The Retirement Board’s Incentive to Protect Inside Interests

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Today’s Providence Journal Political Scene includes a section on the race for seats on the state Retirement Board.  I’ve long been saying that the state needs to run its pension system with the kind of honesty that might leave the government and the system itself open to criticism.  Among the first steps for that to happen would be the Retirement Board’s lowering the discount rate that the actuaries use to make the liability seem smaller, not by a measly half percentage point, as it did to kick of then-treasurer Gina Raimondo’s reform push, but by 3.5 percentage points or more.

By law, the Retirement Board consists of:

  • 3 elected or appointed government officials or their subordinates (any or all of whom could be or be married to active or retired members of the system)
  • 1 representative from the League of Cities and Towns
  • 5 active employees eligible for the system
  • 2 retirees in the system
  • 4 public members (any or all of whom could be or be married to active or retired members of the system)

By design, in other words, one-person shy of a majority has a direct, personal investment in the fund.  In theory, of course, the other eight members have the health of the state and the burden on taxpayers in mind, but that’s become nearly a laughable proposition in Rhode Island — at least that anywhere near all eight would see that as their primary objective.

The incentives for public officials and even people who volunteer to serve on the board as private citizens are entirely unbalanced from the incentives for those in the system, and hard-fisted union tactics can easily swamp a will to do right by taxpayers.  As for the other side of the ledger, a look at the three candidates running to represent the pension-system members gives some sense of their incentives, looking at fiscal year 2014 data from RIOpenGov:

  • Roger Boudreau: retired at 51 (now the president of the Rhode Island Federation of Teachers retiree chapter), having contributed $80,689 to his pension over 30 years. Latest reported annual pension payment: $42,334
  • Michael Boyce: retired at 48, having contributed $24,855 to his pension over 31 years. Latest reported annual pension payment: $28,818
  • Joanne Matisewski: retired at 54 (now working in financial services), having contributed $114,706 to her pension over 30 years. Latest reported annual pension payment: $51,148

The returns on these employees’ investments are obviously well above 7.5% per year, and they have every reason to keep their investments growing.  It doesn’t take all that much cynicism to think that they might decide it’s better to keep the people of Rhode Island from having a true sense of the commitments that their elected officials have made on their behalf.



  • We the People

    Pensions, schmensions….the teabillys have taken over Oregon. That’s where the action is. What’s your take, Justin? Is this the start of something bigger?

    • ShannonEntropy
    • Mike678

      Good AM, troll. Please tell you how you’d fix the challenges in today’s world, for all you seen to do is whine about the potential solutions others offer–more often attacking the messenger than debating the topic. Elitist condescension, I have found, is often the first defense of the close-minded and intellectually lazy. Up your game.

      • guest

        Mike, I don’t think Justin needs you speaking for him. The first thing you need to understand about intellectually laziness is it a product of those that can’t or wont think for themselves (http://www.climatedepot.com/). That you think we need folks like you to generate “potential solutions” for us speaks more to your impression of yourself than anyone else. Don’t expect any thanks from me. If you’re not happy living in the greatest country at the greatest time ever, that’s your problem not mine.

        • Mike678

          Thanks for the advice. I don’t speak for Justin. I speak for myself.

          Frankly, I found your comment somewhat amusing. You demonstrate, IMHO, a high level of condescension coupled with little introspection or self-awareness. I or others like me should should shut up and let people like you run the show? I would if the powers that be were not driving this State into the ground.

          RI doesn’t need solutions? Remind me where RI stands in comparison to the other States that make up this great country? If RI did better, would this country not be even better?

          You should be open to any and all ideas–and we have yet to see yours. But then again, if you are one of those profiting in the current system, your vitriol and preference for the status quo would make more sense.

          • guest

            It’s funny, you’re offering unsolicited solutions to non-existent or fabricated “problems” and you think I have “a high level of condescension”.

            I’m sorry you are not happy with your lot in life. I suggest you do what successful folks do and forge ahead and make the best of it and not look to blame others for your misfortune.

            There are many folks profiting in the current “system”, it’s called capitalism. If you don’t like our system, there are alternatives elsewhere in the world.

            Here’s my Rhode Island:

            http://www.marketwatch.com/story/retire-here-not-there-rhode-island-2012-11-13

          • OceanStateCurrent

            What a thuggish, insider, I-got-mine response. “I’m sorry you’re not happy with what my gang is doing to your living situation. Make the best of it and pay up.” That’s not capitalism, it’s cronyism and theft.

