Financial wiz and former congressional candidate Mike Riley has a column [edit: link added] in today’s GoLocalProv in which he describes a conversation that took place on a recent episode of A Lively Experiment about the health of the state’s pension fund.
A recent panel on A Lively Experiment contained a political science professor, a newspaper editor, a politician, and myself.
The premise was that Rhode Island currently at 56% funded using a 7.5% discount rate in March 2016 would be fully funded by 2040. The politician agreed with the assessment of Treasurer Magaziner that since over 5 out of the last 6 fiscal years the State earned 9.3% that we would be fine and easily be fully funded in 2040. The newspaper editor immediately agreed despite the fact that neither the politician nor the editor has any actuarial skills or basis for their prediction that we will be “fine.”
So first let’s define what “fine” means. In politician parlance, we’ll be “fine” means the comment he made will not be remembered and he can go on pretending he knows something about pension finance for the rest of his political career. In Rhode Island he can sit in the Statehouse next to dozens of others with similar skills. We’ll be “fine,” to the editor means that his newspaper will certainly be dead and buried by 2040 and he may need a government job soon. So why not double down on his lack of knowledge, and on his ridiculous endorsement of a kindergarten teacher for the Treasurer of a critical status State like Rhode Island. Wisely the political Science Professor, passed on having any idea how to answer the question and calculate the odds.
Mr. Riley will outline in an upcoming column where the state pension fund actually stands. Meanwhile, one cannot help but wonder whether our elected officials, including specifically the General Treasurer and the Governor, are also using one of these darker, alternate definitions when they tell the public, usually in a reassuring tone, that the state pension fund is “fine”.