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Fact-Checking Pension Claims in Rhode Island’s Race For Governor

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Amidst all of the pension sparring going on in the Rhode Island governor race, one question recently came to the forefront: Which candidate more effectively managed their respective pension system?

In a recent debate (the video of which can be seen above), Raimondo made the claim that Taveras did very little to improve the health of Providence’s pension system since he’s been in office.

“The pension fund in the city of Providence is only 30-percent funded, about the same level as when he [Taveras] took office,” she said at the debate. “[I] fixed a system for the long term. He made small changes and the pension system in Providence is still in crisis.”

But is that claim true? PolitiFact checked the facts.

We asked the Raimondo campaign for its evidence.

Spokesman Eric Hyers sent us links to two documents. The first was a Jan. 19, 2012 report from Providence’s pension adviser, Buck Consultants, which tracks funding going back to 1994, when the city had 57.4 percent of the pension money it needed.

Since then, the overall trend has been down. The funded ratio had plummeted to 39.3 percent by the last full fiscal year Vincent A. “Buddy” Cianci Jr. was in office. It had dropped to 34.1 percent by June 30, 2010, when David Cicilline, now a U.S. representative, was in his last year.

A year later, when Taveras had been in office for six months, the funded ratio had dropped to 31.94 percent.

The second document was the Jan. 31, 2014 valuation report by the city’s new pension adviser, Segal Consulting.

It reports that as of June 30, 2013, with Taveras in office two and a half years, the funded ratio was virtually the same — 31.39 percent. And this was after Taveras won union concessions to reduce pension costs.

But PolitiFact also contacted the Taveras campaign to hear their side of the story.

Michael D’Amico, Taveras’ former director of administration who is now a budget consultant for the city, said it was “a complete oversimplification” to imply that the changes were small because the funded ratio didn’t change significantly.

The actual cost of the pension system was reduced substantially by negotiating changes such as a 10-year suspension of cost-of-living raises and the elimination of 5- and 6-percent compounded cost of living adjustments, D’Amico said.

“We got just about as much as we possibly could have without cutting pensions,” said Taveras spokesman David Ortiz. “In a sense, the administration faced a choice: do we push Providence into bankruptcy to give a receiver the ability to cut pensions?

“The mayor believed the cost and collateral damage of pushing Rhode Island’s capital city into bankruptcy was not worth extra pension savings we would have been able to pursue,” Ortiz said.

Said D’Amico: “If we hadn’t done anything, the funded ratio would have been much lower.”

PolitiFact’s final verdict: Raimondo’s claim regarding Providence’s pension fund is “mostly true.” From PoltiFact:

When Raimondo said, “The pension fund in the city of Providence is only 30 percent funded, about the same level as when he [Taveras] took office,” she was only off by one percentage point, according to the most recent audit of the fund. That funded ratio has not increased since Taveras was sworn in on Jan. 3, 2011.

But that percentage was on a downward spiral at the time, so having it stabilize at 31 percent doesn’t necessarily reflect “small changes,” as Raimondo claimed in the debate. And the changes negotiated between Taveras and the city’s unions are intended to gradually increase the funding ratio.

Because the statement is accurate but needs clarification or additional information, we rate it Mostly True.

Contribution Rates Down In Wake of New York Pension Fund’s “Solid” Investment Returns

Employers who pay into the New York State and Local Retirement System will soon find their pension contribution bills to be significantly smaller. The System has lowered the contribution rates required of state and local government entities, as reported by the Associated Press:

Comptroller Thomas DiNapoli says the average rate will decrease from 20.1 percent of salary for most public workers to 18.2 percent. For police and firefighters the employer rate will drop from 27.6 percent of payroll to 24.7 percent.

The rate reduction announcement comes as the state’s pension system hit a record high of $180.7 billion. DiNapoli says the fund’s “solid investment performance” means local taxpayers won’t have to contribute as high a percentage toward their employees’ retirement costs.

DiNapoli says that with recent investment gains the state’s pension fund is now 92.2 percent funded. That’s an increase from 88.7 percent.

New York City’s pension funds combined returned around 17 percent last fiscal year. Decreasing employer contributions had been on the table since July, after the returns were announced.

