, Republican Charlie Baker appeared early Wednesday to have secured a narrow victory over Massachusetts Attorney General Martha Coakley. Baker was a board member of mutual funds managed by a financial firm that also manages funds from Massachusetts’ $53 billion pension system. Baker is also the subject of a New Jersey investigation over his $10,000 contribution to the New Jersey State Republican Party just months before New Jersey Gov. Chris Christie’s officials awarded his firm a state pension deal. Christie, whose Republican Governors Association spent heavily to support Baker’s campaign, blocked the release of documents related to that investigation until after the election.

Read the full analysis here.

Photo by Keith Ivey via Flickr CC License

Pensions Make For Interesting Politics In Rhode Island Gubernatorial Race As Unions Pick Sides

In Rhode Island’s gubernatorial race, pensions have muddied the waters of union politics. Gina Raimondo (D) is the one wielding union endorsements. But her opponent, Allan Fung (R), might have union voters on his side regardless.

Almost two-dozen unions have publicly endorsed Raimondo even though she rubbed public workers the wrong way when she froze COLAs and made other changes to the pension system in 2011.

Her challenger, Allan Fung (R), has won no union endorsements. But he’s more popular among union voters. From the Wall Street Journal:

Anger over pension cuts for state employees is driving many union voters in Rhode Island to cross party lines and back a Republican for governor, one of several midterm races roiled by battles over public pensions.

Democrat Gina Raimondo, Rhode Island’s treasurer, spearheaded legislation in 2011 to rein in public-employee pension obligations. Rancor over the move was still strong among union voters in a poll earlier this month, in which they favored Republican candidate Allan Fung over Ms. Raimondo, 42% to 30%; among all those surveyed she led by six points. A poll out Tuesday by Brown University found the race essentially tied.

[…]

Ms. Raimondo in Rhode Island said she understands public employees have “hard feelings” over the 2011 pension changes, which halted annual cost-of-living raises for retirees and forced certain state workers and teachers to move a portion of their retirement savings into 401(k)-style accounts.

“We always knew there could be political consequences, but it was clearly the right thing to do,” she said in an interview. “The good news is the pension system is healthier than it’s ever been. For teachers and state employees, the pension will actually be there for them.”

Mr. Fung also pushed through pension changes as mayor of Cranston, R.I., though they were less aggressive. He said union members who back him aren’t doing so merely to oppose Ms. Raimondo. He has played down a prior comment that he supported right-to-work laws, which forbid labor contracts that require union membership by workers. “The unions are there, and under my administration they’ll always have a seat across the table,” Mr. Fung said in an interview.

Broad labor support for Mr. Fung is striking because he has won no endorsements from unions, while Ms. Raimondo has garnered about two dozen endorsements, mostly from private-sector unions not affected by the state pension changes.

A list of unions that have endorsed Raimondo, according to her campaign website:

Bricklayers’ and Allied Craftsmen Local 3

Ironworkers’ Local 37

Plumbers’ & Pipefitters’ Local 51

Plasterers’ and Cement Masons’ Local 40

Roofers’ and Waterproofers’ Local Union No. 33

Sprinkler Fitters Local 669

Operating Engineers’ Local 57

Sheet Metal Workers Local 17

United Steelworkers Local 12431

Elevator Constructors Local 39

United Food and Commercial Workers Local 328

SEIU 1199 NE

IUPAT District Council 11

IBEW Local 99

32BJ SEIU

UNITE HERE Local 217

Carpenters Local 94

UWUA Local 310

Amalgamated Transit Union, Local 618

Raimondo, Fung Fight Over Pension Funding, Fees

Allan Fung, Rhode Island’s Republican candidate for governor, released an ad last week slamming his opponent Gina Raimondo for paying “high fees” for “poor returns” on pension investments.

[The ad can be viewed above.]

Raimondo’s campaign issued the following statement refuting Fung’s claims and accusing Fung of mismanaging Cranston’s pension system:

“Allan Fung is recycling the same tired, misleading attacks on Gina that Rhode Islanders have already rejected. Everything Gina has done as Treasurer is to protect workers’ pensions. The fact is, Gina’s investment strategy is working and is providing strong returns with less risk.”

