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

Rhode Island retirees win round one.

For those following the pension crisis in Rhode Island, I am happy to say that the employees and the retirees won the first round in court. Now the issue goes directly to the RI Supreme Court. Judge Taft-Carter, in a well thought out argument sided with the workers and retirees. Your pension is in fact a contract!! It is therefore, unconstitutional to change the system for those fully vested employees and the existing retirees. Furthermore the judge ruled that the COLA was in fact part of the contract.

This is not stopping our not-so "Democratic" Treasurer, Gina Raimondo from pursuing her Republican agenda of screwing people out of their hard earned pensions. I have written her office on multiple occasions and have received no confirmation. I even went as far as offering possible concessions (if done right) but made it clear that we have a contract. She still intends to pursue a bastardized pension system of 401K and defined benefits for current employees. This strategy is pure Republicanism. Her intent is to eliminate the COLA for retirees for a period of time until the system is deemed healthy again. Can you see a future politician going before the public and saying; "I'm in favor of re-instating the retiree's COLA"? What kind of drug is Raimondo on?

Let's say that she is successful in removing the COLA. What does that mean for me personally? In my case, I will lose about $2000 per year. My taxes go up, my food costs go up, my fuel costs go up etc. I guess in year one I will make the following changes to my life style: No more Providence Journal rag ($440 savings), We eat out twice a week if not more often, so I will no longer have 2 drinks at dinner only 1 ($500 savings), I'll reduce my Cox cable subscription ($500 savings), I'll reduce charitable contributions ($500 savings). I have now made it through year one and largely maintained my standard of living.

Let's go to year 2. I'll need to economize by another $2000. I guess we will only eat out once per week ($3200 savings), but we still have to eat at home but should be able to count $2000 in savings for year 2.

What about year 3? No more dry cleaning my clothes ($700 savings) (I hate the idea of hurting Barry, my friend), we reduce our trips to the movies to once per month ($700 in savings), no more security system on the house ($480 savings) (Sorry Roger, I love you man, we go a long way back to when you were just a kid) and I'll kill a few magazine subscriptions. I'm by year 3.

What about year 4? I'll still need to find another $2000. Now it is time to really attack the charitable giving by gutting donations and my family Temple membership. Wow! That's great, I got through year 4.

Do you think the COLA will return? Dream on! I'll need to find another $2000 to keep up with inflation. I'm starting to run out of ideas. Maybe it's time for the big move. We could sell the house in Rhode Island where we pay $9,000 annually in property taxes and move to the Cape. A home in Mashpee at comparable value is currently taxed at around $3000 annually (Wow, a $6,000 annual savings). Not only do I save here, I will no longer have to pay income tax on my state pension to Rhode Island ($3000 in savings). I can start to collect my social security and my disposable income has now skyrocketed. I can eat out twice a week, hell four times a week. I can have 2 drinks at every meal and I can go to the movies whenever I want.

Let me see? There are currently 60,000 citizens in Rhode Island that share my predicament and many of them are certainly married. That means that 100,000 people could seek similar solutions.

I feel bad for my favorite restaurants and the wait staff, local businesses that I frequent and the charities that I have faithfully supported. If only the state would return to the tax rates for the wealthy that existed before Republican leadership and tax the yachts that line Narragansett Bay, maybe then the state could acquire the financial resources to meet its' obligations to contracted retirees as required by the state's Constitution.

Here's the final kick: Aren't you glad we have such astute businessmen, brilliant politicians and an exceptional Media rag in the State of Rhode Island?

tomtoak

Do not bundle your phone and internet services

Most people today, including myself have chosen to bundle our electronic services in order to save money. I strongly recommend that people avoid this practice. Here is what happened to me.

For legal reasons and because I am only 95% sure that the story I'm about to tell is accurate, I will not tell you my service provider. Here is what happened.

For a 2 week period I had been receiving a phone call from the 617 area code and the line was always empty except for the first time the call came in. The first time the call came in, when questioned, the person on the end of the line said he was "Eric from Verizon". After that first call, that same number would call our house 4 to 5 times daily. Each time the phone was answered, we had no response, just empty air. I checked the number against all Verizon offices in the 617 area code and their was no match. I was positive that the phone call had some illegitimate purpose, but what?

