Magic Numbers and Pension Politics

Rhode Island GOP Chairman Gio Cicione makes a good point about pensions and General Treasurer Frank Caprio:

In fact, Mr. Caprio knew better a long time ago. As early as April 2002, when he was Senate finance chairman, Mr. Caprio indicated that an 8.25 percent return had "proved to be an overly optimistic assumed rate of interest for the fund" (reported in The Journal on April 17, 2002). Nonetheless, throughout his career in the General Assembly and his tenure as treasurer, Mr. Caprio promulgated this budget fantasy to mask the truth from taxpayers and from public employees who will depend on the state pension fund to provide their retirement benefits.

As a candidate in the upcoming gubernatorial election, and with the pension fund in trouble, Mr. Caprio is working now to appear fiscally responsible, but he has a lot to explain about his two-decades-long political record of endangering the retirement of public employees and increasing the pressure on taxpayers to fill the holes in the fund.

I'd expand the criticism to anybody in government who complied with the conspiracy to behave as if such expectations were founded in reality. Anytime people in government — or in any capacity — get to make up numbers that determine what they can do with the money at their disposal, others should be skeptical. They should be especially wary if the predictions are anything other than clearly conservative.

We are where we are, however, and it appears that Big RI Labor is content to lean on public officials to find some way through the mess that they've jointly created. Since the magic of government accounting cannot reach beyond the printed page into actual transfers of funds (at least in sufficient amounts), it's going to come down to one of two options: Taxes are going to have to increase greatly, or pensions are going to have to be trimmed. Union members should not risk tremendous confidence that it will be the former.