Rhode Island governor-elect

Newspaper: Rhode Island Should Settle Pension Suit With Retirees, But Keep Savings Intact

Rhode Island Governor-elect Gina Raimondo said last week that one of her top priorities was reaching a settlement with workers in the long-running lawsuit against the state’s 2011 pension reforms.

The Providence Journal opines that a settlement would be ideal for everyone – if the law’s savings are kept intact. From the Providence Journal:

State leaders — led by Governor-elect Gina Raimondo — are again eyeing a possible settlement with the unions that are challenging the 2011 overhaul in court. The state’s goal, presumably, is to retain the bulk of the savings created by the overhaul and avoid the risk of losing — an outcome that could cost taxpayers hundreds of millions of dollars that they cannot afford.

That goal is a good one, as long as the bulk of the overhaul savings is retained. Even with those savings, the state’s public pension costs are high, and those tax dollars pay for retirement plans that are often far more generous than those in the private sector.

There is also the issue of uncertainty. The projection that the taxpayer contribution rate will slowly nudge downward assumes that the state’s $8 billion pension portfolio will meet its annual investment goal of 7.5 percent. If that goal is reached or exceeded, all well and good. But if the investment returns fall short, the cost to taxpayers could rise.

The idea of reaching a settlement also raises logistical concerns. There are more than two dozen communities enrolled in the state-run Municipal Employees Retirement System, which will be impacted by the outcome of the pension lawsuit. Naturally, most if not all of these municipalities will want to have a say in any negotiated settlement.

If a settlement is reached, it could look a lot like the one that was almost accepted in 2014. In that deal, 95 percent of the state’s savings were retained. In exchange, pension increases were given to retirees and some employees.

But that deal fell through when one retiree group rejected it.

Photo by By Jim Jones (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Settling Pension Lawsuit Is Top Priority for Raimondo

When Rhode Island Governor-elect Gina Raimondo takes office this month, one of her top priorities will be negotiating a settlement with public employee unions in the lawsuit challenging the state’s 2011 pension changes.

From the Providence Journal:

Days away from taking the oath of office that will make her the first female governor of Rhode Island, Governor-elect Gina Raimondo anticipates that public-employee pensions will be one of the first big items she tackles. Again.

Specifically, she anticipates “early” action to try to forge a settlement in the state’s high-stakes legal fight with its public-employee unions over the 2011 pension overhaul she crafted as state treasurer. “It is a priority,” she said.

[…]

With the state already facing a potential $200-million deficit, she said: “It is in no one’s interest to have a pension system which is unaffordable and unsustainable because, if you do that, a lot of people will get hurt.”

“So I will be reaching out,” she said Wednesday in a brief but wide-ranging interview in which she confirmed her intent to try to reopen the pension talks and, in the interim, ask lawmakers to extend the Feb. 5 deadline for the submission of her first budget proposal.

[…]

“A lot of work and good will went into the terms of the settlement agreement,” said Raimondo, who hopes to revive it. “It gives them peace of mind that their pension will be there … and that it is affordable for the state of Rhode Island.”

Should the state lose the lawsuit, “there would almost certainly be a number of municipal bankruptcies … [and] if we don’t fix the system, eventually you are going to have to go to retired people and cut their pensions … and that would be a terrible thing.”

Raimondo spearheaded the state’s 2011 pension changes, which cut benefits, froze COLAs and raised the retirement age.

Photo by By Jim Jones (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Rhode Island Pension Payments to Total Over $400 Million in FY 2016, 2017 As New Contribution Rates Approved

Rhode Island’s Retirement Board approved employer contribution rates for fiscal years 2016 and 2017 on Wednesday.

Total state and local pension payments are projected to top $400 million in those years, just as they did in 2015.

From the Providence Journal:

New contribution rates approved by the state Retirement Board on Wednesday will require state and local payments into the pension fund of a projected $171.2 million for state employees, and $237.3 million for teachers during the budget year that begins on July 1, 2016.

At those projected payment levels, state and local taxpayers will pay a total of $408.5 million in fiscal year 2017, compared with a potential $411.6 million during the budget year beginning July 1, 2015, according to information the state’s actuary provided the Retirement Board chaired by General Treasurer and Governor-elect Gina Raimondo.

[…]

While most state employees are now required to contribute 3.75 percent of their pay toward their reduced defined-benefit pensions, the actuaries recommended the state share go from 23.65 percent of payroll to 23.78 percent come July 1, 2016.

And while teachers also contribute 3.75 percent of their pay, the state — and the communities that employ them — would pay 22.76 percent of payroll, compared with 23.14 percent a year earlier. (The drop is a result of a lowering of earlier projections of potential teacher salaries.)

The net result: the required contribution to teachers’ pensions will drop from a projected $241,742,873 in the new budget year that begins on July 1, to $237,251,068 the following year, while rising for state employees from a projected $169,811,685 to $171,169,925.

Rhode Island’s pension system for general state employees was 57 percent funded as of June 30. The teachers’ system was 59.6 percent funded as of June 30.

Photo credit: “Flag-map of Rhode Island” by Darwinek – self-made using Image:Flag of Rhode Island.svg and Image:USA Rhode Island location map.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Rhode Island Pension Investment Board Reviews Hedge Fund In Closed-Door Meeting

Rhode Island governor-elect Gina Raimondo and the state Investment Commission held a closed-door meeting last week to review a particular hedge fund, Mason Capital, in which $61.7 million of pension money is currently invested.

The exact reason for the meeting, and what was said during, is unknown because the session was exempt from the state’s Open Meetings Law.

The minutes of the meeting are sealed to “protect the interest of the state’s pension fund”, according to a Raimondo spokesman,

More from the Providence Journal:

Asked to explain [the meeting], Raimondo spokesman Ashley Gingerella-O’Shea drew attention to the exemption that the state’s Open Meetings Law provides for any “matter related to the question of the investment of public funds where the premature disclosure would adversely affect the public interest.”

The state has had an investment in Mason Capital since January 2012 that has increased in value by an average of 1.02 percent per year in the nearly three years since, according to an Oct. 31 report to the investment commission.

It was one of the hedge funds in which Raimondo, a former venture capitalist, invested an overall $1.176 billion in a controversial shift in strategy that figured prominently during her heated primary and general election campaigns. Her opponents keyed their criticism to the sharp increase in state-paid investment fees since she took office.

When pressed, Gingerella-O’Shea sent a further statement on Monday that said the investment commission “reviewed the calendar year-to-date performance” of all of the state’s hedge fund investments during the open portion of last Wednesday’s meeting.

[…]

But a review of the last online Investment Commission report indicates the value of the state’s investment in Mason Capital dropped by about $4.7 million during October, from $66.4 million to $61,751,634.

While the market value of some of the state’s other “global equity hedge funds” dropped in October, none dropped this much.

The closed portion of the meeting was only a segment of a larger, open-to-the-public discussion on the year-to-date performance of the pension system’s hedge fund investments.

The Mason Capital fund returned around 1.02 percent annually over the last three years. Meanwhile, the state pension system’s hedge fund portfolio has averaged returned of 6.9 percent over the same time period.