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Reuters takes issue with Raimondo, NY Times on RI Pensions

October 26, 2011

In an article moved yesterday,  the Reuters news agency has taken issue with the NY Times article in the Sunday editions by Mary Williams Walsh and some of State Treasurer Gina Raimondo’s pension study conclusions. Here is the link.

4 Comments leave one →
  1. Mister Guy permalink
    October 27, 2011 4:53 am

    Here here! We know what has really precipitated this RI pension system “crisis”, and it can be described in one simple word…politics. It was simple & extremely short-sighted politics that allowed RI localities & the state of RI to willingly shirk their responsibilities in the past & not make their required payments into the pension system…that state & local govt. workers had no choice in making from their own paychecks. It’s also short-sighted & perverse politics that are driving the current rush to fix a pension system NOW that, at worse, will run out of funds starting in 8-12 years.

    I read in a recent state report that, if nothing is done to the current retirement system, that the system will return to being ~80% “fully-funded” within 19 years. What is the current estimate on when the pension system will become ~80% “fully-funded” under Raimondo’s current “reform” plan? You guessed it…19 years! The real difference between those two scenarios is what level of funding the state & RI localities will be asked to pay into the system over that exact same amount of time.

    We have been told again & again by Mrs. Raimondo that the amount of money that the state of RI will have to contribute to the pension system will “double” very soon from around $300 Million to around $600 Million. However, we are also told (but it is seldom reported in the media) by Mrs. Raimondo that the state’s level of funding ten years from now for the pension system will only be around $1 Billion. That begs the following questions:
    -What’s happening in the next year or so that won’t be happening in many, many of the latter years between now & a decade from now??
    -What percentage of the RI state budget will around $1 Billion be a full ten years from now??

    “The unions are more likely pointing to the jump in projected pension liabilities from Governor Chaffee’s $4.7 billion figure in March (page 38) to Raimondo’s $7 billion shortfall in June. These differences really matter because retirees will have their benefits cut to help reduce the unfunded portion of the pension plan.”

    To be completely fair, I can’t personally argue against the changes in some of the key actuarial assumptions that Mrs. Raimondo made to make this *projected* retirement fund shortfall look worse. The state’s old expectation level for percentage of return on its pension fund investment stood out like a sore thumb when compared with other states, and assuming that more people will be living longer lives in the future seems like a fair guess to me. It’s important to point out though that these key assumptions about the future (which is ALWAYS uncertain) are what caused the pension fund to look so seriously out of whack over the long-term. The fact that the state has continually monkeyed around with the pension system (and drove many employees to retire earlier than maybe they would have otherwise) in recent years is also a key reason why the *projected* costs of the pension system look worse over the long-term.

  2. ListenUp permalink
    October 27, 2011 4:34 pm

    You mean a Wall Street connected millionaire financier doesn’t care about the middle class? It must be hard to know what it’s like to live off 10k per year when you make that in a week.

  3. Eve Waterhouse permalink
    October 27, 2011 6:05 pm

    You can moan and groan about this situation all day long, but unfortunately, that won’t change it. The State is in financial crisis and needs to take action. Listen, if I had to give 9.5% of my income over a 30 year career in order to get a pension with health care benefits and COLA increases for the rest of my life (presumably another 20-30 years), I’d do that in a heartbeat. It is just a deal that is too good to be true. Mistakes, miscalculations, weakness or evildoing, whatever led to the current situation, you can’t recreate history. So let’s do the right thing and REFORM THE SYSTEM NOW!

    • Mister Guy permalink
      October 27, 2011 11:56 pm

      “The State is in financial crisis and needs to take action.”

      There is absolutely NO immediate “financial crisis”, and that’s a proven fact.

      “if I had to give 9.5% of my income over a 30 year career in order to get a pension with health care benefits and COLA increases for the rest of my life (presumably another 20-30 years), I’d do that in a heartbeat. It is just a deal that is too good to be true.”

      No, it’s simply a system that has worked very, very well for decades now, and it’s a system that will work just fine for at least another decade or so. Because the retirement system that some state & local employees are in now might be better than the one that you’re in (if you’re in one at all) is just a useless argument that ultimately leads to all of us going down the tube together. It’s merely a long race to the bottom, which a rich country like the USA doesn’t need to make at all.

      Should all state & local retirees get health care benefits for life? Of course not, and many (if not most) of the people in the current retirement system don’t get them at all after they retire. Retirees that are of age for Medicare should be on Medicare. Heck, they paid into that federal system in the first place, so why not use it?

      Having a defined benefit retirement system (again, whether you are in one or not) will no COLA is asking retirees to commit slow motion financial suicide. Inflation effects everyone over time, regardless of who or where they are in America. I have little problem with the state transitioning to a retirement system that relies more on defined contributions than defined benefits. The federal govt. has had a similar (not exactly the same) system that’s worked well for decades. However, any financial institution that sells annuities to retirees that’s worth its soul will give those retirees the option of having their payments increase slightly over time to combat inflation. The argument that the private sector (which uses defined contribution plans more & more these days) doesn’t give their employees the option of having COLAs is just a silly falsehood, period.

      “Mistakes, miscalculations, weakness or evildoing, whatever led to the current situation, you can’t recreate history. So let’s do the right thing and REFORM THE SYSTEM NOW!”

      That last statement is a strawman argument. First of all, no one is saying that the current pension system doesn’t need to be reformed. The issue is what should be done to the current system over the long-term. Secondly, to ignore “history” means ignoring how one got into a particular situation in the first place. If you don’t understand how a situation was created in the first place, then you’ll never be able to truly correct that situation at all, and that’s just common sense.

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