Rhode Island pension reformer may win battle, lose war
SPREADING IT OUT: Critics have attacked General Treasurer Gina M. Raimondo’s increase of investment in hedge funds for Rhode Island’s pension system. She says the diversified portfolio will reduce risks long term.
PROVIDENCE - Rhode Island General Treasurer Gina M. Raimondo has experienced a meteoric rise to fame that most politicians can only envy.
Raimondo, a 41-year-old former venture capitalist, was virtually unknown in 2010 when she coasted to victory as a Democratic candidate in a deep-blue state. Soon the new treasurer surprised almost everyone by engineering the most sweeping overhaul of a public-pension system ever enacted. By the time her reforms became law in November 2011 she was one of the most popular politicians in Rhode Island, and the subject of adulatory coverage in both the New York Times and the Wall Street Journal.
Even before the pension process was over, there was growing speculation that Raimondo might run for governor in 2014, in no small part because the incumbent who signed the pension law -- independent ex-Republican Lincoln Chafee -- has had an approval rating in the 20s for most of his term in office. It has become clear in recent months that the treasurer is likely to throw her hat into the ring.
Raimondo is a formidable candidate in a state that has never elected a female governor. A survey in January by Public Policy Polling gave her the upper hand in every hypothetical contest, with leads of four points to 19 points depending on her opponents. She already has $1.3 million in the bank, a significant sum in a small state and more than three times as much as her nearest competitor. Moreover, she’s a Democrat in a state that gave Barack Obama his fourth-best margin over Mitt Romney in the U.S. presidential campaign.
Still, a campaign for governor would be the first real test of Raimondo’s political chops, because her 2010 race was a cakewalk. And it’s possible the same pension changes that have won her such acclaim could prove to be her Achilles’ heel.
Although polls show the pension law is broadly popular, its benefit cuts and new defined-contribution plan angered many public-sector union activists, a powerful constituency in the Democratic primary. Another potential problem is Engage Rhode Island, a tax-exempt group that raised almost $1 million to push the pension law but refuses to disclose its donors; to the delight of the treasurer’s critics, one of the few who came forward is a former Enron Corp. trader. She has also invested more than $1 billion of the state’s pension assets in hedge funds.
“It’s difficult in deeply blue Rhode Island for a Democrat so tightly associated with Wall Street to make the case to the traditional Democratic voter that she has their best interests at heart,” argues Robert Walsh, executive director of Rhode Island’s largest teachers union and a vocal Raimondo critic who helped get Chafee elected. (Engage Rhode Island spokesman Jon Duffy says the group is being “mischaracterized” to damage the treasurer.)
Raimondo’s biggest Democratic rival appears to be Providence Mayor Angel Taveras, who is expected to challenge her in the primary. Taveras, 42, has a strikingly similar profile to the treasurer: An Ivy League-educated Democrat who won office for the first time in 2010, he has carved out a reputation as a fiscal truth-teller who seeks compromise. He’s not a perfect vessel for the unions, though, as a charter-school supporter who terminated all the city’s teachers during a budget crisis. (They were rehired.)
If Raimondo fends off the mayor, she could then find herself facing not one but three opponents in the general election: the independent Chafee; a Republican, probably Mayor Allan Fung of Cranston; and a candidate from the state’s nascent Moderate Party, which took 6.5 percent of the vote in 2010, more than double Chafee’s margin of victory.
However, there’s a silver lining in Rhode Island for those who want to change public-sector pensions: All the potential candidates for governor support doing so in some form or fashion.
Taveras just finalized a landmark settlement with Providence’s retirees that includes a 10-year freeze on cost-of- living adjustments, saving taxpayers roughly $170 million. Fung recently announced a similar agreement in his city. Chafee signed the pension law that Raimondo designed, and also supported deep pension cuts to get the city of Central Falls out of bankruptcy. In short, nobody is running as the defender of the status quo.
It’s possible that pension reformers will lose the battle to elect Gina Raimondo as governor. But they are winning the war to reduce government workers’ retirement benefits.