On Tuesday Rhode Island General Treasurer Gina Raimondo won her state’s Democratic primary race for governor, making the Rhodes scholar and former venture capitalist the front-runner to take the general election in the fall. Raimondo won with more than 40 percent of the votes — proof that a Democratic officeholder can take on pension reforms and still win with the voters. Although Raimondo won going away — her closest rival trailed by 13 percentage points — the race had been close.
Raimondo ran on her record as general treasurer; her biggest achievement since taking office in January 2010, but also her biggest obstacle, was her pension reform efforts. In 2012 Raimondo championed and won significant reforms to the state’s $8 billion pension system, the Employees’ Retirement System of Rhode Island. Many admired her efforts, and she received national attention, including a December 2012 feature in Institutional Investor magazine (see “Rhode Island Treasurer Defies Conventional Pension Wisdom”). But her efforts also spawned union opposition.
Criticism that her pension cuts were too harsh left Raimondo vulnerable to a primary challenge from the left. Her most formidable opponent, Providence Mayor Angel Taveras, also helped reform the deeply troubled nearly $300 million city pension plan, the Employees’ Retirement System of the City of Providence, but the changes he pushed through were far less drastic than the ones for the state. The powerful Council 94, AFSCME, AFL-CIO, which is fighting Raimondo’s pension reforms in court, was one of the groups to endorse Taveras.
The race was close at times, particularly after a third candidate, the self-funded Clay Pell, entered; Pell appears to have split the progressive vote. With 96 percent of the precincts reporting, Raimondo got 42 percent of the vote, Taveras 29 percent and Pell 27 percent. Raimondo won every precinct except in Central Falls, which went to Taveras. Polls as recently as May had Taveras ahead of Raimondo.
“We can’t afford to kick the can down the road anymore,” Raimondo told supporters in her victory speech Tuesday night. And, in an allusion to her pension reform effort, she said, “I’ve shown that I’ll be a governor with the courage to tackle our toughest problems.”
Winning did not come cheaply. As Ted Nesi of Rhode Island television news station WPRI reported, Raimondo spent $4.9 million on her race since the start of 2013, to Taveras’s $2.3 million and Pell’s $3.4 million.
Raimondo received criticism from Taveras and others for receiving donations from Wall Street. Her political contributors have included Orin Kramer, a New York–based hedge fund manager (founder of Boston Provident) who is well known as a Democratic National Committee fundraiser, as well as John Arnold, a former Enron-energy-trader-turned-hedge-fund-manager-turned-philanthropist who is committed to pension reform, among other causes.
The real assault leveled at Raimondo by her critics, however, was that she had taken benefits from pension beneficiaries while giving millions of dollars to hedge fund managers in the form of fees. In fact, the pension reform passed by the legislature and signed into law by lame-duck Governor Lincoln Chafee required across-the-board cuts to benefits and a mandated 401(k) to be part of future pension benefits. As treasurer, Raimondo oversaw the investment of 8 percent of the state pension fund assets in hedge funds.
In 2013 Council 94 hired Forbes.com blogger and forensic accountant Edward Siedle to write a report both about Raimondo’s pension reform and her plan to allocate some state funds to hedge funds. Yet the Providence pension plan, of which Taveras is a fiduciary, actually has a higher allocation to hedge funds than does the state. In fact the Providence plan has many of the same management and investment issues that Siedle argued were in the state plan (see “Pension Reform in Providence: Part Two, The Hedge Funds”).
Raimondo now faces Republican rival Allan Fung, the mayor of Cranston, Rhode Island. Fung won 55 percent of his primary vote. A Raimondo win in November would take back the governorship for the Democrats for the first time in 20 years at the polls (Chafee ran in 2010 as an independent and then registered as a Democrat in 2013). Raimondo would also be the state’s first female governor.
Follow Imogen Rose-Smith on Twitter at @imogennyc.
