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Fire Union Leader Claims Treasurer 'Cooked Books' to Exaggerate Pension Crisis

Paul Valletta accused Rhode Island General Treasurer Gina Raimondo of "cooking the books" to push through pension reform.

The head of the Rhode Island firefighters' union accused General Treasurer Gina Raimondo of “cooking the books,” lying to the General Assembly in an attempt to push through pension reform.

Paul Valletta, head of the Rhode Island Association of Firefighters, said Raimondo created an artificial crisis where there is none in the pension system in order to convince legislators and residents that “draconian” changes were needed in the state pension system.

“The General Treasurer cooked the books on this issue,” Valletta told the joint House and Senate Finance Committees Thursday. “This is not a crisis; it’s a problem. She created the pension problem and dropped it in your laps.”

Specifically, Valletta said Raimondo changed two key assumptions that made the pension crisis look much worse than it is. She raised the assumed mortality age for Rhode Islanders from 65 to 87, increasing the expected liability to the state; and dropped the anticipated rate of return on state investments to 7.5 percent, decreasing the state’s expected income. Social Security expects Rhode Islanders to live only to 78, Valletta noted. Worse, he said, Raimondo used numbers from 1994 in making the life expectancy assumption instead of new numbers released in 2008.

“Why wouldn’t she use the 2008 numbers? Because they weren’t the numbers she wanted,” Valletta said, further charging Raimondo with ignoring the fact that the rate of return prior to 2001 was averaging 9.4 percent. “So they took a snapshot in time of the last 10 years. People should be mad at the General Treasurer.”

Raimondo’s office did not immediately return calls for comment.

Valletta said the pension crisis could be solved simply by returning those two assumptions to their previous numbers. “You should scrap this legislation that will destroy lives,” Valletta said. “This can be solved by working together. We can get out of this problem and lives will not be destroyed.”

The pension reform proposal of Raimondo and Gov. Lincoln Chafee includes suspending the Cost of Living Adjustment — an automatic raise for all retirees that matches the rate of inflation — for up to 19 years; changing the retirement age from its current 62 to match an individual’s Social Security age; and adding a defined contribution plan, similar to a 401K common in the private sector. State employees and teachers would contribute 3.75 percent of their pay toward a pension, for which vesting requirements would be reduced from 10 years to five years. They will also contribute five percent of pay into their own retirement account and the state would contribute an additional one percent to that account.

Chafee and Raimondo have said it is critical to enact reforms now. Without immediate reforms, they say impacts on the state’s finances include:

  • Doubling of taxpayer costs next year to more than $600 million and more than $1 billion in about 10 years. Much of the increase would likely be passed onto municipalities, which pay for 60 percent of teacher pensions.
  • Increases in both state taxes and local property taxes, coupled with budget cuts.
  • An increased risk that the pension fund will run out of money before many employees reach retirement.
  • A possible downgrading of state and municipal bond ratings, increasing the cost infrastructure projects.

Valletta also opposed the move to a defined contribution plan, worrying that Rhode Island will only be giving money to the investment banks that created the damaging recession from which the state is still trying to dig out. He also took issue with the fact that Raimondo herself would sit on a committee responsible for hiring the investment firms to manage the 401(K)-style retirement plan.

“There’s going to be some green flying around this state, folks,” Valletta said.

Rick October 27, 2011 at 08:44 PM
I'm shocked a union officail is opposed to making any change to the status quo
DownTown October 28, 2011 at 01:10 AM
So we are to believe that a firefighter has more accounting knowledge than Raimondo?
Thomas Fredericks October 28, 2011 at 01:22 AM
It doesn't take a rocket scientist or a firefighter to realize that most people don't live to 87 years of age,particularly firefighters. You don't need much accounting knowledge to see that Raimondo has skewed the numbers to further her political and private ambitions.
Arthur Dolloff October 28, 2011 at 01:54 PM
This from a person with so much to gain ???? I would expect more from a firefighter, but I am becoming more aware that the taxpayers are being trashed by elected people with much to gain. Oh and as for Mr. Savage.... We elected you to represent us and vote our demands and interests, not your own personal desires and interests. DO YOUR JOB!!!! DO NOT RECUSE YOURSELF ----VOTE THE PEOPLE'S DESIRE AND REFORM PENSIONS !!!!!!!!!
Bruce Zarembka October 28, 2011 at 02:53 PM
Valletta's comments just go to show how out of touch unions are with the reality this state faces, not only with pensions, but with it's overall financial health...or maybe I should say "sickness." Fredricks is correct..."it doesn't take a rocket scientist,"...however his assuption is wrong...in that it should read it doesn't take a rocket scientist to see that this state and unfortunately the average state worker has been led blindly down the path by union leadership and a generally self serving legislative body. They are the folks who have benefitted from the backroom deals. Take a look at some of the salaries union leadership pull in...look at the pay rate and benefits of our "PART-TIME" legislature. look at the ever increasing operating budget that the legislature pushes through each year. In regard to the 9.4% rate of return Vallata refers to...has he been living under a rock? No one has seen that kind of return in years. As a matter of fact it is one of the reasons that most if not all pension funds, 401K's and IRA's have shown declines or at best remained fairly flat. The COLA's have never been tire to inflation but instead were given away at 3% no matter what the rate of inflation has been (yes under 3%) Most of the general population is invested in some type of 401K...we are not guaranteed anything. Why not pay into social security like the general public...?? well let's face it...it wouldn't be as generous as the corrupt pensions that were given away over the years.
Roberto October 30, 2011 at 06:03 PM
So, a firefighter that's fighting for tax paying state and municipal workers benefits is somehow not the same as a ventrue capitalist trying to steer money into the banking industry. There are many conflicts here on many different levels its mind boggling. I do believe that the state is responsible for the pension mess, they did not contribute as required and spent the money elsewhere. They borrowed from the pension fund when they wanted to, then did not replace the money. Now they're skewing those facts in such a way to make people believe that its the pension itself causing the problem and not the people that are running the plan... After watching the hearings on TV the other night, a police officer stated that the state spends 48% of the state's budget on various forms of welfare... The panel was rude and did not want to address that fact. They'd rather give the money to people that have multiple children from multiple fathers who do not support their children instead of honoring promises made to hard working tax paying citizens, now that its time to collect, the state and Raimondo are reneging on their promises, especially Chaffee, who now states the much touted Chafee plan was just a set of preferences...

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