The Auditor General, Ernest Almonte, has an opinion piece in today’s Projo that corrects Ed Achorn’s baseless praise for Cranston’s pension funding. Of particular note:
Ironically, Mr. Achorn mentions Cranston as a community that has seemingly “staved off — temporarily, anyway — ” a pension disaster. In fact, Cranston is quite representative of the problem throughout the state. One could fairly conclude that Cranston’s police and fire pension, administered by the city, is in crisis.
In 2005, Cranston’s unfunded liability grew by more than $5 million, to $220.5 million — even after I had insisted that the city make the required contribution for fiscal year 2004. Unfortunately, in fiscal year 2005 the city failed to make the required contribution; its payment was short by more than $2 million.
Cranston reported an operating surplus for fiscal year 2005 of $3.5 million. Reporting a $3.5 million “surplus” could be considered misleading. This surplus could have been applied to the pension debt. Cranston based its contribution on an unrealistic 8-percent rate of return; it actually earned less than 4 percent. I hardly think Cranston should be held up as an example for other municipalities to emulate.
So our outgoing Mayor, Senator-wanna-be, sent a letter with the tax bills bragging about how pension assets are “Nearly $40 million! Continually funded,” when in fact the city did not make the required contribution for 2005.
Furthermore, the financial firm responsible for investing our funds, UBS Financial, is only producing a 4% return. Currently, a 4% return has become standard on many savings accounts, with some banks like Capital One offering rates as high as 4.75%. So the city could end its contract with UBS (a contract, which, if I remember Peter T. Pastore’s words correctly at the meeting to seal this deal, is “at will” and can be terminated at any time) and put the money in a savings account and make the same return or more without paying a financial firm one single dime. Or better yet, the city could invest in US savings bonds and make an average return closer to 5%, free of risk. Particularly now, as the stock market is looking shaky, US savings bonds or a savings account might be a prudent move.