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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.

Providence Mayor Tries to Stall Deposition Until After Election in Lawsuit Over Pension Actuarial Errors

Early in 2013, Providence filed a lawsuit against the actuarial firm, Buck Consultants, that had served as the city’s actuary for the previous 90 years.

It takes a pretty serious falling out to break off such a long-standing relationship, but Providence is alleging that Buck made a serious mistake when crunching the numbers behind the city’s recent set of pension reforms.

When the city was designing its pension reforms, it asked Buck to calculate how much the city would save from various policies, namely the suspension of cost-of-living increases. So that’s what Buck did.

But the city alleges that Buck made serious mathematical errors in its estimations, overstating the city’s savings by $700,000 a year and in turn boosting its pension liabilities by $10.8 million over the next 28 years.

The court case is now underway, and the time has come for Mayor Taveras to be deposed. But Taveras says he needs to wait until after the Sep. 9^thgubernatorial primary to answer questions under oath. Buck says “no way.” From the Providence Journal:

The city last week filed an emergency motion for a protective order seeking to postpone until after the primary election Taveras’ questioning under oath about his decisions regarding changes to the city’s retirement system. It asked, too, that U.S. District Chief Judge William E. Smith limit his deposition to three hours, given the “press of city business.”

…

Buck Consultants LLC — which performed financial analyses for the city since 1920 — argues that Taveras’ deposition is imperative to its defense against the city’s lawsuit.

Buck looks to question Taveras, who it identifies as the central witness in the case, not only about his decision-making in pushing for an ordinance suspending cost-of-living increases for retirees but also statements he has made in the course of his campaign for governor. Buck asserts that its lawyers should be allowed to depose Taveras “while the campaign is ongoing” based on his comments.

“Mayor Taveras is not a mere bystander to this dispute,” Buck writes. “As the City’s highest elected official, he is a critically important witness.”

What could Taveras be worried about? For one, Taveras is saying the he wouldn’t have passed the reforms if he’d known about the math errors.

But Buck accuses Taveras of signing off on the series of reforms after he was aware of the errors.

According to Buck, Taveras is using the actuarial mistakes as a campaign ploy to save face on a policy that took money out of the pockets of many voters.

Taveras and his challenger, Gina Raimondo, have been see-sawing back on forth in the polls since last year.

Screen shot 2014-08-13 at 10.48.29 AM — Credit: Wikipedia

Photo: “Angel Taveras headshot” by City of Providence, Office of the Mayor – City of Providence, Office of the Mayor. Licensed under Public domain via Wikimedia Commons

Taking Stock of Where Rhode Island’s Candidates for Governor Stand On the Release of Pension Hedge Fund Records

Last month, current Rhode Island Treasurer Gina Raimondo (Democrat) denied the Providence Journal access to records relating to the state pension fund’s hedge fund investments.

The newspaper appealed, but that appeal was denied as well.

In a letter written by Raimondo at the time of the denial, she justified her actions with the following logic (the entire letter can be read at the bottom of this post):

For democracy to work, the public, often through the press, needs oversight over how government is acting on its behalf. At the same time, the government, to fulfill its obligations to the public, needs to be able to function effectively, which often requires a measure of confidentiality, particularly when contracting with private sector entities. Over the years, the law has determined how to balance these two requirements, and the actions of Treasury were consistent with that balance.

With elections only a few months away, and Raimondo in the midst of a bid for governorship of the state, Raimondo’s opponents have seized the opportunity to pounce on her decision to deny access to the hedge fund records.

Providence Mayor Angel Taveras (Democrat), who is now running for governor of the state, had this to say:

“Apparently, the treasurer is more concerned about hedge funds being able to keep their talent than taxpayers knowing how their money is being spent,” Taveras’ spokeswoman Dawn Bergantino said. “The treasurer should be looking out for our interests, not Wall Street and hedge fund billionaires.”

