When she unveiled the massive pension reform bill a couple of weeks ago, General Treasurer Gina Raimondo went out of her way to make the point that politics was being taken out of the pension process.
“It is going from the political to the actuarial,” she said more than once. It was going to be about the numbers, not the politics.
The public employee unions apparently took her at her word.
The unions, whose modus operandi is perceived to be flexing their political muscle with the General Assembly, changed strategies and went after Raimondo's numbers. This is a risky tactic, for sure, because numbers are Raimondo's home-field advantage. But it seemed to score some points with lawmakers last week when Paul Valletta, president of the RI Association of Firefighters charged that the general treasurer “cooked the books” to manufacture a pension crisis so she could come in — riding a white horse, no less — to fix it. He implied that she did it for political gain and everyone seems to have inferred that he meant she would run for governor in 2014.
Valletta went one step further than his union colleagues had to date, perhaps intentionally, perhaps only with his colorful phrasing.
“Cooked the books” suggests skullduggery, if not outright criminality. It is a very serious charge when lodged against a fiduciary like Raimondo. Number crunchers tend to be mild-mannered types on the whole, but them's fightin' words in Raimondo's milieu.
On the other hand, Valletta's fellow unionists have been telling me something similar throughout the entire process. Since the summer, they have been saying this is a problem that has been ginned up into an emergency, manufactured to whip up both the public and the legislature into a crisis mentality to demand, and produce, immediate and drastic action.
Here's the thinking behind Valletta's remark: the unfunded pension liability has been a medium-sized problem for more than a decade now. And the General Assembly has been doing medium-sized things to address it. They did a reamortization about 11 years ago, and more recently — often prodded by former Gov. Don Carcieri — they made trims and cuts here and there to retirement ages and other aspects of the pension system.
Nothing much has actually changed with the pension system. What has turned it from a we're-going-to-have-to-do-something-about-this-someday problem to a run-for-your-life, call 911, every-man-for-himself crisis is assumptions.
Actuarial assumptions are the only thing that have changed. Back in April the state retirement board voted to change the anticipated rate of return on investments from 8.25 percent to 7.5 percent. Lowering that expectation on how much the fund will earn for the foreseeable future immediately shot the unfunded liability through the roof.
But that's not all. The board also accepted new actuarial assumptions on mortality, determining that teachers and state employees are due to live exceptionally long lives. That, too, instantly prompted a whopping increase in the unfunded liability.
Thus did the pension problem become the pension crisis, Valletta and the unions assert. It wasn't politics that created the crisis, it was math. Or maybe a little bit of both.
So the General Assembly is back in a special session — that means they have to do SOMEHTING now, doesn't it? There is massive political pressure from many sides to pass Raimondo's bill. Last week the group EngageRI, a business-oriented group organized specifically to address the pension crisis, had well-dressed businessmen and women not usually given to such displays of protest and activism, standing in the Statehouse Rotunda shouting “Pass the bill! Pass the bill!”
So much has been made of the unions' political clout in the General Assembly (now more reputation than reality), that business, citizens, good-government and other groups are marshaling their forces to oppose it.
Yes, the unions struck a chord with Valletta's “cooking the books” remark, but will it be enough to stop or slow down the Raimondo juggernaut? That's hard to tell.
When the emcee at the EngageRI Rotunda rally last week brought Raimondo to the microphone, she got the response you would expect if Lady Gaga had just been introduced to an arena full of teenagers. The crowd went nuts. It should be noted that she did nothing to discourage the reaction or tone the mob down. She was pumping her fist high in the air as they chanted, “Gina! Gina! Gina!” I'm going to go out on a limb and say no Rhode Island General Treasurer has ever generated that kind of excitement in the history of the state. It was Ginamania.
Gov. Lincoln Chafee, who moments before had gotten a more than polite but far more subdued reception from the same crowd had to be looking ahead to the 2014 election and thinking dark thoughts. He has been eating Raimondo's dust all through the formation of this pension reform bill. This is seen almost universally as her bill and if it passes and if it works, it is she who will get all the credit. If that is the case and she does run for governor in 2014, voters will pick her up on their shoulders and carry her into the office. We would hardly have to bother holding an election.
With that kind of popular wind at her back, Raimondo may be able to make the legislative leaders dance to her tune. House Speaker Gordon Fox and Senate President Teresa Paiva Weed have already kind of hitched their wagon to Raimondo's pension reform movement. It may be difficult for them to change course now, even if some members of the joint House and Senate Finance Committee are scratching their heads and wondering whether the treasurer was selling them a big shiny crisis with nothing but overblown assumptions behind it. It may be too late to turn back now.
But there is a little bit of wiggle room.
The state still has 19 years left on its current 30-year reamortization and Raimondo's plan (notice that neither I nor practically anyone else in the media calls it Chafee's plan) proposes to extend that out to 25 years. If it were extended out to 30 years, that would put a lot more money on the table that could be used to accommodate amendments.
That would allow for at least some tinkering around the margins, even if the bill as proposed is pretty much a political done deal.