44 Municipal Workers Face Charges After Montreal Pension Protest

Dozens of municipal workers in Montreal are facing criminal charges after participating in a protest that left the city hall in shambles.

The protest stems from a proposed law, Bill 3, which would force workers to pay more into the pension system to cover funding shortfalls. From the Canadian Press:

Montreal’s police chief says 44 people will face criminal charges in connection with a rowdy pension protest inside city hall earlier this month.

Marc Parent says the charges will include participating in an illegal gathering, mischief and assault.

Around 250 unionized municipal workers stormed into city hall on Aug. 18, where they tossed paper all over the main chamber and plastered the building with protest stickers.

The demonstrators also unfurled a sign calling the mayor a thief, while one councilor alleges he was struck while others said they were sprayed with water.

More details on the controversial Bill 3, from the Montreal Gazzette:

Here is what Bill 3 would do:

— Ensure that as of Jan. 1, 2014, all municipal employees would, retroactively, begin to contribute half the cost of their pensions, while municipalities pay the other half. (Some unions have negotiated better pension deals, where the employer pays 70 per cent and the employee pays 30 per cent, for example);

— Ensure that employees and municipalities share the cost evenly of any pension plan deficits accumulated before Jan. 1, 2014;

— Forbid pension plan costs from exceeding 18 per cent of payroll costs;

— Allow cities to freeze cost-of-living increases in pension payouts to municipal retirees;

— Allow the province to appoint an arbitrator who could impose a settlement if negotiations fail to result in an agreement within 18 months. The arbitrator would then have an additional six months to impose a settlement.

Moody’s Report Reveals Cost of Seven Counties Departure From Kentucky Pension System

Seven Counties, a mental health agency, removed itself from the Kentucky Employees Retirement Systems Non-Hazardous Plan earlier this summer in an attempt to avoid the mounting pension obligations it claimed would leave it insolvent.

Soon after, a judge affirmed that Seven Counties could indeed leave the system—a decision that sent shockwaves through Kentucky because of the precedent it set for similar agencies facing similar problems.

The problem for Kentucky, of course, is that it now has to contribute more money annually into the system to cover its growing funding shortfalls.

A new report from Moody’s delves deeper into the extra costs Kentucky faces in the wake of Seven Counties’ departure—and the costs that could come if other agencies follow in Seven Counties footsteps.

The Moody’s report is behind a paywall, but Insider Louisville did everyone the great justice of giving us the details:

Debt rating agency Moody’s Investor Services has just issued a new report finding the departure of mental health services provider Seven Counties Services from Kentucky Employees Retirement Systems Non-Hazardous Plan means the state now assumes an additional $1 billion or so in pension costs.

If the remaining mental health organizations leave the state pension system, that amount could rise to $2.4 billion, according to the New York City-based agency.

Which of course has sparked a big political battle, with legislators and state officials panicked at the thought all community health agencies could exit the pension systems, leading to a meltdown.

The chart at the top of this post illustrates the burden Kentucky is, and could be, facing.

Insider Louisville pulled out one jarring quote from the Moody’s report:

The Commonwealth of Kentucky (rated Aa2/stable outlook) has Moody’s third highest adjusted net pension liability for all states at 211 percent of its revenue.

But Moody’s was quick to point out that they don’t think Kentucky will be falling apart in the near future; the agency believes the state can “absorb” the mounting pension costs as a result of cost-cutting measures elsewhere.

Will Villa Park Cut Ties With CalPERS?

The California city Villa Park could vote today to remove itself from the California Public Employees Retirement System (CalPERS).

The decision comes in the face of mounting pension costs and calls for increased transparency in local budgets, which would shine more light on California cities’ unfunded pension liabilities.

First reported by the Voice of OC:

The Villa Park City Council could vote Tuesday to end its contract with the California Public Employees’ Retirement System or CalPERS, the world’s sixth largest pension provider, in an effort to reduce increasing pension costs.

The CalPERS move follows an Orange County Grand Jury report that called for greater budget transparency in Orange County cities.

The report indicates Orange County cities’ unfunded pension liabilities have been increasing on an annual basis since 2007.

