Separate Topics (Somewhat): RI Bitterness and Pensions

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Ted Nesi’s weekly shotgun column, today, suggests two… I don’t want to say corrections, so maybe one explanation and one correction.  On the former count, Nesi raises the skirmish of words between Rhode Island’s Republican and Democrat chairmen, Brandon Bell and Joe McNamara, respectively.  Bell had used a brief spotlight at the Republican National Convention to describe the poor condition of Rhode Island politics and government, and McNamara took issue with badmouthing the state outside of its borders.  Nesi editorializes:

… before you start flaming me on Twitter, don’t misunderstand: nobody should bury their heads in the sand about bad decisions, let alone corruption. It’s more a question of balance. Intensely negative feelings about Rhode Island sometimes seem rampant on social media; does that attitude blind people to the state’s strengths, or lead them to throw up their hands and withdraw? How do you balance honest skepticism with an appreciation for the positive? I don’t have the answer. Perhaps the media, with a default focus on bad news, bears some blame. But it’s a matter worth pondering some sunny August day when you’re sitting by a beautiful Rhode Island beach – one you probably arrived at after driving over a crumbling bridge.

Perhaps because that bridge is crumbling, Nesi skips right over the divide that provides the balance.  Rhode Island as a geographical location is beautiful, and although the tides of time have made many of the details indistinct, its history continues to add to its quality.  But Rhode Island as a governmental entity is a travesty.  The Democrats, who have controlled the state for the better part of a century want people to elide the two, as Nesi has done, because in a sense they thereby get credit for good things that they have (if anything) dampened while distracting from the bad things, which fall squarely on their accounts.

These two sides of Rhode Island are part of what makes non-insider Rhode Islanders so cynical — even bitter.  The insiders take advantage of the state’s valuable aspects to empower themselves, enrich cronies, and abuse residents.  If the state as a geographic and historical location weren’t so attractive, the insiders would never get away with the abuse, because people would have evacuated the state long ago.  As I said in my latest Katz’s Kitchen Sink video, we’d be shirking our duty as citizens if we didn’t complain, and in a way that gets the attention of complacent insiders.  Bell certainly did that.

Of course, one of the major ways in which insiders take advantage of Rhode Island’s ability to attract and keep people despite the horrid governance is through pensions, and on that topic, I’d go so far as to suggest that this statement from Nesi requires a more corrective response:

The disclosure that Rhode Island’s pension assets fell by $467 million in the 2015-16 budget year has set off new alarm bells about the solvency of the fund. It’s worth taking a closer look at what caused the decline: more than 90% of the fall – $440 million – was due to withdrawals for pension payouts, not investment losses.

Strictly speaking, that’s true, and reporters certainly should be clear the $467 million drop wasn’t on top of pension payouts, but the matter is distorted in the other direction if reporters don’t also give some explanation about how the dollars work out.  Do the math.  If the pension fund had hit its assumed return on investment of 7.5%, its total assets would have grown, not decreased.  The payouts ought to have been expected.  Think of it this way: When the state discloses the ratio at which the pensions are funded, it “discounts” the promised payouts by its expected investment return.  The money it didn’t take in is therefore most appropriately seen as a loss.

Having been watching the History Channel show Vikings, this analogy comes to mind:  If the Northmen entered winter with their stored food waning, it wouldn’t be accurate to blame the village for its ordinary and expected eating habits.  The fault would lie in the fact that the village hadn’t replenished its supplies.

The pension fund’s problems are largely attributable to the fact that government officials have long pretended that the investment fields would produce more crops than is likely on an ongoing basis, and they have perpetuated this scheme because it increases the riches they can spread around among themselves and use as political bribes.



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