The center scored all of the state pension systems and sorted them into three categories: "solid performer," "needs improvement," and "serious concerns." You can guess where Lil' Rhody landed.
Ass out of you and me
I'm going to let you in on a little secret: running a big, multimillion dollar pension is just a bunch of guesswork.
It's actuaries in ill-fitting suits and poorly chosen shoes predicting, say, how long it will take Linda, the secretary at the Department of Education, to croak after she leaves her job.
The estimates have an enormous impact on how much the state socks away for its pension fund — if you think the average retiree is going to kick the bucket at 80 instead of 75, you need to set aside a lot more dough to pay her.
Among the most important guesses: the return on a state's pension investments.
If you assume the stock market is going to hum and it doesn't — see the last decade — you'll be short millions in the long run.But if you're too conservative, you are going to set aside more than needed — bolstering the pension plan but shortchanging schools, roads, and other goodies in the process.
As you see here, Rhode Island's assumed rate of return is among the highest in the nation. And if the state adjusts it down, watch out.
With modest projections for the portfolio, the pressure will mount to pull more dollars out of health care, education, or your wallet.
Gina Raimondo, the state's new treasurer, is upbeat, engaging — and, lately, downright terrifying.
For the last few weeks — in a series of appearances on PBS's NewsHour, local television, and in the ProJo — she's been sounding the alarm on pensions at earsplitting decibels.
"I think it could be the greatest financial threat we face as a state — or a nation," she said, in a recent interview with the Phoenix.
That $4.8 billion unfunded liability? Raimondo says it could be as high as $10 billion. And in just a couple of years, she warns, pensioners in the most distressed cities — like Central Falls — could simply stop getting checks.Raimondo is not yet offering a specific fix; she's waiting on an in-depth study of the system due next month. But she's argued that only sweeping change will do — think 20- or 30-percent haircuts for retirees.
And pensions aren't the only problem. There's also the explosion in retiree health care costs, a problem the nation is just waking up to; Rhode Island's unfunded liability, in that category, is $1 billion at last count.
Whatever the treasurer recommends, it'll carry some serious weight in the State House. Raimondo is a Rhodes Scholar. A former venture capitalist. And, apparently, skilled in the arts of persuasion.
She's already talked Governor Chafee out of a plan to refinance the pension obligation — saving millions in the short-term, but creating a bigger liability down the road.
And the rank-and-file in the General Assembly . . . well, let's just say she won't be matching wits with Warren Buffet.