Democratic State Treasurer Gina Raimondo recently championed an aggressive and much needed reform of Rhode Island’s public pension fund, and it could cost her a seat in the governor’s mansion.
In 2011 Rhode Island’s fund had less than 50 percent of the money needed to meet its expected obligations, making it one of the most underfunded in the country. Raimondo, who’s now running for governor, outraged public unions when she convinced the legislature to enact sweeping reforms without negotiating with them. Now many of their members say they’ll vote for her Republican opponent Allan Fung.
The sweeping reforms raised the retirement age from 62 to 67, suspended retiree’s cost of living adjustments until the fund is 80 percent funded, and incorporated defined contribution benefits to the traditional defined benefit plans. The overhaul nearly halved the unfunded liability and is saving taxpayers loads of money, but left rank and file union members seething.
“She’s playing with our livelihoods in a way that’s not kosher,” a disgruntled worker, Serena Mancini, told The New York Times. Mancini will be receiving less money as a result of the reforms, and now plans to retire at 59 instead of 54.
Some unions are involved in an ongoing lawsuit against the state, and many of their members have indicated they’ll vote for Raimondo’s Republican opponent Allan Fung for governor. Although he also reformed pensions as mayor of Cranston, R.I., and supports right to work laws, Fung has promised unions they’ll always have “a seat across the table” in his administration.
In an October WPRI-TV/The Providence Journal poll, Fung led Raimondo 42 percent to 30 percent among union members, although Raimondo was six points ahead overall. That lead has narrowed in recent weeks and is now ranked as a tossup by Real Clear Politics.
Raimondo’s also been accused of siding with Wall Street investors over workers and taxpayers, because she opted for a relatively expensive and high risk investment strategy. She transferred $2 billion — about a quarter of the pension fund’s assets — into risky Wall Street hedge funds, private equity funds and venture capital funds, reported The New York Times.
Rhode Island paid $70 million in fees for those funds in fiscal year 2013 alone, up from earlier reports of about $11 million, reported The New York Times, but Rhode Island’s funds continue to perform below the national average. That gap meant the state lost $372 million in potential returns, reported the International Business Times.
She owns shares in a venture capital partnership she used to manage at Point Judith Capital, which is one of the funds the state now pays millions to invest in, according to a lengthy report by Forbes columnist Edward Siedle, commissioned by a Rhode Island public union. And over the next 20 years, these risky investments could cost the state $3 billion — more than the total projected savings from the overhaul of the pension fund.
Nevertheless, Raimondo beat two union-backed Democrats in the September primary. The Wall Street Journal editorial board celebrated the win and lauded her fiscally conservative policies in a piece following the win: “Democrats run 13 state governments with little Republican opposition. So it’s important that Democrats willing to reform government can prosper politically.”
A win Tuesday for Raimondo would deal a blow to public sector unions across the country. “If she wins, I think that may embolden other Democrats around the country to take on pension reform,” Darrell West, vice president of governance studies at the Brookings Institution, told The Wall Street Journal.
The RealClearPolitics polling average has Raimondo up four points on Fung.
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