Yesterday, the Providence Journal editorial board endorsed Rhode Island’s Democrat General Treasurer Seth Magaziner’s ideas of a revived Public Finance Management Board and a new Office of Debt Management to oversee the massive amounts of debt that politicians have piled on taxpayers’ backs, not only in state agencies, but across the quasi-public organizations and municipalities. Following Magaziner’s own op-ed, the editorialists cite the 38 Studios fiasco and Woonsocket’s monumentally dumb idea to sell bonds to fill its pension fund for purposes of investment.
Rhode Islanders really must get away from their habit of believing that the state’s problem is that it lacks some sort of tool that would have stopped it from behaving as it does.
Both 38 Studios and the Woonsocket pension bond required enabling legislation through the General Assembly, probably with some heavy political and personal incentives behind the scenes in both cases. A new bureaucratic polyp would not have stopped either, although it may have brought in a few more palms to grease.
As a matter of civic structure, to the extent either of Magaziner’s boards would actually succeed in consolidating and controlling the issuance and management of government debt in the state, it would simply be completing the noose in an unconstitutional scam. For one thing, the state would be taking even more authority away from municipalities, where at least taxpayers have a chance to push back against ill-advised projects. For another, state-government oversight and ultimate control over the “moral obligation” bonds issued through quasi-public agencies would simply finalize the government’s workaround of Article VI, Section 16 of the state constitution:
The general assembly shall have no powers, without the express consent of the people, to incur state debts to an amount exceeding fifty thousand dollars, except in time of war, or in case of insurrection or invasion; nor shall it in any case, without such consent, pledge the faith of the state for the payment of the obligations of others.
We already know the “moral obligation bond” mechanism is a lie intended to undermine this protection of the people of Rhode Island, but having an executive board with any degree of control over the debt that is thus issued would finally lock it into place.
One suspects the idea is really just to expand the number of high-dollar jobs politicians can hand out. The treasurer’s office alone has a budget for 83 employees. The Office of Management and Budget has another 30. Nothing is stopping the treasurer or other elected executives from making a very slight shift in priorities to replace some “policy analysts” with some debt analysts and then to use the power and bully pulpits of their offices to improve debt practices.
At the end of the day, though, the real problem that needs fixing is the lack of interest and understanding among the public, and in that regard, we can have no faith that Magaziner is interested in solutions. As I pledged last week, I’m on a quest for one number related to the state’s pension fund for state employees and teachers: How much money does the state estimate that it has committed to pay out… in actual dollars, not reduced to a “present value” by some fantasy discount rate?
On Monday, I spoke with actuary Joseph Newton of Gabriel Roeder Smith, who handles Rhode Island’s pension valuation, and he declined to give me the number, saying there’s been some email debate within the state regarding what they should make public, and he redirected me to Frank Karpinski of the Employees’ Retirement System of Rhode Island as the person who could authorize the transparency. Karpinski redirected me to Magaziner’s communication’s director, David Ortiz. I’ve called or emailed Ortiz almost every single day this week and have received no answer whatsoever.
That’s for one simple, central number related to the state’s pension debt.
If 38 Studios and the Woonsocket pension bond prove anything, it’s that Rhode Island is well past the stage of being able to trust state government when it comes to debt. Another office to help obscure what’s going on, to grab authority from local governments, and to complete the unconstitutional scheme of non-general-obligation debt is not what Rhode Island needs, but rather another distraction.