Dying Detroit needs ACTION not words

Detroit--on life support--is a classic case of Democratic Party policies destroying the fabric of a city. Even the current Mayor doesn't get it.  When you have an organization, city, country--anything--in as bad shape as Detroit is, you take DRASTIC action, and here he is again just promising faster change. ACTION, not words Mayor!!

Bing vows faster pace of change for city | The Detroit News | detroitnews.com: "Responding to a Detroit News poll this week showing some 40 percent of residents plan to leave within five years — mostly due to crime — Bing said it's critical to get fiscal reforms in place. City administrators pointed to Midtown development as a sign that Detroit is poised for rebirth. "This is a long-term problem," he said. "We've got to get people thinking it's worth staying here, because it's starting to change. That it's not the time to run, because something good is starting to happen.""

Well as they say--LEAD, FOLLOW, or GET OUT OF THE WAY!

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WHAT IS WRONG WITH THE PEOPLE IN CHICAGO?

If there is one city that needs complete disintermediation in its schools, it's Chicago. But Mayor Rahm Emanuel is being stymied by unions, politicians, teachers, and even some parents from doing the right thing--read the full article at the link below for more--

New chief at Chicago Public Schools - Chicago Tribune: "Emanuel on Wednesday told the Tribune editorial board that the schools have slots for 600,000 children when there are 405,000 attending, although he did not say how many schools would be closed or converted to privately run charter schools, even as he conceded the difficulty of closing schools."

Difficulty closing schools?--CLOSE THEM! 

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Federal Government fires ATF agent for exposing corruption?

Exposing Federal Government corruption apparently leads to job termination--wonder why Obama hasn't been asked about this?

ATF Whistleblower Fired in Denny's Parking Lot For Exposing Corruption - Katie Pavlich: "Special Agent Vince Cefalu has worked for the Bureau of Alcohol Tobacco and Firearms for more than 25 years. On top of successfully placing dozens of hard criminals behind bars throughout his career, Cefalu has received promotions and consistently positive evaluations. When he started raising his voice about ATF corruption and illegal wiretapping in 2005, things changed.  Tuesday evening, Cefalu was asked to meet Special Agent in Charge of the San Francisco Field Division Joseph Riehl at a Denny's Restaurant near Lake Tahoe. When he arrived, he was served termination papers in the parking lot. Classy move"

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Pension Mess - Illinois, Kentucky and Pennsylvania becoming like Greece?

If you live in a state like Illinois, Kentucky, or Pennsylvania, get ready for some very bad news:

Pension Funding Scare Won’t Frighten All States - Bloomberg: By Peter Orszag Oct 23, 2012 ". . .  Any way you do the calculation, clearly there’s a big problem. . . . Myth Busting Alicia Munnell, the director of the Center for Retirement Research at Boston College, takes on each of these myths in her new book, “State and Local Pensions: What Now?” Munnell, with whom I served in President Bill Clinton’s administration, has devoted most of her career to pension issues. First, she computes a funding ratio -- that is, the ratio of assets to liabilities -- for each state plan. She finds substantial variation . . . Illinois, Kentucky and Pennsylvania face enormous gaps, while Delaware, Florida, North Carolina and Tennessee have managed their pension plans relatively well. Why were some plans so badly underfunded and others not? . . . union strength isn’t what matters. These plans, though, did tend to share two characteristics: They were disproportionately teachers’ plans, and they used a funding method (called the projected unit credit cost method) that is less stringent than those used by other plans. The states with huge funding gaps have “behaved badly,” Munnell concludes. “They have either not made the required contributions or used inaccurate assumptions so that their contribution requirements are not meaningful.” She added, “Fiscal discipline simply appeared not to be part of the state’s culture.” . . . as in life, what goes around comes around. In states that have behaved well in the past -- such as Delaware -- the burden of pension plans will increase in future years only modestly if at all. In contrast, a state such as Illinois, which has perhaps the worst record of avoiding necessary funding even while expanding benefits, will have to increase its pension contributions sharply if it is to meet its obligations. To get a sense of what looms, assume that, over the next three decades, the plans will earn an average nominal return of 6 percent on their assets. In that case, Illinois will have to raise contributions from less than 8 percent of total state revenue in 2009 to an average of 14 percent between 2014 and 2044. Delaware, in contrast, would need to raise its contribution by only 2 percent of state revenue. The required adjustments in the states with problems need not, and should not, be made overnight, but they will be a drag on state resources for a long time. The revelation that problems exist mainly in states that have failed to adhere to a credible long-term funding strategy contains a lesson for policy makers in Washington: It is essential to behave responsibly. Simply hoping our long-term fiscal problems will magically disappear is not a credible strategy. As part of the negotiations over how to address the fiscal cliff -- the federal spending cuts and tax increases scheduled to take effect in January -- policy makers should combine more support for the economy in 2013 (in the form of tax cuts and infrastructure spending) with a specific and credible deficit reduction plan that rolls out gradually over the next several decades." (Peter Orszag is vice chairman of corporate and investment banking at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. The opinions expressed are his own.)