“In contrast, as mayor, Fung has failed to make full payments to the Cranston pension system and is proposing that we actually default on a debt the state owes. That’s reckless, risky and will hurt taxpayers,” she said of his stance on the 38 Studios bonds.

She cited annual financial reports indicating that the city never paid more than 87 percent of its required pension contribution the first four budget years Fung was mayor.

Fung’s spokesman responded to that attack with a subsequent statement:

“Cranston’s locally administered pension plan had been severely underfunded for years before Allan was elected mayor. … He increased contribution levels and negotiated a responsible pension reform plan,” and is “proud of the fact” the city budgets have had enough money to make full payment the last two fiscal years.

The Raimondo campaign has previously acknowledged that the pension system’s investment fees totaled $70 million in fiscal year 2012-13. Around $45 million of those fees were from hedge funds.

The Raimondo campaign has also clarified that the pension system’s hedge fund investments returned 8.8 percent in 2013. The system’s overall portfolio, meanwhile, returned 15 percent.

Gina Raimondo Suddenly Pulling In Union Endorsements

Heading into the primary that took place earlier this month, Rhode Island’s democratic candidate for governor Gina Raimondo had notoriously little union support.

That was due to the 2011 pension reforms she spearheaded. Unions, aside from disliking the policy, thought they never got a fair shake during negotiations.

But now Raimondo is pulling in union endorsements by the dozen. Her stance on pensions hasn’t changed. So how is she doing it? The Providence Journal asked the same question:

What did Raimondo tell these unions to win their support?

Neither Raimondo, the state’s general treasurer, nor her Republican opponent, Cranston Mayor Allan Fung, has been willing to make public their written answers on any candidate questionnaires they submitted in pursuit of endorsements.

Why not? They won’t say.

[…]

Gina Raimondo is on a roll, with a new endorsement almost every day this past week.

In the last week alone, the Democratic nominee for governor has picked up glowing endorsements from the International Brotherhood of Electrical Workers Local 99 and an arm of the Service Employees International Union that represents “nearly 1,000 contracted janitors at office buildings in R.I.”

A week earlier, she netted the endorsement of the separate wing of the SEIU that won the right to unionize at-home child-care workers.

Raimondo has now picked up endorsements from 15 unions.

Unions have vocally opposed Raimondo’s 2011 reform efforts for years.

But it could be that they see her as the lesser of two evils; unions could have reason to believe they’d have better luck with Raimondo in office than her Republican challenger, Allan Fung.

But without the release of the questionnaires, we won’t know for sure.

Craig Douglas: Massachusetts Candidates Need To Take Page Out of Gina Raimondo’s Book

Rhode Island’s pension system, and the race for governor surrounding it, has been grabbing all the headlines of late. But it’s neighbor, Massachusetts, is probably just as deserving of the press.

Data from the Center for Retirement Research suggests that Massachusetts’ various retirement systems are among the most underfunded in the country. And, like Rhode Island, the state will soon vote for its new governor.

Craig Douglas, the managing editor of the Boston Business Journal, says Massachusetts’ candidates for governor would do well to take a page out of Gina Raimondo’s book. From his editorial in the Providence Journal:

It’s high time Massachusetts had a governor who actually acknowledged the state pension system for what it is: a ticking time bomb.

[…]

Whereas Raimondo fought to overhaul Rhode Island’s worst-offending pension plans, Massachusetts has been a serial can-kicker. In 2011, Gov. Deval Patrick, Senate President Therese Murray and House Speaker Robert DeLeo were quick to dole out the back slaps after amending the state pension system’s funding schedule and benefits for newly hired employees. The moves, they said, would lower the state’s annual pension payments by a cumulative $5 billion through 2040.

What they didn’t mention is that, by extending the system’s payoff period by 10 years, they were baking in an additional $26.4 billion in costs for the state, according to an analysis by The Pioneer Institute. Welcome to the Bluto Blutarsky School of Pension Math.

