In politics, as in pensions, assets can turn into liabilities. RIPR political analyst Scott MacKay wonders if an advocacy group for pension overhaul that doesn’t need to disclose its members has become state Treasurer Gina Raimondo’s Achilles heel.
When she began her crusade to overhaul Rhode Island’s foundering state employee pension system in 2011, General Treasurer Gina Raimondo urged local business leaders to get involved in the issue. At the time, she had a strong message: that pension change was not going to occur if our state’s business community did nothing more than wave from the sidelines.
For once, business interests listened. A group of wealthy donors formed a group known as Engage Rhode Island to work with Raimondo on advocating changes to protect taxpayers and future retirees from the soaring cost of public employee pensions.
Engage Rhode Island was successful in helping the pension overhaul championed by Raimondo and Gov. Lincoln Chafee win General Assembly approval despite the vigorous opposition of labor unions representing state workers and public school teachers. Raimondo was applauded for a steely focus on pensions and was applauded widely for saving taxpayers millions. At the same time, the State House discussion was mostly civil, without the divisive battles that marred collective bargaining restrictions in Wisconsin.
Engage Rhode Island spent more than $600,000 on its campaign to win approval for pension change, including State House lobbyists and splashy television advertising. The group opened a political action committee that contributed to the campaigns of lawmakers who supported Raimondo’s initiative, including such powerful Assembly leaders as House Speaker Gordon Fox and Senate President Teresa Paiva Weed.
What Engage Rhode Island never did was to tell the public who put up the money for this political campaign, despite calls from good-government groups to do so. This lobbying group is under no legal obligation to disclose its contributors or make its membership list public because it is organized under a section of federal law that allows such secrecy.
As is the case with other political interest groups these days, what’s scandalous about all the money washing around the system isn’t what is illegal, it is what is perfectly legal. That’s particularly true in the post-Citizens United world, where anyone can launder as much money as they want through shadowy committees that support candidates and political causes and never tell voters who they are.
At first, Raimondo supported the secrecy of engage Rhode Island, telling reporters that there was no need to lift the veil. ``I have no doubt that people funding it have a self-interest in pension reform because everyone does,’’ she said.
Later, she changed her mind after the Wall Street Journal punctured Engage Rhode Island’s secrecy by revealing that a billionaire Texas hedge fund manager gave the group between $100,000 and $500,000. And such groups as Common Cause Rhode Island raised questions about the transgression of open government perpetuated by such secrecy. Now, Raimondo is seriously mulling a run for governor and says the donors ought to come clean in the name of government transparency.
More recently, the treasurer’s management of the $7 billion state pension fund has become a political issue. An opinion blogger for Forbes online criticized Raimondo’s stewardship of the pension fund. Blogger Ted Siedle, a veteran pension analyst, hammered Raimondo, saying she has shifted state investments from more traditional markets, such as stocks and bonds, to hedge fund holdings that carry more risk for retirees and taxpayers.
Raimondo responded quickly, saying that she is trying to maximize the performance of the retirement fund while smoothing out peaks and valleys in the state’s return on investments. The treasurer also said that since she took over in 2011, the fund is generating nearly a 10 percent return, which is comfortably higher than the 7.5 percent target rate set by the State Investment Commission. Raimondo also asserts that the investment choices have been transparent and unanimously approved by investment commission members, including representatives of organized labor.
Raimondo may well be right, but that won’t matter in the heat of a campaign for governor. Most voters don’t have an MBA; the vast majority are not going to understand blather about placement agents or Wall Street’s arcane investment language. What the Rhode Island main street voter gets is secrecy.
It’s hard to make a 30-second television attack ad on pension fund management; the viewer’s eyes will quickly glaze over. But it’s easy to put together a spot showing a wealthy Houston hedge fund operator getting out of his private jet and bashing Raimondo as a Wall Street Democrat who is too solicitous of the one-percenters. The treasurer swears that this guy, a former Enron trader named John Arnold, does no pension fund business. But how about the other fat cat contributors to Engage Rhode Island whose names we don’t know?
Secrecy is also catnip to reporters. Until Engage Rhode Island releases a list of donors, journalists are naturally going to try to pry it loose. Journalism is a competitive business and every reporter in our state would love to break this story.
Raimondo is shaping up as a very competitive candidate for the governorship in 2014. If her friends in Engage Rhode Island want to help her, they’d be wise to come out of their financial closets.