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.