The consequences of public officials "behaving badly" also has ramifications far beyond the immediate problem of unfunded pension liabilities. For example, knowing the above, why would any business decide to locate or expand operations in a state like Illinois, Kentucky or Pennsylvania? It would be like choosing to live in a "bad neighborhood" instead of a "good neighborhood."

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Are Public Pensioners Safe?

Of course not! 

Are Public Pensioners Safe? | The Business Desk with Paul Solman | PBS NewsHour | PBS: "My own prognosis for public pensioners is pessimistic. Pension funds are in general underfunded, as we've reported early, again and again. They assume unrealistically high rates of return on their assets. They refuse to, or simply cannot, raise taxes on their citizens and businesses. The only alternative is to cut benefits. And that's happening with increasing frequency all over this land."

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LA’s Pension War Goes Nuclear

LA’s Pension War Goes Nuclear: "LA WATCHDOG - Mayor Richard Riordan’s proposed ballot measure, the “Fair Share Pension Reform Act of 2013,” is LA’s Prop 32 (Paycheck Protection), only on steroids, as the leadership of the City’s public unions will view this money saving initiative for our cash strapped City as a direct assault on their control of the City’s purse strings. . . .Riordan’s Fair Share Pension Reform plan will also force the candidates for Mayor, Controller, City Attorney, and City Council to pick sides as the union leadership will demand absolute loyalty in return for their campaign contributions. Based on press reports, Riordan’s plan would “move newly hired workers into 401 (k) style plans and freeze retirement benefits for existing workers,” saving the City “hundreds of millions of dollars every year by 2017 and upwards of a billion dollars by 2020. . . Underlying this plan for serious pension reform is the very real concern that our City will become insolvent within the next five years. Our City’s finances are so desperate that senior elected officials have secretly discussed the sale of our Department of Water and Power, the Port of Los Angeles, and/or Los Angeles International Airport. To earn a seat at the table, our public sector unions must develop a detailed plan that addresses how the City will “Live Within its Means.” This would include a Five Year Financial Plan, balanced budgets based on recurring revenues and Generally Accepted Accounting Principles, and, over the next ten years, programs to eliminate the $10 billion unfunded pension liability and to repair our lunar cratered streets, our cracked sidewalks, and the rest of our crumbling infrastructure."

"Live within its means"--what a novel concept!


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Public blames politicians, not unions, for pension mess

OK--but who elected the politicians?

Public blames politicians, not unions, for pension mess - chicagotribune.com: "Emanuel has pushed the cost-shift proposal, arguing that Chicago property tax payers already are responsible for the tab for pension benefits to retired Chicago Public Schools teachers. . . . "The districts should cover their pensions and not the state," Burns said. "Chicago does. When you raise your pensions locally, you can do what you want with them." But the plan isn't gaining traction in places where taxpayers fear they stand to take the hit. In the collar counties, 55 percent said they were against the plan while 35 percent supported. In suburban Cook, 49 percent opposed and 34 percent supported it. And Downstate, 50 percent were opposed while just 21 percent backed the idea."

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California and Illinois in a race to the bottom

Oh "woe is me" say California and Illinois, the two basket cases of unfunded public pension liabilities:

Finke: Poll: Don't blame public workers for pension woes - Peoria, IL - pjstar.com: "It should be noted that The Associated Press reported on Oct. 8 that California, not Illinois, leads the nation in unfunded pension debt at $100 billion. But Illinois still has an $85 billion unfunded liability, more than twice as much as New Jersey, which is No. 3." 


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Changes to pensions will create two-tier workforce

O Canada!--pension reform--Canada leads the way:

Changes to pensions will create two-tier workforce in the public service | canada.com: "Canada’s public servants will have to pay more for their pensions and new hires will have to work longer than their older colleagues before they can retire with full pension benefits. The changes will create the first two-tier workforce within Canada’s bureaucracy with all new hires losing the once-sacrosanct early retirement provisions that let public servants retire at 55 and they will be forced to work until age 65 . . ."


