Newport, Rhode Island, was voted to the Forbes list of America’s prettiest towns:
There’s a good reason Presidents Eisenhower and Kennedy chose Newport, Rhode Island, for summer escapes by the water. First, consider the draw of one of the most enchanting stretches of shoreline on the East Coast, a seascape best viewed when traveling down the ten-mile twist of Ocean Drive. Then there’s Newport’s time-traveling charm, its ability to whisk you away to other periods in American history by way of colonial-era homes and Vanderbilt mansions.
From June 23 to July 1, Newport will host The America’s Cup World Series races. It’s an exciting time to be in Newport.
The local pensions, on the other hand, are not pretty or exciting. Newport, along with Middletown and Portsmouth, make up Aquidneck Island. The local paper, The Newport Daily News, ran this headline last week for the town of Portsmouth: “Pension Outlook Worsens.” The plan guarantees an 8% rate of return. Remember now, the higher the guarantee, the less needs to be saved by the town to meet its promises. The actual annual performance over the past 10 years has been 4.1%.
“The Portsmouth pension plan is in much worse shape than has been presented over the last few years,” said Jonathan H. Harris, chairman of the town’s Joint Pension Review Committee. “The town does not have the resources to pay the increased funding costs, and serious consideration must be given to making reductions in the pension benefits, just as the state has implemented with teachers and state employees.”
Using a guaranteed 8% rate of return, the unfunded liability is $22.1 million. Reducing it to 7.25% increases it to $28.5 million, and 6.75% to $32.9 million. The more conservative 6.75% increases the unfunded liability by close to 50%. Imagine using a realistic return like a five-year Treasury. The numbers are blown out of the water like a catamaran.
Portsmouth isn’t alone. You can check out Newport’s abysmal pension numbers on Richard C. Young’s RIP Map. The pension problem hasn’t been solved in Rhode Island. But like most things, it will take a real crisis to finally get serious about it.