Playing Pension Fund Poker with the Public


Rhode Island’s pension fund (mainly covering state employees and teachers) hasn’t been doing very well at the investment market’s poker table. According to a Dec. 16 article by Katherine Gregg (“R.I. pension fund sharply lags expectations again”), the $7.63 billion fund has seen only a 0.88 percent return on its investments during the calendar year now coming to a close. The pension system’s financial plan requires a 7.5 percent return every year.

The reaction of General Treasurer Seth Magaziner, a Democrat, in the article is so wholly inadequate that he ought to be made to spend the next few weeks of news cycles backtracking: “The assumed rate of return reflects an expectation for the average performance of the pension system over the long-term; we do not expect the pension fund to meet this target each individual year,” he said.

Pressed on the wisdom of keeping the predicted return so high compared with recent results, Magaziner continued, “Our actuary has recommended that the current investment assumption remain in place for the time being, but we will continue to evaluate the situation.”

Anybody who’s read through a handful of pension reports will suspect that the actuary doesn’t really “recommend” an assumed rate of return so much as tell officials whether the rate that they find politically comfortable is outlandish for financial reasons. The question isn’t, “Is this the correct investment return to predict?” Rather, it is, “Would it be reasonable of us to predict this investment return?” The difference is critical.

Continue reading in the Providence Journal.

  • ShannonEntropy

    Remember that both Gina & Seth began their careers as venture capitalists. It’s all part of the plan to funnel eight figures in fees to their investment banker buddies — a lot of which will surely end up as “campaign contributions” or other in-kind kick·backs

    All Ed DiPrete & Buddy ever did was take bribes — and they ended up in prison. To paraphrase Vito Corleone :

    A General Treasurer with connections in the financial industry can steal a heck of a lot more money than a bank robber with a gun

    • Mike678

      I often wonder how many of the activist organizations that embrace violence or threats of violence (more appropriately, terrorist organizations as they embrace violence in the pursuit of political change) are funded through my tax dollars? How much money do the Feds funnel to organizations like the former ACORN or the current Planned Parenthood that come right back into a certain parties politician’s campaign war chests?

      As a separate issue, If Obamacare is the law of the land and all are eligible for health care, why do we need to continue funding these private clinics?

      • OceanStateCurrent

        On your first question: A whole lot.

        It was eye opening for me a few years ago when I started looking into that organization PolicyLink, which provided the “equity” work for RhodeMap RI. The organization had long received some government funding and funded things like an MIT professor’s project to define neo-socialism, which he called “Capitalism 3.0,” and to figure out how to impose it on the country. With the election of Obama and wave of stimulus money, PolicyLink’s funding grew enormously, including HUD requirements that states and smaller governments receiving HUD funds had to hire PolicyLink.

        That’s one obscure organization.

        The federal budget, deficits, and debt aren’t so huge for no reason.