STUMP » Articles » Public Pensions and Election Day: Quick Roundup » 3 November 2014, 06:42

First off, Ace of Spades HQ Decision Desk may need more election day volunteers. I’m doing New York (and it looks like my state is pretty well-covered). Finally, some excitement for a conservative in NY!

But back to election day & pension politics.

First back to the Rauner situation, and Ted Siedle has a warning for Illinois:

At this time, as an expert in pension forensics, I cannot opine whether Rauner has, or has not, done anything wrong—because Rauner has for decades refused to disclose any information regarding his past pension dealings. Based upon recent SEC revelations regarding private equity industry abuses and his firm’s SEC filings, there is a need to investigate Ranuer’s past pension dealings, in my professional opinion.

Too bad– it’s too late.

If Rauner wins, questions about his past secret pension dealings that were not asked during the campaign will surface with a vengeance.

Given Rauner’s seemingly airtight confidentiality agreements with state pensions (which preclude disclosure to the public), intervention by the Securities and Exchange Commission may be required to break the dead-lock and ferret out any potential private equity misdeeds.

Doesn’t sound like a bad thing at all to me. Rauner may not be happy about it (and many others, like Rahm Emanuel, might not like it), but why voters should be scared of an SEC audit is beyond me. They should want one. If a Rauner win makes that more likely, what’s not to like?

And don’t forget, the SEC has dinged Illinois, specifically about its pensions, before. I am sure the SEC would be happy for a Round Two, whether covered by the excuse of Rauner’s win or just looking into things.

Next, there is a ballot issue in Phoenix:

(Reuters) – A push to reform Phoenix’s retirement system has become the latest front in a battle between union-backed groups and a Texas hedge fund billionaire over the future of America’s public pensions.

Hundreds of thousands of dollars, much of it anonymous out-of-state money, has been flowing to backers of a November 4 ballot initiative in Phoenix that aims to end traditional public pension plans for the city’s new hires.
….
In the Phoenix battle, over $40,000 has come from the Action Now Initiative, a non-profit fund run by John Arnold, a former trader at Enron, the defunct energy company. Arnold went on to make an estimated $3 billion running Centaurus, a Houston-based natural gas trading hedge fund.

Arnold is a marked man by unions. The National Public Pension Coalition, which is mostly funded by national unions, asserts that through his philanthropic foundation, personal gifts and donations from the action fund, Arnold has given over $53 million to groups backing pension reform efforts in 17 states since 2008, including California, Rhode Island, New York, Florida, and now Arizona.

An NPPC spreadsheet of purported Arnold pension-related donations “lays out for the first time in a very compelling way how bent on eliminating public pensions John Arnold is,” said Jordan Marks, the NPPC’s executive director. “Money speaks louder than words. John Arnold may claim that his aim is not gut public pensions, but financing nearly every effort to attack pension benefits definitively proves otherwise.”

Arnold, in an interview and through emails, denied allegations that he wants to eliminate public pensions. He said the NPPC spreadsheet is riddled with errors, shoddy methodology and bias, and has grossly and falsely inflated his pension-related giving. It is the latest in a long line of smear tactics to discredit his work and attack him personally, he said.

It is interesting how many hedge fund people are involved in this public pensions battle, but I think you’ll find that this is nonpartisan, inasmuch we’ve got players on both the Republican and Democratic sides.

Case in point, Gina Raimondo in Rhode Island:

PROVIDENCE, R.I. (AP) — After outraising and outspending two primary opponents to win the Democratic nod for Rhode Island governor, Gina Raimondo found herself in an unfamiliar spot in the general election: way behind in the money chase.

The state treasurer had shelled out more than $5 million, and her campaign account was dry. Meanwhile, her Republican opponent, Cranston Mayor Allan Fung, received a lifeline of $1.1 million in public matching funds.
…..
That’s hardly the criticism that has given Raimondo the most trouble. Progressive Democrats opted not to endorse her, calling her a “Wall Street Democrat” and her economic policies “unacceptably conservative.” Some firefighters protested outside a fundraiser she held in Warwick last week.

Raimondo’s landmark 2011 overhaul of the public pension system — her biggest achievement — angered one of the most reliably Democratic constituencies: unions. Many labor groups have since fallen in line behind her after opposing her in the primary, but there are notable exceptions. The best the state AFL-CIO and National Education Association could do for her were personal endorsements from President George Nee and Executive Director Robert Walsh Jr., respectively.

“I think it should help; I hope it helps,” she said of their support. She said she understands the “residual anger” over the pension changes, which are being challenged in court, but that the message Nee and Walsh are trying to send is that the state “can’t afford Allan Fung.”

Democratic pols like Raimondo and Quinn have decided that rolling back pension promises are the way to go, but precious little about improving funding.