          • guest

            I know you have a personal philosophy similar to Mike where you feel that “thuggish”, “insider”, “gang”, and “cronyism and theft” are responsible for your personal shortcomings, but the bottom line is the private sector is working for many of us. Could things be better, of course. What I’m suggesting is that it’s not necessary to thrown the baby out with the bathwater.

          • OceanStateCurrent

            To the contrary. I’ve found opportunity within Rhode Island’s oppressive environment, but I’m still able to observe anecdotally and through data the suffering that it’s causing. Again, it’s thuggish rhetoric to attempt to make the conversation about the inadequacies of the people with whom you’re engaged in discussion, especially when you leave them no way to judge your own claims about yourself.

            The larger point is that we have a highly constrained version of capitalism in Rhode Island, with the constraints serving a few at the expense of many; that doesn’t mean people can’t make it without being part of the system, just that too many can’t. It’s only throwing out the baby if you’re among those whose success comes at others’ expense via the insider system.

          • the truth

            The seeds of Fascism are able to take root in this great land and already are being sown.
            It is easy:
            To blame the identifiable minority for undermining the national ethos.
            To blame the identifiable minority for gaining wealth through immoral means.
            To blame that minority for being unpatriotic and and working against the safety and protection of the nation.
            To push the concepts that the poor people of the majority are being swindled out of their national, God given heritage.
            That one man, and his political party, can correct all these imaginary wrongs, and make that nation great again.

          • OceanStateCurrent

            I think you must be putting your comment on the wrong site. The “identifiable minority” that I’d suggest is undermining the national ethos and gaining wealth through immoral means is the government. If the man, woman, or party who people put in power to correct that problem doesn’t limit government, but expands it, then he’ll lose his mandate. Indeed, that’s what’s happening to the GOP on the national level.

  • ShannonEntropy

    The answer to the pension crisis is so simple that it’s painful to realize the sheeple of this State will never insist it happens =►

    Convert the system from a defined-benefit plan to a defined contribution plan — like us private citizens have had to deal with for the past 30 yrs

    No more State taxpayer money goes into the fund … pay out to current retirees until the fund runs dry. Then it’s Sayonara ,, peeps … see ya in Court !!

    p.s. it’s kinda funny how State pensioners get their total 30 yr ‘contributions’ back in just 2 yrs or so

    I did the math on my own social security benefit … and I would have to collect for FIFTY-ONE MORE YEARS to get all my money back. So NO … I donut feel the least bit guilty that my Medicare only costs $ 105 / month

    • Mike678

      See California–yesterday’s Wall Street Journal in fact–for the union driven challenges to the people’s efforts to go to a 401 or other system. The Unions will lose in the end–but the delaying action will cost the taxpayers tens of millions of dollars and perhaps be the straw that breaks the back of the middle class in this once great state.

  • Ed Major

    Boudreau is not the President of American Fed. of Teachers- Frank Flynn is…Get your facts straight before you slant your bias against hard working retirees who put into their retirement fund in every single paycheck unlike the state who didn’t put into the ARC for some years..Boudreau is Pres of the AFT-R <—-.the "R" standing for retires only-and has been chosen COALITION or RIPERC President because the other union traitors to their rank and file members cannot lose their status quo. Get your facts before you spout…As for your use of the term hardfisted union tactics…you need to correct that to say hard-fisted Union Leadership tactics -the leaders intimidated and bullied and schemed to get SA -2015 passed and bury the unconstitutional RIRSA..Funny you don;t mention Chief Justice Frank (unethical) Williams the biggest bully intimidating retirees at meetings he was attending. He would go to lawyer-client meetings coercing retirees to vote for the SA…and he was as far as i am concerned in collusion with Dingley and Raimondo…or why would he accompany a member of the governor's office-and Treasury office to meetings to scare off voters? .And why aren't you even reporting that Williams is still collecting a pension when he is working for the state which is improper and possibly illegal? If you opened your biased mind, you would see that you would not need a settlement agreement if the law was valid and legit would you? so please stop showing your bias…get the facts straight as you did by saying the 7.5% rate of return is a joke–that was to buy raimondo time…the state puts in less money to the pension with a higher rate of return. And she never fixed it.

    • OceanStateCurrent

      I’ve corrected that typographical error, but it’s hardly critical to the point of this post, which is that retirees get an extremely good — so good as to be unsustainable — deal.

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