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Mayor of Baltimore on the pension problem

Not often you hear this kind of honesty--especially from a public official (Mayor of Baltimore):

Baltimore County government pensions - baltimoresun.com: "As 20 years of fiscal mismanagement by government officials comes to a head, we repeatedly hear public servants warn of their underfunded pension funds ("Baltimore Co. weighs pension bonds," Oct. 14). While the private sector* has had a decline in real wages over the last 20 years and the evisceration of pensions, government compensation has continued its upward climb. A recent article by CNN's Fareed Zakaria points out that the municipal bankruptcies we keep hearing about aren't about taxes being too low or spending on services being too high but about pensions. Mr. Zakaria notes that California's pension-related costs rose 20-fold in the decade since 1999, and that this frightening trend is true almost everywhere in America. For decades now, local governments have doled out patronage by increasing pension benefits that impact the budget years later, when the officials who gave the benefits are safely retired themselves. . . .In the private sector, the old defined benefit pension has long ago been replaced by the defined contribution plan. Yet the government plans are paying two or three times more than pensions in the private sector. This is a ridiculous situation that needs to be solved the old-fashioned way: By restructuring the government plans so they are in line with those of the private sector. . . .--Gary Moyer, Baltimore

*Remember Obama saying "the private sector is doing fine"? 



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Public Pension promises easy to make, hard to keep

Public Pension crisis--promises too easy to make, and so hard to keep.

The woods are lovely, dark and deep. 

But I have promises to keep, 

And miles to go before I sleep, 

And miles to go before I sleep.

 --Robert Frost, “Stopping by Woods on a Snowy Evening”

Warren Buffett on pension fund investment return assumptions. | DavidGCrane: "Whatever pension-cost surprises are in store for shareholders down the road, these jolts will be surpassed many times over by those experienced by taxpayers. Public pension promises are huge and, in many cases, funding is woefully inadequate. Because the fuse on this time bomb is long, politicians flinch from inflicting tax pain, given that problems will only become apparent long after these officials have departed. Promises involving very early retirement – sometimes to those in their low 40s – and generous cost-of-living adjustments are easy for these officials to make. In a world where people are living longer and inflation is certain, those promises will be anything but easy to keep."

Link to full report: http://www.berkshirehathaway.com/2007ar/2007ar.pdf

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Public Pensions and the Assumed Rate of Return

How big are the unfunded public pension liabilites? Bigger than reported and bigger than you think because almost every public pension fund uses unrealistically high "assumed rates of return"--

Reason Foundation - Out of Control Policy Blog > Warren Buffett on Public Pensions: "Most public pension funds assume, for example, that they will earn 7.75% or 8% a year, on average, while Buffett has said that 6% would be more realistic."

Study: Public Pensions Underfunded by $1.2B | Fox Business: "Critics have called for public pensions to reduce their assumed rates of return to as little as 5 percent or less, which would cause unfunded liabilities to soar and likely leave taxpayers having to cover the difference. But without the change, critics say, future generations will be left to deal with a financial bomb. Other studies have tried to measure the overall size of the problem. The Pew Center on the States found that the shortfall is about $766 billion. Moody's Investors Service said in July that the collective gap would be $2.2 trillion if funds used a 5.5 percent discount rate."

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Pension Reform in Illinois

One true statement in an otherwise useless article (read the bold):

Pension Reform in Illinois | Poli Chi: "Many are now saying it was too easy to pass pension benefits with a 50%+1 voting model, and that it is because of those easily passed pension benefits that Illinois is in the financial crisis it's in now. This pension reform is expected to be the savior of Illinois' credit rating."

Increases are not the problem are they? Illinois can't afford the pensions it currently has--until you have true pension reform--i.e. cutting benefits and automatic increases, increasing employee contributions, etc., any talk of reigning in "future increases" is not solving the problem.

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A Federal Bailout for State Pensions?

So is this what Governor Quinn (Illinois), Governor Brown (California), and every other state sinking in unfunded public pension liabilities is hoping for? Don't count on it--hope is NOT a strategy--

Bluegrass Beacon - A Federal Bailout for State Pensions? Say It Ain’t So! | SurfKY.com: FRANKFORT, KY (10/14/12) - "Could it be that one of the reasons Kentucky’s political leaders continue to kick the commonwealth’s can of unfunded pension-liabilities down the road is because they are counting on a bailout from the federal government? . . . It must have made the hearts of Gov. Steve Beshear and his political pals controlling the House in Frankfort leap with relief when they heard fellow Dem and Illinois Gov. Pat Quinn recently run the idea of a federal bailout for his state’s $167 billion pension liability up the political flagpole. For years – particularly when economic times were good – Kentucky’s politicians padded pension and health-care benefits as a way of currying political favor, even bringing private entities into the take. The bloated system now has 1,701 different entities, along with their thousands of employees, connected to our state government’s pension teat. The story of states’ failing pension funds has been repeated nationwide. States now face a combined total of$2.5 trillion in unfunded pension costs, including Kentucky’s $34 billion liability. Giving such funding power to cowardly politicians in the first place was like giving car keys and whiskey to teenage boys. An ensuing crash is inevitable, and a bailout would only acquiesce to their disastrous behavior. . . "

