In the movie, Armageddon, a giant asteroid is hurtling through space and is on a collision course for the Earth. The bright folks at NASA are called upon to come up with a plan to avoid this disaster, and naturally, decide that Earth’s fate should rest in the hands of the greatest drilling experts, played by Bruce Willis and Ben Affleck. Throw away the implausibility of the movie and the fact that it defies every law of physics, and focus on this: they identified the problem and a possible solution and found the best people available to solve that problem.
Locally, Gina Raimondo is leading a newly-formed Pension Advisory Group. The group is responsible for creating a bill framework for the General Assembly to pass that will fix our pension problem once and for all. Are the best people available the ones solving that problem right now? Remember, the pension situation isn’t about politics. It’s about MATH. From what our local leaders are saying, the current structure is just not sustainable. “A promise made is a promise kept” is meaningless if there is no money to keep the promise. Therefore, we need MATH experts in this group, not prominent Rhode Islanders, and certainly not labor leaders, to solve this problem for us. The labor leaders on this board are the same people represented in a local ad campaign saying the pension system shouldn’t be touched at all. Now, state workers have paid into the system for many years, and they have the right to expect a reasonable payout at retirement. The task at hand is to figure out the mathematical equivalent of “reasonable.”
There’s a reason insurance companies stay in business: They don’t promise more than they can pay out. An immediate annuity is structured exactly like a pension. Money is paid in and the insurance company promises to pay the annuitant over a predetermined period of time. Do you know who’s calculating those payments for insurance companies? Actuaries. The best mathematical minds in the history of mankind. Right now, they’re sitting in the bowels of some huge skyscraper, figuring out when you and me and people like us are going to die. And they get paid handsomely to make sure the insurance company isn’t shocked when we all live to 120. I, for one, would feel much more comfortable about the Pension Advisory Group if they assured us that these were the types of minds working on our pension Armageddon.
