PROVIDENCE, R.I. (WPRI) – The three candidates for Rhode Island general treasurer all agreed Friday that the state’s landmark pension overhaul was necessary and pledged to negotiate a settlement to a lawsuit filed by public employee unions in order to avoid years of costly legal battles over the 2011 law.
Democrats Frank Caprio and Seth Magaziner as well as independent Ernest Almonte made their comments in an hour-long debate during a special edition of WPRI 12’s Newsmakers. There is no Republican candidate in the race to replace incumbent Treasurer Gina Raimondo, who is running in the Democratic primary for governor this year.
Caprio, a former state treasurer who ran unsuccessfully for governor in 2010, said his “passion for the office” led him to seek a return to his old job after several years in the private sector. He said that all state officials need to be thinking about how to create an atmosphere to maintain jobs and create new ones.
Magaziner, a former Teach for America corps member who has worked as a vice president for socially responsible investment firm Trillium Asset Management, painted himself as a fresh face who can transform the treasurer’s office into an “engine for economic growth.”
Almonte, a former auditor general who planned to run as a Democrat before filing as an independent, made the case that his 35 years of experience as a certified public accountant and fraud investigator make him qualified to solve a “prolonged budget crisis” that takes money away from schools, kills jobs and drives away the state’s young people.
The debate focused primarily on the treasurer’s primary responsibility: overseeing Rhode Island’s roughly $8 billion pension portfolio.
Support for pension reform, settlement
All three candidates said they supported the 2011 pension law that saved taxpayers roughly $4 billion through changes such as a freeze on cost-of-living increases and an increase in the retirement age, but which is currently being challenged in court by Rhode Island’s major public employee unions.
Caprio said many of the changes made in the law were ones he suggested during his 2010 campaign for governor, although he said he disagreed with freezing cost-of-living adjustments. Magaziner called Rhode Island’s pension history a “tragedy” that needed to be reformed after years of mismanagement. Almonte said he has been highlighting the state’s pension problems for 17 years, but his criticism largely fell on deaf ears.
“Political leaders chose a good political decision over a good financial decision,” Almonte said.
Democrat Gov. Lincoln Chafee, Raimondo and most of the public unions reached an agreement earlier this year to settle a lawsuit over the reform law that would have maintained about 94% of the deal’s savings, but the settlement collapsed in April when 61% of eligible police officers voted against it. The suit is scheduled to head to trial in September.
The three candidates said they would work with the unions to reach a deal to avoid a legal battle that would likely be appealed. Almonte said he would seek an agreement that would not add to the unfunded liability, while Caprio indicated his experience would be beneficial during negotiations. Magaziner said he would seek to return to mediation on day one.
“I don’t want to give up on these settlement talks,” Magaziner said. “I want to get back to the table.”
While all three men generally agreed on the pension issue, the two Democrats were critical of one another. Magaziner suggested the pension system’s investment returns lagged behind the national median during Caprio’s tenure as treasurer between 2007 and 2011, while Caprio criticized his 30-year-old opponent for lacking experience.
“If I was going to be putting my money with someone with my retirement at stake, I may look at their experience and I may look at how long they have spent behind the desk helping people,” Caprio said.
All three of the candidates said they support lowering the interest rates that can be charged by payday lenders as well as the $248 million in bond referendums that will appear on the November ballot. Caprio and Magaziner said they voted for President Obama in 2012, while Almonte declined to say whom he supported in the presidential race.
Caprio gave Raimondo an “A” letter grade, while Magaziner said the treasurer deserves the same grade for several accomplishments, but an “incomplete” for the pension law. Almonte declined to offer a grade, but said Raimondo deserved credit for her effort to reform the pension system. They all disagreed with Raimondo’s decision to divest from gun distributors. As for the Rhode Island politicians they most admire, Caprio said former Gov. Joe Garrahy; Magaziner said U.S. Sens. Jack Reed and Sheldon Whitehouse; and Almonte said former Gov. Bruce Sundlun.
On political party affiliations, Caprio acknowledged that he briefly considered running for treasurer as a Republican, but said he has always been successful as Democrat. Magaziner said his decision to be a Democrat is “not out of political convenience; it’s out of conviction.” Almonte called it a mistake to select a party for his first run for office and argued that the treasurer should be an “independent watchdog.”
While Magaziner and Almonte pledged to reduce the fees paid to hedge fund managers, Caprio said he would consider pulling state pension funds out of hedge funds altogether. He noted that the state had very little of its pension money in hedge funds during his time in office. Magaziner said he would work with other small states to negotiate better rates with hedge fund managers, while Almonte said he would hold managers to a “higher standard” because they are paid with public funds.
On municipal pension plans, the candidates agreed that the state needs to provide more support to cities and towns. Providence Mayor Angel Taveras and Cranston Mayor Allan Fung, now candidates for governor, were critical of the state pension law in 2011 because it failed to address locally run pension plans.
Asked about the projected rate of return on the state’s pension investments, Almonte said he believes new accounting rules will require the state to use a roughly 7% assumed return, while Magaziner said he believes the current 7.5% rate is “achievable.” Caprio said he thinks the projected return could be raised slightly. Prior to the pension reform law, the assumed rate of return was 8.25%.
Pensions aside, the three candidates each said they supported the General Assembly’s decision to pay back bondholders in the failed 38 Studios loan deal, though Caprio suggested lawmakers were backed into a corner by bad advice from the state’s financial adviser, First Southwest. All three said they would get rid of First Southwest.
Caprio and Magaziner will square off in the Democratic primary Sept. 9. The general election is Nov. 4.
This week on a special edition of WPRI 12′s Newsmakers – an hourlong debate between the three candidates for Rhode Island general treasurer: Democrats Frank Caprio and Seth Magaziner, and independentErnie Almonte. Caprio and Magaziner will face off in the Sept. 9 primary, and the winner will take on Almonte in the Nov. 4 general election.