One day around noon I was working my e-mail account when the phone call came in. Again, there was nothing but empty air. I hung up the phone and exited my e-mail thinking I had finished for the time being. Five minutes later, I realized that I forgot to send an e-mail so I tried to re-enter my account and my identity was stolen. Coincidence or criminal activity? I immediately began the painful process of trying to contact a live person at my e-mail provider. Thanks to the help of the Reference Department at my local library, I was given a group of numbers to call.

Here is the funny thing, as I dialed these numbers, the number would show up on my e-mail entry page under "user name". My telephone was talking directly to my computer on my e-mail page. I recovered my e-mail in approximately 50 minutes, but the damage was done. Minutes later I started getting calls from treasurers of organizations I belong to asking why I was requesting wire transfers of money. A crime has been committed but does anyone care?

Nobody cared; nothing was stolen, the police could care less; but even more outrageous, the service provider could care less. After warning 3000 people in my address book, I decided to have it out with my service provider.

I sat for 3 hours trying to explain to person after person what had happened and was met with only denial. What really burned me was my service provider would not even put me in touch with a forensic person to study my claim. The company supervisors also denied they had fraud units - this is an absolute lie.

I spoke to a person who shall remain nameless but has intimate knowledge of communications and how these systems work. This person is about the smartest person I have ever known and his resume includes work in national defense, NASA and a host of other impressive high tech companies. He absolutely agreed that this is how my e-mail was stolen. Now my 95% certainty has shifted to 99%.

My service provider simply did not care; not even when I told them that my only alternative is to UN-bundle. I blocked the bogus number from reaching my phone through the service provider, but the crooks could be working off of dozens of numbers and they could call again at any time. Now I take the phone off of the hook when I'm using my e-mail, but I intend to change my phone to a different company.

Beware; I hope you have not had the misfortune that I had.

tomtoak

Obama needs to get out of the middle of the road.

As the saying goes; a man in the middle of the road is more likely to be the one hit! This is exactly what is happening to Barack Obama and it is really the first time I am seriously questioning his leadership.

The recent fall of the stock market because of the S&P downgrade of the U.S. credit worthiness is directly related the handling of the debt crisis by the President. Obama can cry foul all he wants, but he had the opportunity to make sure that did not happen no matter what Congress eventually did.

Obama should have stepped up as Bill Clinton suggested and used his authority to put congress in its place. Obama should have used the 14Th amendment to the Constitution. What does the 14Th amendment say? "The validity of the public debt of the United States, authorized by law, ..... shall not be questioned." The 14Th amendment goes on to say that Congress should police this article.

Obama chose the wimp approach - the middle road - and simply waited for Congress to do its job. A job which Congress new it had to do regardless of what the President said. A month before the default date, Obama should have come out strong and told the world that America will never default on its debts as it is not permitted in our Constitution. He should have gone on to say that if Congress does not do its job which they are sworn to do, then he will do his job under the Constitution to which he has sworn allegiance. President Obama should have used his office to ensure that U.S. debt will be honored and if Congress failed in its duties, he will extend the debt ceiling by executive order.

Obama failed the American people on this one and he needs to realize that the Republican Congress will do every thing it can to see him out of the White House. It's time Obama stood tall and fought back. It's time Obama gets out of the middle of the road. He is going to get rolled over and may never recover.

I'm a fiscally conservative liberal Democrat and I'm mad as hell!

Tomtoak

Letter to Governor Chafee and public pensions

Below you will find my recent letter to Governor Chafee that addresses problems with the actions taken in Central Falls regarding the stripping of publicly earned pensions. While the jury is still out on this, it was important for me to state my position and hope that government does the right thing. We can't exist like Germany in the 1930's with wealth being stripped from a select group of people. In Germany, it was the Jews while in America, it seems to be the public employees. Republicans continue to scapegoat public employees and it needs to stop. Besides the attack on public pensions, this year in Rhode Island all longevity increases for state employees was stricken from the law. In Rhode Island, employees enjoyed a 5% bump in pay 4 times throughout their career. That right was taken away without negotiation. Let's hope that Rhode Island's Governor can make a national statement. He has before.

The Honorable Governor Lincoln Chafee

Office of the Governor

222 State House

Providence, RI 02903-1196 July 21, 2011

Dear Governor Chafee:

I could not get much sleep last night thinking about the plight of retired public employees in Central Falls. What is currently happening is reprehensible, morally wrong and, quite possibly, illegal. This country is approaching a precipice and I think it is up to you to stand strong and correct injustice.

