Are local governments unknowingly or purposely hiding the truth from their residents?
How do you solve a problem if some don’t think there is a problem?
An debate is underway, and the sides are taking shape. On one side are the City of Warwick, its local newspaper, and state officials. On the other side are current and former Warwick city council members, a scholar from a nationally recognized think tank, National Review, and our own Center for Freedom & Prosperity.
A locally published interview with a member of the national pension task force, assembled by the RI Center for Freedom & Prosperity, has caused a stir in Warwick, puzzling the Mayor, confusing the local paper, and leading to an online rebuttal. Even the Providence Journal has covered the action.
On May 24, the Warwick Beacon published an article from an interview with Eileen Norcross, senior research fellow and lead researcher on the State and Local Policy Project with the Mercatus Center at George Mason University, attempting to refute her warnings that the City of Warwick is not accurately representing the true scope of the liabilities in its locally administered pension plans. Norcross published a pie-chart depicting what she calculates as the true budget snapshot for the city. See the pie-chart here.
In citing Mayor Avedisian’s puzzlement by Norcross’s figures, and in misstating facts itself, the article is an example of the complexities involved in this important issue for cities and towns in Rhode Island. A point-by-point clarification, “Wake Up Warwick,” was subsequently posted by Norcross as a rebuttal to the Warwick Beacon article.
Further, National Review Online has also published an article in support of Norcross’ perspective.
At question is the “discount rate,” or “rate of return,” utilized by most government agencies to value long-term pension liabilities. Many economists believe that government actuaries use higher rates than they should, which ends up understating the scope of the liability. If rates that are commonly used in private industry were to be utilized, the pension liability would be 2-3 times larger in many cases. What politician would want that kind of information to come out?
Is this arbitrary accounting practice done out of habit, or ignorance or, worse, is it done to purposefully deceive the public by kicking the can down the road and forcing future administrations to deal with the true scope of the problem?
The Center for Freedom & Prosperity takes the position that this debate — and this level of transparency — should take place in every city and town in Rhode Island. We strongly urge concerned citizens to publish or otherwise distribute the Open Letter to Municipalities: Tell Us The Truth previously published by our Center.