The Real Pension Fund Dilemma in Rhode Island

Today on the news I heard that RI state pension funds had a return on investment of 1.5% in the last fiscal year.  Grew right along with the growth of the economy for the 1%.  Rest of us fell further behind.

But what the pension fund really fell behind on was its expected growth, the growth that allows the fund to make payments to retirees. The official expectation for the pension fund is growth of 7.5% each year.  This is recent as previously the rate of return expected had been close to 8%.  In either case the actual return was only 1/5 of the expected return.  Adding to a long string of years in which growth targets were missed by a wide margin.

In a place without an out of control ruling class seeking new ways to loot the populace, the state would tax the wealthy to make up the difference in the pension funds because there is a clear understanding that equalizing the wealth strengthens the economy.

But even that will not really solve the problem that the pension funds are going to get smaller and smaller returns over time.  Not due to mismanagement, but because the economy is going to get smaller.  The stringing out of the recovery after the bubble burst being only the latest and most abundant clue that we have essentially reached the end of economic growth in the west, especially any growth that actually flows into the hands of the 99%.

There are many levers that can be pushed to create more economic growth, but the one thing economic growth is unable to survive is ecological collapse.  The loss of soils, clean water, forests, fisheries, and biodiversity, combined with the fires, droughts, floods, and heat waves of climate change is eating up all the actual growth and many people are ending up poorer even if a few in the cities are getting richer.

This is why over the last 15 years the west has either been in the midst of some bubble or in recession. We have gone from HI Tech and internet, to Housing and strange financial instruments as the bubble we obsess over, but the results are the same.  A small class makes out, everyone else falls behind, and the Earth becomes a less hospitable place with diminished life.

Rhode Island’s pension fund is hurting even with the current “fix” and the economic shenanigans used to grow the economy faster are a disaster (remember 38 Studios).  Rhode Island needs a new course, based on ecological healing and economic justice if it is going to have prosperity.

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Greg Gerritt is a long time activist on the ecology/economy interface and is associated with Friends of the Moshassuck, the Green Party, and

5 responses to “The Real Pension Fund Dilemma in Rhode Island”

  1. leftyrite

    The above information is generally true, but the subtext seems to be, “Why don’t we admit that we can never, ever fix this in an equitable way?”

    To which the answer is, “We can’t with the status quo clearly in control, and by that, I mean people talking over retirees’ heads as if they were stupid.” Unions included.

    We read the papers, and much else, too. Many of us are well aware of the situation.

    But some people get bailed out to the tune of 16 trillion or more, while others are told to accept exploitation or take a hike.

    Gina Raimondo, who has dealt with structured debt, no doubt, for most of her career, doesn’t want to compete on the open political market, as it were, with other debt structurers with powerful ideas. She wants the monopoly over OUR monies that she never, ever earned or contributed to.

    Can’t do the job? OK. Let’s negotiate and structure a settlement that has some dignity for the public retirees that have earned it. It’s their money, remember?

    Maybe we need, as part of the price of partial default, a new pension oversight authority, consisting much more authoritatively of the pensioners themselves.

    THEY have an interest in better government. You can’t scare everybody all of the time.

    I guess that we are just not in enough pain yet. Rather than explode, or collapse, maybe we should better protect our public pension investment. It could get stolen. (See B. Madoff.)

    At some point, you must admit that government in Rhode Island is corrupt, in the Latin sense of the term: broken.

    Intelligent working people and knowledge workers are needed in order for us to jump ahead of the decent competition, who are much more burdened by their cultures.

    Who can bring the smart Manhattan money in? The families, not the corps(es).  

    Who can throw a monkey wrench into the arbitraging of our land and history?

    I despise being colonized. 

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  2. platoscave

    Wow. What a self-indulgent, self-righteous, useless piece of stream of consciousness. Good job.

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  3. leftyrite

    Well, I guess I’ve been told.

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  4. platoscave

    I was referring to the origice piece.

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  5. Sully

    “But what the pension fund really fell behind on was its expected growth, the growth that allows the fund to make payments to retirees. The official expectation for the pension fund is growth of 7.5% each year.”

    This is incorrect. The official expectation is for the plan to grow at a rate of average rate of 7.5% over a long period of time; it does not expect to earn 7.5% each indivual year.

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