Here's why the "federal bailout" won't happen:

"Why should hardworking taxpayers in Washington state – whose pension system at 95 percent funded is the nation’s healthiest – be forced to subsidize the abuse of Kentucky’s pension system by politicians in the form of overspending and benefit creep during the past several decades, which has left the commonwealth’s workers’ retirement funding level at barely 30 percent? . . ."

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The dollar’s days as reserve currency are numbered

Deficit spending, hogs at the trough, public pensions out of control--where does it all lead? Those "public servants" who have led us down this path have NO idea of the pain yet to come as a result of their greed, gluttony, and irresponsibility:

The dollar’s days as reserve currency are numbered - FT.com: "For the US not to address its looming fiscal challenges would be more alarming still. America may not be at risk of default, because the Fed is there to backstop the market in Treasuries. But if the current situation persists, America’s sovereign obligations will not hold their value indefinitely. And if they fail to hold their value, they will not hold investors’ confidence. If they no longer offer the safety that investors have come to expect, they will not function as the stable collateral required by bank funding markets. They will not be regarded as an attractive form in which to hold international reserves. And they will not be seen as a convenient vehicle for merchandise transactions. A serious shortage of international liquidity would spell the end of globalisation as we know it. International financial and merchandise transactions would become more expensive. Without an attractive means to hold the reserves they need to intervene in international markets, central banks and governments would be reluctant to give those markets free rein. Controls would become widespread."

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Chicago still "kicking the can"

Chicago--better read the fine print--

Read Rahm’s lips: No new taxes in next city budget - Chicago Sun-Times: "By holding the line on new revenue for now, Emanuel is also holding open the possibility that a massive tax increase of some kind will be needed to solve the city’s pension crisis — even if union leaders ultimately agree to pension reforms. Ald. Pat O’Connor (40th), the mayor’s City Council floor leader, is scheduled to hold a day-long hearing on the pension crisis on Monday, featuring testimony from the five city employee pension funds. “You can’t fix this with money alone. That would forestall a financial Armageddon. But, the model is not sustainable. There are structural problems that must be addressed,” O’Connor said."

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Public pension funds stung by losses

The hole gets deeper and deeper--

U.S. public pensions end bumpy second quarter with losses | Reuters: " . . . pension funds for U.S. state and local government workers were stung in April, May and June by sagging global stock markets. The funds recorded losses of $14.2 billion for the second quarter, the U.S. Census Bureau said on Thursday. . . U.S. taxpayers worry that commitments made to public employees for retirement benefits may absorb bigger slices of public funds as local and state governments weather America's slowly growing economy. States and local governments face unfunded pension liabilities of $750 billion or more, depending on estimates. . . In the second quarter, states as well as city, county and other local governments throttled back on pension contributions, which totaled $21.36 billion - down from $24.1 billion in the first quarter, Census Bureau data showed. In 2011's second quarter, government contributions were $22.5 billion. In contrast, employee contributions to pension funds rose from the first quarter's $9.3 billion to $10.3 billion in the second quarter. Employee payments to the pensions were $10.9 billion in 2011's second quarter, according to the Census data. Census Bureau data is based on the 100 largest public-employee retirement systems."

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Public pay and pensions too generous

At some point, the trough will be empty--

Ohio public pay called too generous | www.daytondailynews.com: "State employees in Ohio receive $9.89 per hour more in wages and benefits than their private-sector counterparts, according to a report released Thursday by a conservative watchdog group. This disparity is larger than in 44 other states, according to the report from Washington D.C.-based Citizens Against Government Waste. It gives Ohio the grade of “F” compared to other states. A major driver of this difference, according to report authors, is generous public sector pensions: “Taxpayers in every state are struggling to grasp the sheer magnitude that state and local government unfunded pension liabilities are having on programs and services,” it states. In Ohio, the conditions the report illustrates have long been the focus of attention. On Wednesday Gov. John Kasich signed a major overhaul of Ohio’s five public sector pension systems that will cost workers billions, require them to work longer, reduce cost-of-living adjustments and make the programs solvent . . . Nationally, the report authors say state governments pay on average 6.2 percent more per hour in wages and benefits than the private sector in these fields. Utah has the lowest disparity, with state workers there earning an average $28.70 versus $24.74 in the private sector."