I asked Baker and Coakley to reflect on Raimondo’s approach and whether it jives with their own pension policies. Their responses? Egh.

The Coakley camp “applauds” Patrick’s efforts to address the state’s retiree obligations, and used all sorts of buzz words and nuance to make clear that she is no Gina the Reformer. When politicians couch pension reform with terms such as “we need to take a serious look” and “additional reforms for new workers,” you can bet they are peddling yesterday’s meatloaf as today’s sloppy Joe.

As for Baker, well, his response was at once promising and disappointing. While he hit all the right talking points — better funding ratios, smarter investment strategies, an end to kicking “the can down the road” — Baker’s blueprint to tackle those problems is both vague and short on specifics. He even suggested more local aid could help address the equally frightening pension crisis affecting Massachusetts towns and cities. Come on Charlie, you’re better than that.

Or maybe not. If candidates are unwilling to take a tough stance on the fiscal straits facing Massachusetts today, when will they?

Massachusetts’ pension systems were 61 percent funded in 2013, collectively.

Investigating Gina Raimondo’s Ocean State Investment Pool

GoLocalProv today published the results of an investigation into an investment pool – called the Ocean State Investment Pool – set up by Rhode Island Treasurer Gina Raimondo to help towns and cities “maximize investment returns”.

GoLocalProv writes that the fund certainly saw gains – but it also racked up investment expenses:

The investment pool is being run by Pyramis Global Advisors, LLC, a company owned by Fidelity Investments. The firm was paid a fee of $757,701 for fiscal year 2013 to manage what was by the end of the year $545.1 million in assets, according to the annual report for that year. After the fee, the pool generated a net investment income of $698,263, according to the report. (The pool earned a total of $1,450,050 in interest income that year.)

For the first three months of the pool’s existence—from March to June 2012—Fidelity Investments fetched a fee of $199,690, almost as much as the $448,680 in interest earned by the pool, according to the last annual report.

[…]

Pyramis’ fee ranges from .138 percent to .148 percent of the average net assets. The rates for the fiscal years 2012 and 2013 were on the higher end of that range, at .147 and .148 percent, respectively. The rates decrease as assets increase, meaning that the more money that’s in the pool, the lower the cost.

More on the creation and purpose of the Ocean State Investment Pool, from GoLocalProv:

Known as the Ocean State Investment Pool, the program was launched in the spring of 2012. Two years later, just three municipalities have signed up: Bristol, Cranston, and Lincoln. The remaining six governmental members are all state entities and include the state pension fund and the Rhode Island Student Loan Authority, for which the treasurer is a board member. Money from the state general fund also accounts for more than half of the assets in the fund.

The Ocean State Investment Pool was designed to help cities and towns maximize investment returns on so-called liquid assets—cash that cannot be invested over the long-term because it needs to be used for day-to-day expenses, like payroll.

GoLocalProv reached out to several cities and towns, asking why they had not signed up.

Answers varied. In Warwick, a city official said the investment pool does not meet all the city’s criteria for its liquid investments. William DePasquale, the acting chief of staff for Mayor Scott Avedisian, said that after the 2008 recession the city had a adopted a policy of only making liquid investments that were FDIC-backed. For that reason, he said the investment pool was not considered by the city.

Read the entire investigation here.

Photo by TaxRebate.org.uk

Rhode Island, Raimondo Defend Hedge Fund Position After CalPERS Pullout

Rhode Island’s pension fund invests nearly $2 billion in hedge funds, or 14 percent of its overall portfolio.

In light of CalPERS high-profile pullback from hedge funds, The Providence Journal asked Gina Raimondo, Rhode Island’s Treasurer, for her thoughts on CalPERS’ decision and the fate of hedge funds in Rhode Island’s portfolio:

State Treasurer Gina Raimondo sees no immediate reason to pull Rhode Island’s pension money out of hedge funds, just because the largest public pension fund in the U.S. – the California Public Employees Retirement System – has announced plans to do so over the next year.

