slides: Rhode Island Pension Battle: Who are the Players?
Wednesday, October 09, 2013
From the Wall Street Journal, to Rolling Stone, to Rhodes Scholars --- there is a diverse, informed, and growing list of those who are weighing in on, and impacting, the ongoing pension reform and investment strategy debate in Rhode Island.
See who the power players are BELOW
At the local level, in the legal sphere, the lawsuit filed by public employee unions continues to move forth challenging the pension overhauls, with court-ordered mediation efforts being undertaken between state and union lawyers since ordered in 2012.
In the political realm, the hot-button issue promises to play a pivitol role in the 2014 Rhode Island election cycle. Yesterday, former General Treasurer Frank Caprio, in announcing his bid for another go for the office next year, said he would deviate from the state's current pension investment strategy by reducing the use of hedge funds, and money managers, as part of the portfolio if elected.
In response, Rhode Island General Treasurer Gina Raimondo, who has yet to formally announce her future political aspirations, said, "It's time to stop using pensions as a political football and instead put the best interests of our valuable state employees and teachers first."
And while turns and developments continue at the local level, Rhode Island's pension reforms -- and current investment strategy -- are seeing increased national attention, with coverage in Wall Street Journal, New York Times, Forbes, and most recently, Rolling Stone.
Today, GoLocal takes a look at the key players involved -- as well as perspectives from local and national experts and pundits. Who is dictating the conversation -- and where is it ultimately headed?
Front and center in Rhode Island's pension fund strategy debate is the Rhode Island General Treasurer. After a resounding win in 2010, Raimondo was quick to address the state's unfunded pension liability, first by convincing the state's retirement board to lower the assumed rate of return from 8.25% to 7.5%, and then pushing through sweeping pension reforms under the Rhode Island Retirement Security Act, which was enacted by the General Assembly in November 2011.
The Rolling Stone journalist has taken a highly critical look at hedge funds -- and Rhode Island -- penning such articles as, "How Wall Street Killed Financial Reform" and "Bank of America: Too Crooked to Fail." Raimondo's investment strategy was the latest to come under Taibbi's wrath in his article entitled, "Looting the Pension Funds."
The Forbes columnist and President of Benchmark Financial has been an outspoken critic of Raimondo's hedge fund strategy, penning numerous articles for the famed financial publication, including "22 Tough Questions for Rhode Island's Pension 'Reform' Treasurer."
The Governor was a proponent for pension reform along with Raimondo at the time of RIRSA's passage, and now Chafee has pushed hard for a settlement in the pension lawsuit facing the state from the unions -- rather than expensive litigation.
Until recently, Chafee was widely thought to be challenged for re-election in 2014 by Raimondo, but as the Governor announced last month that he would not be seeking another run, presenting a new dynamic for the now potential field that could include former gubernatorial candidate Ken Block, Providence Mayor Angel Taveras, and Republican Mayor of Cranston Allan Fung.
The former General Treasurer made his official announcement Monday for his run for the office again in 2014. And while widely expected to be running for Governor in 2014, Raimondo has made no official announcement as of yet.
In his launch, Caprio said that if elected, he would sharply deviate from the current use of hedge funds -- and money manager fees -- to maximize the state's pensions.
"I pledge to reduce the number of outside money managers and hedge funds and work with a handful of money managers who can efficiently and less expensively assist the Treasury in maximizing our return on investments," said Caprio, if voters give him the nod for the post.
"I've lowered Wall Street fees as evidenced by a national study and made our pension less risky in the past by exiting sub-prime mortgage bonds before the crash, and I'll do it again."
Sarah Taft Carter
The Rhode Island Superior Court judge is overseeing the union lawsuit against the state that she ordered into mediation last December, and is a pivotal player in the future of the pension conversation in the state.
The pension reform group, which was influential in passage of the Rhode Island Retirement Security Act, was active as recently as 2012 -- but recently announced that they were folding.
Last December, GoLocal reported that the Wall Street Journal had that former Enron exec and billionaire John Arnold made a six-figure contribution to Engage RI - and Taibbi touched upon Arnold's support for Rhode Island pension reform in his latest piece.
"A dickishly ubiquitous young right-wing kingmaker with clear designs on becoming the next generation's Koch brothers, and who for years had been funding a nationwide campaign to slash benefits for public workers," said Taibbi of Arnold.
Arnold and his wife pledged $10 million of their own personal fortune this week during the government shutdown to help Head Start programs
This past April, the American Federation of State, County, and Municipal Employees reported that that were stymied in their efforts when they asked Raimondo's office for ERSRI Investment Performance Reports, and fees paid both in dollars - and basis points -- to investment managers.
The current head of the Providence Firefighters Union, who has been an instrumental figure in recent city pension battles as well, acknowledged in the recent Rolling Stone article that he, and others, felt outmatched at the time by the education credentials of Raimondo during the nascent stages of pension reform.
Former Head of the Providence Firefighters Union, Day has been both an outspoken critic of the recent changes to the state pension system, as well as the Providence pension structure as well.
The former head of the Rhode Island American Federation of Teachers (and member of the state's investment commission) called out the latter this past April, questioning the state's use of Third Point Capital -- citing Matt Taibbi's Rolling Stone article which looked into Third Point's founder Dan Loeb's management of public pension funds while "simultaneously campaigning against defined benefit plans."
- AFSCME Taps Forbes Finance Expert to Probe Hedge Fund Investments
- NEW: Caprio Splits with Raimondo on Hedge Funds
- NEW: Siedle Blasts Raimondo for Withholding Hedge Fund Info
- Raimondo Got Donation from Hedge Fund Indicted for Fraud
- Rhode Island Steers Clear of Hedge Fund Trap
- Should Raimondo Release Contracts with Hedge Funds
- Ted Siedle: Hedge Fund Industry Loves RI Pension—For Good Reason
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