State Pensions Killing State Budgets

Sorry for the lack of posts lately. Anastasia has been ill and the daily rituals of life have kept me away from posting.

Below is yet another story describing the troubles with State pension systems. They are nothing more than Ponzi Schemes that eventually either will bankrupt states or force taxpayers to be taxed to levels that just may finally force taxpayers to wake-up and start a revolt.

Cathy

The following piece appeared on Bloomberg.com.



State Pensions’ $865 Billion Loss Affects New Workers

By Adam L. Cataldo

Jan. 13 (Bloomberg) -- State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires.

Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16, according to the Center for Retirement Research at Boston College. The Standard & Poor’s 500 Index of stocks fell 41 percent in the period.




“Not a whole lot of people get too excited about pension funds,” Philadelphia Mayor Michael Nutter said in an interview. “But if you have to pay those costs, they do grab your attention.”

After Philadelphia’s fund lost $650 million in the first nine months of last year, Nutter joined the mayors of Atlanta and Phoenix in writing a letter to Treasury Secretary Henry Paulson seeking financial help for U.S. cities. Their November letter cited investment deficits and rising pension costs.

The $865 billion in losses, which exceed the $700 billion Troubled Asset Relief Program that Congress approved in October, comes as states face budget deficits totaling $42 billion.

The Boston College center analyzed holdings reported on financial statements from 2006, when the 109 funds had about 20.4 million members. It didn’t specify which of the 218 U.S. state funds it studied.

To return to 2007 actuarial funding levels by 2010, the 109 funds would need annual returns of 52 percent on assets, the analysis found. Annual returns of 18 percent would achieve the goal by 2013, the center said. The projections are based on a 5.7 percent annual increase in liabilities and a $50 billion increase in assets from contributions above annual payouts.

‘Accelerating Complications’

State funds have enough money on hand to pay benefits for the foreseeable future, said Alicia Munnell, the center’s director. “Even if markets recover, this will be a one-time loss that will have to be made up in the future by taxpayers,” she said.

“We can’t make enough on investments to drive out of this hole if all you do is depend on investments,” said Mike Burnside, executive director of the Kentucky Retirement Systems in Frankfort.

As of June 30, Kentucky’s largest fund for state workers held about 52 percent of the assets needed to pay current and future benefits to its 117,000 members. The plan had an unfunded liability of $4.8 billion at that time, while the entire system’s liabilities totaled about $16 billion.

‘Negative Cash Flow’

“When we are experiencing a negative cash flow and we are having to eat capital to make payroll, we are accelerating the complications,” Burnside said.

Increasing taxes to fill the pension gap has little support, said Frank Karpinski, executive director of the Employees’ Retirement System of Rhode Island in Providence.

“I don’t think anybody wants to do that, likes to do that or would say it would be an easy sell anywhere, especially given the current economic situation,” he said.

State and local governments contributed $64.5 billion to pension plans in fiscal 2005-06, according to data from the U.S. Census Bureau. That’s about 57 percent of the $113.2 billion spent on police and fire services.

Attempts to reduce benefits also face opposition.

“I believe that our members will oppose such initiatives in collective bargaining or in state legislatures,” said John Adler, a director with the Capital Stewardship Program in New York for the Service Employees International Union, which represents public workers. The union’s 850,000 members were in retirement plans with more than $1.5 trillion in assets as of Jan. 1, 2008, Adler said.

Two-Tiered Plans

To cut pension costs, some states are creating two-tiered systems offering less to new hires.

Kentucky lawmakers this year set the state’s first minimum retirement age, 57, for employees hired after Sept. 1, and required 30 years of service, up from 27, to receive full benefits. They capped cost-of-living adjustments, which had been tied to the Consumer Price Index, at 1.5 percent. The system had an unfunded liability of about $16 billion as of June 30, executive director Burnside said.

New York Governor David Paterson, trying to close a $15.4 billion budget gap over 15 months, wants to reduce new workers’ benefits and raise the retirement age to 62 from 55. New York’s pension system was over funded, with assets of $153.9 billion, as of March 30.

‘Weakest Cases’

Of the 109 state funds, 43 were funded at 79 percent or less of estimated current and future costs. Those below 80 percent “constitute the weakest cases,” said Ted Hampton, an analyst with Moody’s Investors Service Inc. in New York. The average level is 85 percent, according to an analysis prepared for a Moody’s report published in July 2008, Hampton said.