[…]

Asked Tuesday if Rhode Island would take its cue from Calpers, Raimondo chief of staff Andrew Roos said: “We will continue to learn from best practices around the country and will look closely at the CalPERS decision.’’

But he said: “Rhode Island’s pension fund is less than 3% the size of Calpers and has very different funding and cash-flow needs. Given our fund’s different characteristics, we will continue to pursue strategies that pursue the best outcomes for Rhode Island pension participants.’’

Roos acknowledged that the state’s hedge-fund-heavy strategy brings loads of fees. He also admitted that the hedge funds have under-performed in 2013 compared to the rest of the pension fund’s portfolio. But he stood by the investments. He told the Providence Journal:

“Every action the State Investment Commission has taken during this administration has been to promote retirement security and ensure funds will be available to pay pension checks to our retirees,’’ he said.

“After the financial collapse of 2008-2009 when the fund lost over $2 billion dollars, the SIC reviewed its policies and unanimously adopted a plan to reduce volatility while continuing to pursue strong long-term returns … As a part of the strategy to reduce volatility while maintaining strong long-term returns, the SIC improved the pension fund’s diversification, which included making allocations to hedge funds….’’

“This strategy is working,’’ Roos said. “Over the last three years we have reduced the volatility of this portfolio by 50% and achieved strong returns (1 year: 15.12%; 3 year: 9.05% as of June 30, 2014) … [But] like every other investment the state makes, the SIC and staff are constantly evaluating and making adjustments to the hedge fund allocation to ensure it is performing as intended.’’

Rhode Island’s pension fund paid $70 million in investment fees in the 2012-13 fiscal year. Meanwhile, the state’s hedge fund investments returned around 8.8 percent in 2013-14, while the pension fund’s overall portfolio returned 15 percent over the same period.

Rhode Island Gov. Candidate Allan Fung Is A Pension Reformer, Too

By now, everyone knows about Gina Raimondo’s track record on pensions. Despite the controversy surrounding her 2011 reform efforts and subsequent investment strategies, she made pensions a central facet of her campaign for governor.

Her Republican opponent, Allan Fung, is now taking up a similar strategy. Fung, currently the Mayor of Cranston, has this week begun touting his own record of pension reform. From Public Sector Inc:

Like Raimondo, Fung, who served on a reform panel that helped craft the 2011 state pension changes, has been an ardent backer of trimming pensions to make them more affordable. The difference is that the media hasn’t seemed to consider that such an unusual story for a Republican politician. Raimondo, by contrast, has benefited from a barrage of stories hailing her as a Democrat willing to take on public employees and their unions.

[…]

Cranston’s current employees participate in the state’s retirement system, so the city had a stake in the state-engineered reforms. But Cranston fire and police retirees and those workers who were hired before July 1, 1995 participate in a separate city-directed plan that was deeply in debt . Although the plan has just 483 members, the vast majority of which were already retired, the plan was so expensive that it cost the city $22.3 million to support this year, amounting to 20 percent of the city’s operating budget, excluding its school system.

Earlier this year Fung struck a deal with the majority of plan members to suspend cost of living adjustments and to cap any future COLA’s at 3 percent. The deal is expected to save Cranston about $6 million a year for a plan that was so expensive that the city began winding it down in 1995. When Fung took office in 2008 the pension system had just 15 percent of the assets on hand necessary to pay its current liabilities, and Fung warned beneficiaries that a day could come when the fund went bankrupt. Now the system is on track to be fully funded, but it will take two decades.

Cranston is also saving money because Fung struck a deal to place new city employees in a 401(k) style defined contribution plan.

A side note: this election will be a historic one for Rhode Island no matter who wins. Raimondo is vying to become the first woman governor in the state’s history. Fung, meanwhile, would be the first Asian elected to that office.

Photo credit: “Mayor Allan Fung visits Providence” by Office of Mr. Fung. Licensed under Creative Commons Attribution 3.0 via Wikimedia Commons

Deprecated: Function get_magic_quotes_gpc() is deprecated in /home/mhuddelson/public_html/pension360.org/wp-includes/formatting.php on line 3712