"We see a quarter-billion dollars in a pension fund that needs to be funded at $1.2 billion."
Daniel Harrop on Sunday, December 15th, 2013 in an appearance on WPRI-TV's Newsmakers
Providence Mayoral candidate Daniel Harrop says the city needs $1.2 billion to finance its pensions but has only about $250 million
Providence Mayor Angel Taveras had to deal with near bankruptcy in the capital city after he took office in 2011. As the city struggled to fix its budget problems, he won union concessions to reduce pension costs.
But critics question how far the pension deal negotiated by Taveras, now a candidate for governor, went to fix the problem. The most recent figures released last month show the plan is only 31.4-percent funded.
Republican mayoral candidate Daniel Harrop raised the issue during the Dec. 15, 2013, edition of WPRI's "Newsmakers" program.
Asked why he wants to run again, he said the city needs a mayor who will stay around to solve the city's long-term problems and not have aspirations for higher office, like Taveras and his predecessor, David Cicilline, now a member of Congress.
"We see a quarter billion dollars in a pension fund that needs to be funded at $1.2 billion," Harrop said.
That would mean that the city, at the time, had a pension system that was only 20 percent funded. (The U.S. Government Accountability Office says public pension plans should be at least 80 percent funded.)
First, we need to explain why we're ruling on a seemingly-straightforward statement two months after it was made.
We began work on this item in December but getting up-to-date numbers about the city's pension fund turned out to be maddeningly difficult. The city was often slow to respond and listed different amounts in different reports over different time frames.
We decided to wait for the completion of the latest estimate of the city's accrued liability, in part because the city has refused to release an earlier actuary report for the year ending June 30, 2012, citing a dispute over its accuracy.
Finally, a week ago, the city released the latest actuarial report, for the year ending June 30, 2013, allowing us to proceed.
So let’s go back to December, when Harrop made his statement.
At that point, we asked Harrop about his figures. He cited two blog postings on the Providence pension system from reporter Ted Nesi of WPRI.com.
Harrop also cited a 2011 city report saying the liability as of June 30, 2010, was $1.256 billion, with assets of $316 million.
We don't know the precise status of the pension system the day Harrop made his statement. But now that we have the up-to-date financial reports, we do have a snapshot of what the system's assets and liabilities were as of June 30, 2013.
According to that latest actuary report, released Jan. 31, 2014, on June 30 the city needed $1.2 billion to cover its current and future pension obligations. On that point, Harrop turns out to have been right on the money.
At the same time, according to both the actuary report and the city's latest annual financial report, released about a month after Harrop made his statement, the Providence pension fund had $336 million in investments and other assets, a lot more than what Harrop stated.
The amount in the city's investment account was $247 million. In addition, there was $3 million in cash and $59 million the city paid into the fund that year. Finally, the report counted as an asset $26 million owed to the fund from loans made to people in the retirement system at a rate of 9.25 percent, according to David Ortiz, spokesman for Mayor Taveras.
Add all those together and you get the $336 million.
In Harrop’s defense, at the time he made his statement, up-to-date data on the city’s pension obligations were not available. The city was withholding it as part of an ongoing dispute with its actuary, Buck Consultants, who the city accused of making "fundamental and inexcusable errors" in its 2012 pension calculations. This year Providence used a different firm, Segal Consulting.
In December, Daniel Harrop said, "We see a quarter billion dollars in a pension fund that needs to be funded at $1.2 billion."
Harrop was citing numbers from different sources and different years, and those numbers are moving targets. They all support his underlying point: Providence's pension program is woefully underfunded, even with recent concessions negotiated with the city's unions.
Based on the latest report of the city's actuary, which was not available at the time Harrop made his statement, the candidate was correct on his $1.2 billion figure.
At the same time, there was significantly more than a quarter billion dollars set aside in the city's coffers for pension costs. But the number he cited accurately reflected the approximate amount the city had in its investment portfolio.
On balance, we rate his statement Mostly True.
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