RI General Treasurer's pension plan will devastate businesses

It's curious why General Treasurer, Gina Raimondo would propose her pension reform act before the RI Supreme Court rules on the constitutionality. To date, she has lost in the courts. After seeing her jubilant waves to the "Engage Rhode Island" rally and her refusal to speak to the retiree rally on October 26, 2011, it became clear to me that she only cares about her political future. She should have been saddened by having to be the instrument of broken promises. The jubilation was a shameful act.

The Providence Journal’s pension reform chart (COLA Wars, October 27, 2011) tells an interesting story. Raimondo’s plan is the largest business killing legislation that anyone could dream of. How can the Rhode Island business community and the Governor wave the flag?

The average state retiree will have a cumulative income loss of between $185,500 and $139,386 and the average public school retiree will experience a cumulative income loss of between $227,406 and $146,464 over the next 19 years. With over 50,000 retirees in the system at any one time, the loss to Rhode Island’s economy will be close to $10 billion during the next 19 years. Now let’s assume a subset of retirees is pissed off enough to move out of state. If 20,000 people with their spouses move to states without a state income tax and the family income is $60,000, the state’s economy will be losing an additional $1.2 billion each year. Over the 19 years the total loss to the state’s economy could be well over $30 billion. Make a COLA adjustment but don’t eviscerate retirees and businesses.

I’m glad I don’t own a small business in Rhode Island. If I did I would be fighting this legislation. Be careful what you wish for.

tomtoak

Random Reasonings XVII

An occasional column of random thoughts and observations:

• No COLA for 19 years is what Rhode Island's General Treasurer came up with? I was willing to give some back for the benefit of everyone but I am not going to get raped without fighting.
• Regarding the RI rape of retirees; I wrote the governor, treasurer and every single legislator. You should all do the same. I wrote the Providence Journal today that reported the average retiree ($27,000 pension) will lose $9,286 over the first 10 years of the treasurer's plan. Fact checkers at the Providence Journal are too stupid to do the math as is the treasurer's office. The $9,286 is the loss of income in year 10 alone. What about year 1 through 9? The average state employee will lose $48,805 in the first 10 years and $165,142 in the 19 years of the treasurer's plan.
• Barack Obama has been the greatest foreign policy president in my life time. I wonder if he was born in the United States?
• Did you hear that Mitt Romney said Obama's job program would make everyone millionaires and then we would all have to pay higher taxes? Nice one Mitt: make me a millionaire, the 99% are all for it.
• Did Dick Cheney's pace maker stop? I thought I heard a sucking sound!
• That sucking sound was actually public employee retirees leaving Rhode Island and moving to New Hampshire or Florida to avoid paying state taxes on their pensions.
• Only democrats can overthrow terrorist regimes without losing a single U.S. troop. Obama - great job in Libya and Clinton - great job in Bosnia.
• Funny; the Iraq war is over but the Republicans are still fighting it. I guess they are still looking for the WMD.
• Herman Cain - be serious - order pizza!
• Rick Santorum - do you still practice rhythm - I hope so.
• If the General Treasurer of Rhode Island is raping the retirees, can we all have access to abortion?
• There is no truth to the rumor that Sarah Palin has a "thing" for Herman Cain. There may be truth to the rumor that Sarah had a "thing" for Barack Obama. He was a black basketball player and they both spent time in Hawaii. Was that before Hawaii was a state?
• What Tea Party?
• What will happen when 10% of Rhode Island's population moves out of state because of General Treasurer, Gina Raimondo? I would not even invest in a McDonald's in this state.
• Obama has delivered on almost all of his campaign promises, the exception being the closing of Guantanamo Bay prison.
• Raimondo and Chafee make Wall Street look like it has compassion on a par with Mother Teresa.

tomtoak

Is Rhode Island being lied to about pensions?

I suppose because I have a direct interest in the outcome, I've studied this issue fully. The brickbat bullies that dominate the airwaves and printed word have not done their homework. Some folks are just fighting for the sake of fighting. They truly believe that they are paying my pension. They are very wrong.

I paid for my pension. Any problem with the system is a direct result of the leadership in this state not living up to it's promises. Are there problems? The current issue has been largely driven by the move of the State to decrease the actuarial growth chart and assume a longer living period for it's retirees. The power of a defined benefit pension plan is in the long-term cost averaging advantages that the state will realize. Individuals may be vulnerable in a defined contribution plan because of market fluctuation and timing associated with retirement dates.

While there may be small problems to deal with, we are being lied to and I mean a whopper of a lie. Rhode Islanders are being told that the state will have to now contribute 35% of salary to save the system. What? Are you fucking kidding me? 35%? Nobody has said that this is a one year issue to infuse the system. We are being led to believe that this is for the future - the foreseeable future at least. Please everyone, I beg you to get out your calculator and do the math. A school teacher that starts at $40,000 per year and tops out at $100,000, 35 years from now would have contributed somewhere in the vicinity of $5 million. Now the teacher retires and let's assume a small actuarial growth of only 5 percent annually, the teachers pension check should be $250,000 per year. This is how absolutely crazy the sob story is. For those of you that are math checkers, don't forget that the teacher is contributing 9.5 % each year (total annual contribution would be 44.5% of salary and don't forget the 7% compounded growth).

Now I know that there were tremendous abuses that the system is still paying for, but those problems are dying. Abuses have been addressed during the past 25 years. Did you know that the Rhode Island system grew by over 20% this year and the actuarial certainty being provided to our citizens is based on old data? Do you know that Rhode Island finished last year with a $60 million surplus which brings the rainy day fund to $130 million?

Now our infamous "Republican" Treasurer (she calls herself a Democrat - just another lie) wants to establish a hybrid plan so that retirees share the risk of the system. Are you kidding me? Do you know what a money maker this is for the state? If the state only met it's fair contribution, dollar for dollar, and made minor adjustments to pay for the sins of the past, a defined benefit pension plan is a huge money maker for the state. Pensions are paid from the accumulated wealth of the system generated by the hard working employees. When the employee or spouse dies, the system swallows the principle. In the case of a school teacher, 19% contribution, half from the teacher, is more than enough to meet the defined benefit.

I know that there are certain jobs that might really want to swing the way of the 401K plan that the General Treasurer is proposing. If I were press secretary to the governor, I'm probably only there for a short time. If you are a school teacher and have chosen the career for your future, you want a defined benefit plan. We need this in place to retain and recruit the best teachers. For new hires, I am not opposed to a choice. Treat the employees like people not pawns. Provide a choice even if you decide that the employee contribution needs to increase to pay for the sins of the past. Give the employees that are not fully vested a choice! Stop shoving things down our throats and try a little honesty.

tomtoak