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 "It's upside down politics in Rhode Island now," said Wendy
Schiller, associate professor of political science at Brown
University.
The strange situation stems largely from a divisive battle over
public pension benefits and a more mundane question that's normally
the pragmatic purview of public finance geeks: bond payments.
The race pits Democrat Gina Raimondo, Rhode Island's current
Treasurer and a former venture capitalist, against Republican Allan
Fung, the mayor of Cranston, a city of 80,500 residents southwest of
Providence.
Polls had shown Raimondo in the lead. But the latest from Brown put
the two contenders in a statistical tie, with each at about 38
percent.
While in office, Raimondo spearheaded one of the most far-reaching
pension reforms in the United States. Public sector labor unions
sued, and the case is set for trial after the police union scuttled
a settlement in April.
The benefit cuts and other overhauls aimed to shore up the pensions,
funded at just 49 percent in fiscal 2010, among the lowest of all
U.S. states.
If the state loses in court, the next governor would face a huge
bill. It could cost the state at least $220 million annually to pay
down an extra $2.5 billion in unfunded liabilities, state data
showed.
"The loss... would be quite catastrophic," said John Simmons,
executive director of the Rhode Island Public Expenditure Council.
Fung also boosted his city's pension system by striking a deal with
unions, though his changes weren't as sweeping.
While Raimondo won endorsements from some union heads, her tough
stance on pensions may have lost her votes from workers. Fung led
Raimondo 42 - 30 percent among union households, according to an
early October poll by WPRI-TV and The Providence Journal.
Currently, Florida-based Cumberland Advisors doesn't own any Rhode
Island general obligation debt. John Mousseau, director of fixed
income at Cumberland, said he "would look much more favorably upon
it" if Raimondo gets elected.
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The candidates also differ on whether the state should repay $75
million of bonds it backed in 2010 for ex-Red Sox Pitcher Curt
Schilling's video game company.
The company went bankrupt, putting taxpayers on the hook for bond
payments. Credit rating agencies warned that if Rhode Island doesn't
repay bondholders, they would slash the state's rating.
That would cause higher borrowing costs - anywhere from $26.3
million over 10 years to $260.4 million over 20 years, state budget
officials said.
Raimondo says the state must make payments to avoid long-term fiscal
penalties. Fung, however, says he would not make the payments
because taxpayers should not have to "bail out" investors.
But the decision would not be up to the next governor alone. State
lawmakers decide whether to allocate payments in their annual
spending plan, which the governor signs.
House Speaker Nicholas Mattiello, a conservative Democrat, backed
the payment of the 38 Studios bonds.
(Reporting by Hilary Russ; Additional reporting by Megan Davies;
Editing by David Gregorio)
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