In his Jan. 21 “Other Views” commentary, “Misinformation adds to public plan woes,” Keith Brainard accuses us of either “negligence or fraud.” Why? Because our calculation of the investment performance of the Employees' Retirement System of Rhode Island was based on the latest annual report available on the plan's official website. Some figures might look somewhat different if the plan provided timelier reports, but this would do little to alter the basic facts. The plan is, by its own reckoning, deeply underfunded; under any accounting methodology that makes economic sense, things look much worse.
Our goal has only ever been to shine light on the state of public pensions. It is misinformation from the plans themselves that is adding to public pension plan woes. They could easily remedy the confusion by reporting the actual payments they expect to make, instead of some nonsensical valuation of these payments based on extrapolating past returns on risky assets into the future. More transparency would greatly benefit the public. To that we hope Mr. Brainard can agree.
Robert Novy-Marx
Assistant Professor of Finance
Simon Graduate School of Business
University of Rochester
Rochester, N.Y.
Joshua Rauh
Professor of Finance
Stanford Graduate School of Business
Stanford University
Palo Alto, Calif.