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PENSION CRISIS: Municipalities wait their turn

PENSION CRISIS: Municipalities wait their turn | Central Penn Business Journal: ""Something needs to be done. We all know the legacy costs," said Eric Montarti, senior policy analyst for the Pittsburgh-based Allegheny Institute for Public Policy. "How do we get from identifying the problem and coming up with a solution to churning through the legislative process?" New to the debate is a proposal from the state's auditor general to consolidate municipal pension plans. The debt Excluding Philadelphia, Pennsylvania's roughly 1,400 municipal pension plans have a little more than $2 billion in combined unfunded liabilities, according to the state Public Employment Retirement Commission, which tracks the progress of local and state pension plans."

Ever think of abolishing public pensions altogether?

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Washington Versus America --part 2

Washington, D.C.--where most of the "hogs" live (part 2):

Washington Versus America - NYTimes.com " . . . Our gilded District is a case study in how federal spending often finds its way to the well connected rather than the people it’s supposed to help, how every new program spawns an array of influence peddlers, and how easily corporations and government become corrupt allies rather than opponents. The state of life inside the Beltway also points to the broader story of our spending problem, which has less to do with how much we spend on the poor than how much we lavish on subsidies for highly inefficient economic sectors, from health care to higher education, and on entitlements for people who aren’t supposed to need a safety net — affluent retirees, well-heeled homeowners, agribusiness owners, and so on. There’s a case that this president’s policies have made these problems worse, sluicing more borrowed dollars into programs that need structural reform, and privileging favored industries and constituencies over the common good. But this story is one that Romney and his party seem incapable of telling. Instead, many conservatives prefer to refight the welfare battles of the 1990s, and insist that our spending problem is all about an excess of “dependency” among the non-income-tax-paying 47 percent. In reality, our government isn’t running trillion-dollar deficits because we’re letting the working class get away with not paying its fair share. We’re running those deficits because too many powerful interest groups have a stake in making sure the party doesn’t stop. When you look around the richest precincts of today’s Washington, you don’t see a city running on paternalism or dependency. You see a city running on exploitation."

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Washington Versus America --part 1

Washington--where most of the "hogs" live--

Washington Versus America - NYTimes.com: "Last week, new census data revealed that 7 of the 10 richest American counties in 2011 were in the Washington, D.C., region. Fairfax, Loudoun and Arlington Counties, all in Northern Virginia, have higher median incomes than every other county in the United States. Whence comes this wealth? Mostly from Washington’s one major industry: the federal government. . . . like the ruthless Capital in “The Hunger Games,” the wealth of Washington is ultimately extracted from taxpayers more than it is earned. And over the last five years especially, D.C.’s gains have coincided with the country’s losses. There aren’t tributes from Michigan and New Mexico fighting to the death in Dupont Circle just yet. But it doesn’t seem like a sign of national health that America’s political capital is suddenly richer than our capitals of manufacturing and technology and finance, or that our leaders are more insulated than ever from the trends buffeting the people they’re supposed to serve. For Mitt Romney and the Republican Party, what’s happened in Washington these last 10 years should be a natural part of the case against Obamanomics. . . ."

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LA pension peril

Jim Newton: L.A.'s pension peril - latimes.com: "Recognizing that threat, labor leaders may reason that it's better to let Riordan take heat from union members than for those same leaders to participate in pension cuts or contribution increases that make them complicit. They might nominally object but in fact wage only a half-hearted campaign against Riordan's measure, understanding that it might ultimately save them from themselves. "If labor leaders do not see their positions at risk," noted Alex Rubalcava, a municipal finance expert who works closely with Riordan, "they're not paying attention." Then there's the question of how labor would fare if it targeted the reform measure for defeat. Public anger over perceived largesse in public employee pensions is a serious phenomenon, and recent ballot measures to curtail those pensions won in San Diego, a fairly conservative city, and San Jose, a very liberal one. It's quite possible that even if labor did oppose a similar measure here, it would nevertheless pass. Riordan, as usual, is playing his cards carefully. He was coy about his proposal when I met with him at his Brentwood home (in the library, dominated by a photograph of Riordan and then-Texas Gov.George W. Bush), but he insisted this was the most important civic effort on his plate. And he emphasized that L.A. is careening toward bankruptcy. Today's pension system, he said, is "a pyramid scheme." Riordan, who made a fortune as an investor, also made it clear that he's already covering his bases: "I sold all my government bonds two years ago."

Caveat emptor.

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