The consequence of government action amounts to the taking of wealth from a select group of people (public employee retirees) and reminds me of the taking of wealth from the Jews by the Germans of the 1930’s. Removing the hard earned rights to a pension will result in a waterfall of events that include; foreclosures, personal bankruptcy, inability to enjoy your last years by eating out in Central Falls restaurants, court actions involving alimony payments and significant marital stress.

Beyond the consequences, I want to talk about the legality of such takings. To begin with, the United States Constitution has established priorities for payments of public debt. “The validity of the public debt of the United States…including debts incurred for payment of pensions … shall not be questioned.” U.S. Constitution, Article XIV, Section 4. While the clause uses the “United States”, Congress has clearly elevated the importance of paying pensions when considering the public debt. If I read this amendment like most people read the second amendment (eliminating part of the sentence) than the taking of pensions is unconstitutional.

I want to look a little closer at the Rhode Island Constitution and Article 1, Section 2 says a whole lot. I’m talking here about tax burdens being equally distributed. “…the burdens of the state ought to be fairly distributed among its citizens…” Confiscating wealth of retirees is an unfair distribution of the burden of debt. Government has its way to correct short budgets through taxation. This taxation should be equally shared by all and retirees should not have to folk over half of their earned pensions. By doing so, the public employee becomes the scapegoat, stripped of earned benefits, robbed of their future and paying a higher tax levy to government.

Additionally, Rhode Island has not exhausted its taxing potential and laws that eliminate the sales tax from the boats and yachts that line Narragansett Bay is not constitutionally sound. In this instance, wealthy citizens that can afford the toys of the Bay are excluded from taxation forcing higher burdens on everyone else.

Furthermore, when discussing options for solving pension issues for state employees, the Rhode Island Constitution is very clear. “No ex post facto law, or law impairing the obligation of contracts, shall be passed” RI Constitution, Article 1, Section 12. It is my strong belief that retiree agreements in state government must be met. I have no problem with amending the system for future retirees, but existing retirees should not be obligated to pay a higher tax burden. The Constitution of RI is clear; the burden must be shared equally.

Governor Chafee; I have seen you stand tall many times in the past. I could never forget you standing tall in the Senate when it came to Iraq. I remember you standing tall on the changing of the name of the State of Rhode Island and Providence Plantations by pointing out that the U.S. Constitution would have to be changed. You brought this to light after years of hemming and hawing in this state. I fully appreciate your understanding of constitutional law.

I am no lawyer, but what is occurring now in Rhode Island will spread throughout this country. We need to be making statements about the importance of maintaining the public trust. I was almost denied a mortgage refinance because the bank held feelings that public pensions may be pulled. We need you to stand tall and do what is right. Please do what is morally right. Protect public pensions and share the burden of taxation to fix the problems. Please make a statement now that gets the attention of everyone across this country. You have done it before and I hope you will do it again. I’m counting on you. You are my friend.

Sincerely,


tomtoak

Republicans are killing democracy

OK: I admit, that is a pretty strong statement in the title of this post. With the recent Supreme Court decision that treats corporations as individuals, moneyed interests will buy the future and buy the votes. It is so hard for me to believe that 48% of Republicans are Republican. Walk into any trailer park and I'll bet you will find significant majorities voting Republican. Why? I understand the top 2% of the Republican party voting Republican, but don't tea party folks realize that the Republican leadership wants to strip them of social security and their medicare benefits.

For you middle class Republicans, you have to realize that it is the Democrats that have fought for better lives for all citizens. The private sector has some great people providing jobs throughout this country (people of both parties), but in the end, every American needs to be worried about their future. Social Security and Medicare are easily fixed by raising taxes only slightly on the rich in this nation. Hell - During the Eisenhower administration, citizens making over $1 million per year were taxed at a 91% rate. World War II had to be paid for. All Obama is asking is for the wealthiest in our society to pay 39% instead of 36% of income (Clinton level taxation). Bush pushed the tax cuts for the middle class and the rich but this long ugly experiment simply has failed. Government needs to raise revenue just like any business. Our wars need to be paid for and with the wealthiest calling the shots, they need to pony up.

I would ask Republicans to join "Patriotic Millionaires For Fiscal Strength" and I would also urge everyone to read "Bush era tax cuts the largest contributor to the public debt."

I could never be more eloquent on this issue than a former Supreme Court Justice:

"We can have democracy..... or we can have great wealth concentrated in the hands of a few, but we can't have both". Justice Louis D. Brandeis

With the current Republican intransigence, I ask you; are Republicans killing democracy?

tomtoak