Q-and-A: Treasurer discusses new plans
Q: Jamestown has been successful in managing its own pensions. How is it that some municipalities can manage its pensions so well compared to others?
A: It’s a well-managed town. Your current manager is doing a good job. The reason these liabilities get away from us is that people aren’t managing them. Historically a lot of towns have given away pension benefits that they didn’t have to pay for until some time in the future. Now they’re feeling the pain of it. I don’t know the details about Jamestown, but the answer is that it’s a well-managed situation.
Are the current problems the result of too much being given away at the bargaining table?
It’s certainly not the fault of public employees. They didn’t do anything wrong. They were playing by the rules of the system. The problem is that years ago politicians gave away benefits that were never affordable. They didn’t sit down to calculate the costs. The problem with pensions is that in the first year or two it’s not very expensive, but five, 10 or 20 years out, the costs add up.
Some of it is demographics. The baby boomers are hitting retirement age. The stock market has performed poorly. When the state pension system was put into place in the 1930s, the retirement age was 62, which was high back then. There was no cost-of-living increase and the benefit was pretty modest. Then a series of legislative changes by politicians over the years reduced the retirement age, addeda3percentraiseforretirees, and raised the benefits. As a result, it became unaffordable.
You are working on an initiative regarding payday loans.
We’re trying to end the practice essentially. There is a usury law in Rhode Island that says that the banks can’t lend at a higher rate than 36 percent annually. Some years ago the General Assembly passed a loophole for payday lenders, defining them as small loans. They’re allowed to charge as much as 260 percent. We think that’s wrong.
That industry has grown tremendously in Rhode Island. It has doubled since 2008. Maine and Rhode Island are the only states in New England that have this loophole. It’s been banned around military bases by Congress. The problem is that it ruins people’s lives. They prey on people who are poor. It’s a huge problem for older people. They make you pledge your next paycheck or Social Security check to pay back the loan. The average payday borrower has six of these loans at 260 percent.
The bottom line is that it’s wrong. It’s hurting Rhode Islanders. They’re preying on people who can least afford it at a time when Rhode Island is in tough shape. As treasurer, I am the state’s chief banker. We’re trying to get them to get rid of that loophole so these payday lenders are also capped at the 36 percent just like every other bank and credit union.
You’ve asked for $2,500 from the Crime Victim Compensation Fund to be available for relocation expenses.
My office administers the Crime Victims Compensation Fund, which is federally funded, as well as funded by court fees and fines paid by felons. It doesn’t touch the state budget. It provides compensation for victims of violent crime. We are asking to be able to include relocation expenses to the list of things that victims of violent crimes can receive money for.
It’s especially useful for victims of domestic violence. We’ve heard from people in the community who work with survivors of domestic violence. If people can just get out of an unsafe situation, they can start over.
As treasurer I’ve asked the General Assembly to pass legislation that would allow us to include relocation expenses as one of the coverable expenses. Rep. [Anastasia] Williams (D-Providence) is sponsoring the bill in the House, and Sen. [Donna] Nesselbush (DPawtucket, North Providence) is sponsoring the bill in the Senate, so it’s in active legislative process.
You said you want to help municipalities improve their infrastructure in terms of things like roads and bridges.
We want to set up a revolving loan fund. There is a well-run organization called Rhode Island Clean Water. As treasurer I sit on the board of it. It’s a revolving loan fund that for many years has provided money to cities and towns for wastewater-treatment plants. The city or town borrows from the fund, then when it’s paid back, the fund can loan the money out to another city or town.
Our proposal is to set up that same structure for local roads and bridges. Several months ago the speaker of the House came to me and said we need to rebuild our infrastructure. We can’t have jobs if our roads are falling apart. He asked me to figure it out.
Rhode Island Clean Water works. It’s a triple-A rated, quasipublic agency that’s run incredibly well. So I’m saying let’s expand what works. It would work just like the clean water, only for roads and bridges. So for example, if Jamestown had a road project, instead of going out to borrow money in the bond market, or taxing its residents, the town could go to the fund and borrow the money at a discount.
It saves taxpayers money because you can borrow at a discount. It allows cities and towns to plan. The whole point is that it’s stable, long-term financing. Right now it’s sort of a Band-Aid approach. Maybe the General Assembly will make an appropriation. Maybe the town will make an appropriation. But if you talk to city and town managers they want to make something like a 10-year infrastructure plan. I think that’s a good thing. We want them to be thinking long term, not Band-Aid. We don’t need money from the state budget to do this.