There have been increased calls for budget transparency in recent years as cities and towns in the CalPERS system have shouldered more liabilities. A recent report called for all cities to put their budgets online and include CalPERS cost projections in all budgets going forward.

Villa Park has millions in unfunded pension liabilities. From Voice of OC:

For its pension costs, Villa Park, a north OC bedroom community of about 5,000, has a shortfall of about $3.5 million, leaving 17.5 percent of its employee pension costs unfunded, according to the grand jury report.

Gov. Jerry Brown enacted sweeping pension reforms in 2012 aimed at reducing pension payments for most public employees hired after 2013.

But because many public workers were hired before 2013, they are grandfathered into the old system, and reforms likely won’t make a dent for another decade, the grand jury report states.

Villa Park could vote on leaving CalPERS as early as 6:30 pm (Pacific Time) Tuesday. The city wouldn’t be the first to leave CalPERS; Canyon Lake, a city of 11,000, left the system in 2013 due to increasing employee contributions.

Why Did Ontario Lawmakers Wait So Long to Release A Report Critical of Its Pension Systems?

There’s been much concern in Ontario about the sustainability of its public pension systems, particularly in the electricity sector. Ontario Auditor General Bonnie Lysyk warned in 2013 that electricity sector pensions were unsustainable and quite possibly too generous.

Union leaders, taxpayers and other concerned parties agreed that the systems deserved a closer looking-at.

So, last December, Ontario lawmakers appointed Jim Leech—former head of the Ontario Teachers’ Pension Plan—to examine the pension systems inside and out to produce a report and make recommendations to improve their sustainability and affordability.

On March 18, 2014, the report was delivered to Ontario lawmakers. But not to the public.

For over four months it didn’t see the light of day. But last Friday, August 1, the report was finally released to the public. And it was highly critical of the sustainability and cost of the electricity sector’s public pension plans.

[The entire report can be read at the bottom of this page.]

From the Toronto Star:

As reported by the Star’s Rob Ferguson, the 45-pagestudy by former Ontario Teachers’ Pension Plan head Jim Leech finds that Ontario taxpayers contribute $5 for every $1 employees are putting into their pension plans at Hydro One.

Ontario Power Generation isn’t much better, with employees contributing just 24 per cent of contributions compared to 76 per cent by the publicly owned utility.

Meanwhile, compared to other public-sector plans, the ones at Ontario’s four electricity agencies are “generous, expensive and inflexible,” Leech wrote.

What’s more, the study found all four pension plans “are far from sustainable.” Wrote Leech: “Should plans go further into deficit, the sponsors and, ultimately, ratepayers will be required to pay even larger contributions.”

The report has already accomplished part of its purpose: get the government thinking about ways to make these systems more sustainable and less costly.

But new questions are being raised about the transparency issues surrounding the report’s release. Although lawmakers saw the report in March, the public had to wait. Why was it allowed to gather dust for nearly five months?

Other stakeholders are wondering the same thing. Some reactions, as reported by The Star:

“This is awfully suspect,” said Progressive Conservative MPP Vic Fedeli, his party’s finance critic, questioning Wynne’s oft-stated goal of running an “open and transparent” government.

“There was ample opportunity to release this document with good public scrutiny. What are they hiding? What didn’t they want us to know?”

Also:

“Why now, why not before the election so people would have known what’s happening?” said Plamen Petkov, whose lobby group opposes the ORPP as too expensive.

“We’re very worried to see government agencies where employees are paying only 20 cents on the dollar for their pensions when taxpayers pay the other 80 cents. No wonder the government itself expects electricity prices to go up 42 per cent over the next five years,” he told the Star.

“It’s really disappointing. We recommend the government clean its own house first before they ask employers to contribute $3.5 billion a year to the Ontario Retirement Pension Plan.”

Government officials said they originally planned to release the report on May 1, when Ontario’s new budget was passed. But the budget wasn’t passed, and that led to new elections being held.

The report was held as elections played out. The results of those elections weren’t confirmed until June 24^th. Still, the report remained in the hands of the government for another 5 weeks afterward.

Here is the report, which can also be found on Ministry of Finance website.

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Photo: “Ontario-flag-contour” by Qyd. Licensed under Public domain via Wikimedia Commons

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