Unsurprisingly, it’s not just the gubernatorial race affected by the pension reform talk, but also the race for RI treasurer.

Ernest Almonte, an independent running for general treasurer, was asked during an interview that aired Oct. 5, 2014 on the second half of WLNE’s “On the Record” whether the 2011 overhaul of Rhode Island’s state pension system went far enough.

“First of all,” Almonte said, “I was speaking out on pension reform almost 17 years ago, warning elected officials that if you didn’t take care of this problem, it would take draconian measures” to fix it.

…..
We wondered whether Almonte, who served as Rhode Island’s Auditor General from 1994 to 2010, was prescient enough to be warning about problems with Rhode Island’s public pension systems 17 years ago, and what kinds of reforms he was saying were needed.

Almonte’s campaign sent us several documents from the auditor general’s office. Only a few go back to late 1990s and the relevant ones dealt with pension payment problems in individual communities, not state employees.

One was a 1998 letter to Coventry’s treasurer saying that some of the town’s pension plans “have insufficient assets to meet projected benefits.” That was 16 years ago.

Another was a 1998 copy of a report by the Johnston Financial Review Commission, which Almonte chaired, warning that the town owed $3.2 million in required pension contributions for its employees. For example, Johnston hadn’t paid into the firemen’s pension fund for more than three years, putting it more than $1.3 million behind in its payments.

We note that Almonte’s comments in both of these reports are in dry auditor language. Some readers might not take that as the type of scary warning that Almonte says he made.

I find auditors plenty scary.

Back to the Rhode Island gubernatorial race:

Anger over pension cuts for state employees is driving many union voters in Rhode Island to cross party lines and back a Republican for governor, one of several midterm races roiled by battles over public pensions.

Democrat Gina Raimondo, Rhode Island’s treasurer, spearheaded legislation in 2011 to rein in public-employee pension obligations. Rancor over the move was still strong among union voters in a poll earlier this month, in which they favored Republican candidate Allan Fung over Ms. Raimondo, 42% to 30%; among all those surveyed she led by six points. A poll out Tuesday by Brown University found the race essentially tied.

Many see the contest as a test of the political consequences of tackling pension plans that are pressuring state budgets. “If she wins, I think that may embolden other Democrats around the country to take on pension reform,” said Darrell West, vice president of governance studies at the Brookings Institution.

….
Rhode Island has the nation’s fifth-highest percentage of workers belonging to unions, at 16.9% or 77,000 members. Slightly more than half are government employees. Registered Democrats outnumber Republicans 4-to-1 in the state, and it is rare for a majority of union voters to back a GOP candidate.

Broad labor support for Mr. Fung is striking because he has won no endorsements from unions, while Ms. Raimondo has garnered about two dozen endorsements, mostly from private-sector unions not affected by the state pension changes.

The split between public unions and private unions was bound to happen. They have very little in the way of common interests, once one starts to think about it.

The other thing that becomes more clear is the split between union rank-and-file and leadership. The leaders may not endorse particular candidates (or do endorse them), but the rank-and-file may be looking to their own interests.

And their own interests may be not getting taxed as much:

When Californians go to the polls on Nov. 4, they will face 140 different proposed tax increases on various local ballots. These range from old favorites like hotel and sales taxes in Palm Desert and Palo Alto to new targets like soda and marijuana taxes in San Francisco and Santa Cruz.

Taxes keep on rising while infrastructure keeps on crumbling. The American Society of Civil Engineers estimates that 40 percent of California’s bridges are in some need of repair. Tax-weary Californians looking to explain this paradox need look only to former Vernon (population 114) city administrator Bruce Malkenhorst for an answer.

Malkenhorst received a $552,000 pension in 2013, according to just-released 2013 CalPERS pension data on TransparentCalifornia.com. Though Malkenhorst was convicted in 2012 of using public money for personal play during his time in office, (supposedly) causing his pension to be cut to a mere $115,000, the data show that his massive pension lives on. Malkenhorst has successfully tied up the cut to his pension in legal challenges.

Malkenhorst is part of a growing number of 99 California retirees who received at least half-million-dollar pension payouts in 2013, up from four in 2012. Such lucrative pensions mean that in 2014, California will spend approximately $45 billion on pensions, equaling total state and local welfare spending for the first time. And in the zero-sum game of government spending, an extra dollar spent on pensions means one less spent on welfare, infrastructure or safety – or returned to the taxpayer.

And the thing is, public employees also have to pay local taxes. Realizing their money is going to piggies like Malkenhorst, and they’re not going to get a cut… yeah, even public employees may have had enough from their own union leadership.

Looking forward to Tuesday… and keep an eye on the Decision Desk!

Compilation of Rhode Island posts

Compilation of Illinois posts