Allan Fung (Republican) is currently the mayor of Cranston, Rhode Island. But he’s in the running for governor of the state as well, so he put his thoughts on the table:

“There is a dramatic difference between what is required legally and what is necessary to do the right thing,” Fung said. “Current and retired state employees depend on the strength of the pension fund for their retirement security, and all Rhode Islanders face the risk of higher taxpayer contributions if these investments come up short. We all face tremendous risk and we deserve to know the basis for these investments.”

According to the latest polls, Taveras is currently up on Raimondo, garnering 33.4 percent of the vote to Raimondo’s 29 percent. Clay Pell remains a distant third with 11.5 percent of the vote.

Raimondo’s position has notably diminished since she chose to withhold the hedge fund records. Although she is drawing in the same percentage of votes, the issue may have swayed undecided voters to side with Taveras.

On the Republican side, the latest poll has Ken Block maintaining a healthy lead over rival Allan Fung.

Screen shot 2014-08-05 at 2.49.57 PM — Credit: Wikipedia

And, as promised, here is the letter that Raimondo wrote when she denied the Providence Journal access to the state pension fund’s hedge fund records.

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Photo by: By Jim Jones (Own work) via Wikimedia Commons

Rhode Island Denies Newspaper Access to Records of Hedge Fund Investments by Pension System

When the Providence Journal initially asked to see records relating to hedge fund investments by Rhode Island’s pension system, they were surprised that their request was promptly granted.

But they soon found out why: the documents were heavily redacted, and much of the information journalists were looking for—manager compensation, as well as risk and investment strategies of the funds—was blacked out.

So the newspaper filed a complaint against the Attorney General’s office in hopes of receiving access to the full, uncensored documents. The request was denied Thursday. From the Providence Journal:

Attorney General Peter Kilmartin’s office has ruled against The Providence Journal in a long-running dispute over records related to the state pension system’s investment in hedge funds.

The Journal initially sought the records from General Treasurer Gina Raimondo’s office. After that office provided heavily redacted documents, the newspaper appealed to Kilmartin’s office.

Assistant Attorney Gen. Michael Field, in a decision released last week, rejected The Journal’s appeal, which focused on a section of the state’s Access to Public Records law that says records presented and discussed at a public meeting are always public.

Field hung his decision, in large part, on an interpretation of “the plain language and meaning of the word ‘submitted.’”

The ruling stems from a complaint The Journal filed after Raimondo’s office refused to make public, in full, the “due diligence reports” that the state’s investment adviser, Cliffwater LLC, prepared prior to the state’s investment in three hedge funds: Third Point Partners, Elliott Associates and Mason Capital.

The Providence Journal claims that the documents should legally be available under the state’s Access to Public Records Act. That law states that records presented and discussed at public meetings are available to the public upon request. The Journal claims that the documents were discussed at an open meeting of the State Investment Commission. More from the Providence Journal:

The complaint stemmed from an April 14, 2013, request by then-Journal reporter Michael Stanton to the treasurer’s office for investment and due-diligence reports that Cliffwater prepared and presented to the State Investment Commission, chaired by Raimondo, on 19 hedge funds.

He also requested a copy of the PowerPoint presentation that the Point Judith Venture Fund II, created by a firm cofounded by Raimondo before she took office, presented to the investment commission in the lead-up to a $5-million state investment.

The Journal argued that: “All of the documents Stanton requested were presented in full at public meetings of the [State Investment Commission] and are referenced in meeting minutes and tape recordings.”

Raimondo’s office provided heavily redacted copies of the records, asserting that the redacted portions of the records contained information deemed confidential, [proprietary] and/or trade secrets.”

The Journal released a statement that said the media, as well as citizens, have “a vital interest in knowing how the pension fund investments made by the [State Investment Commission] are performing and what those investments cost. Without access to specific information about the performance and fees of hedge funds, which make up nearly 15 percent of the portfolio, neither The Journal nor the public can evaluate those investments.”

Photo by JohnnyMrNinja via Flickr CC License