We should see this report for what it is a political attack that is only interested in discrediting me and undermining pension reform. Contrary to the authors narrative, I did not enter public office to enrich myself. My job is to stand up for all Rhode Islanders. Politics as usual, including attacks like this, are getting us nowhere fast. Rhode Island is struggling.
In 2011, Rhode Island was facing a pension crisis. Prior to the passage of the Rhode Island Retirement Security Act in 2011, the state-administered pension fund had an unfunded liability of $7 billion and was 48 percent funded. Reform reduced this liability by $3 billion, making it possible to tell every public employee and retiree their pension checks will be there when they need them.
Although the decisions the state made were difficult and the reforms have significantly strengthened the system, the fund still pays out more in benefits than it receives every year in contributions. This reality means we have to use different ways to reduce risk, even more so than other pension funds. We have to balance our longterm obligations and our shorterterm cash flow requirements when building the investment portfolio. The system is still recovering from the 2008-2009 market crash, when it lost $2.1 billion.
In order to have the money needed to pay pensions the system needs to earn an investment rate of 7.5 percent after all fees are paid. The State Investment Commission is pursuing a strategy of diversification and risk reduction, which we believe will be the best way to reach the states investment goal of 7.5 percent over time. The return last fiscal year was 11.1 percent after all fees were paid. The three-year return was 10.43 percent after all fees were paid.
Unlike the tactics being used by those financing this report, pension reform has never been about us vs. them. Its about ensuring that no public employee or retiree faces losing half their pensions like Central Falls retirees experienced, and that the state can continue to invest in the education, roads, libraries, and public transportation to get the Rhode Island economy back on track.
It is also important to note that the Rhode Island pension system has been investing in alternatives since 1982. Over the past two years, our state has become a national leader for transparency regarding investments and fees.
Our investment fees, along with data and minutes from every State Investment Commission meeting since June 2008, are listed on the Treasurys website as part of the states first ever Investor Relations Portal developed by this administration.
It is important to continue to build trust and allow for honest dialogue through transparency and disclosure. Creating an environment that encourages accountability and developing a more robust and transparent system for financial disclosure, will help build investor and taxpayer confidence.
I am proud of the work of the Retirement Board, State Investment Commission and General Assembly did to make our pension system stronger for public employees and retirees. This work also has a ripple effect across our entire state and its economy. Fixing our fundamentals, including the pension system, benefits us all.
To read more about our work in Treasury, visit treasury.ri.gov.
- Gina Raimondo Rhode Island General Treasurer