A survey of state funds found they owed $2.35 trillion to pension payments over 30 years, a December 2007 report by the Pew Center on the States found.

Company pension funds have also lost assets in the stock- market decline. The value of so-called defined benefit plans fell to $1.2 trillion at Dec. 31 from $1.6 trillion a year earlier, according to Mercer LLC, a New York-based pension consulting unit of Marsh & McLennan Cos.

Last month, after Pfizer Inc., International Business Machines Corp., United Parcel Service Inc. and dozens of other companies said losses could force them to make unexpectedly large contributions, Congress voted to delay provisions of the Pension Protection Act of 2006. The law would have penalized employers that didn’t cover at least 94 percent of their liabilities this year.

Membership Growth

For state plans, which weren’t covered by that mandate, the funding issue is complicated by 12 percent growth in membership since 2002, with 23.1 million now participating, according to census data.

Excluding Social Security, public employers’ pension costs are three times the retirement costs of their private counterparts, according to a June 2008 report by the Washington- based Employee Benefit Research Institute.

Some state retirement systems have seen losses in derivatives as well as stocks. Public pension funds bought more than $500 million in so-called equity tranches of collateralized debt obligations, according to public records compiled by Bloomberg in 2007. CDOs are packages of securities that are backed by bonds, mortgages and other loans. Their equity tranches are considered their riskiest portions.

The Missouri State Employees’ Retirement System invested $25 million in half the equity portion of the BlackRock Senior Income Series 2006 collateralized loan obligation, managed by New York-based BlackRock Inc. Moody’s last month cut ratings on parts of the debt, saying a drop in value of the underlying collateral may cause “an event of default.”

Finding Funds

Chris Rackers, the manager of investment policy and communication for the Missouri fund, didn’t return calls seeking comment.

In Rhode Island, state and local governments were scheduled to make contributions equaling 25 percent of their payroll expenses to retirement plans in 2010, said Karpinski, the executive director. Barring a recovery, the contributions may increase to as much as 30 percent in 2011, he said.

“That is kind of the elephant in the room,” he said. “Where are the funds going to come from to make these kinds of required contributions?”

To contact the reporter on this story: Adam L. Cataldo in New York at acataldo@bloomberg.net.

Anastasia has been ill.

Anastasia has been ill the past two days. I will BLOG again when I have the time.

More Education Tax Dollars Wasted on Union Members.

400 million education tax dollars that do not help students in the classroom. NEA to Spend $250,000 on Obama Inauguration. Hat tip to the Education Intelligence Agency for publishing the following information.

Cathy



1) NEA to Spend $250,000 on Inauguration. The National Education Association will spend up to $250,000 on activities related to the inauguration of President Barack Obama. Part of the money will be used to pay for "NEA presence at appropriate events."

With large Democratic majorities in both the House and the Senate, the union is also setting its priorities and is expected to concentrate on a handful of issues, including education funding, NCLB reauthorization, health care, GPO/WEP and "21st century skills" (which I would support if they were defined as the ability to detect, analyze and evaluate hogwash).

The only good news for education reformers is that NEA realizes it has to make some movement on the alternative compensation front (merit pay, performance pay and differential pay all being taboo terms), but hasn't figured out how to do it "without creating internal association strife."

NEA expects membership growth to flatten considerably in the next few years (not if the history of school hiring is any indication), but income is certainly not an issue. NEA's annual take is approaching the $400 million threshold. The union is so flush with cash that even in an election year it spent only $13 million out of an available $20.4 million from its Ballot Measure/Legislative Crises Fund, a national war chest funded by a $10 assessment from each member.

In addition to the inaugural expenditures, NEA will also send $250,000 to the National Coalition on Health Care, and $1 million to Communities for Quality Education, an NEA front group created as "America Learns" in 2004. No word on whether CQE will use some of the money to finally update its web site.

EIA will have much more on NEA spending next week.

Full Day Kindergarten Is Not in the Best Interest Of Children.

There is plenty of research out there that shows early education does not provide benefit to a child unless of course it is spun or done by educrats who would benefit from the tax dollars of said early education programs. That research can be found here, here and here just to name a few. Further research on your own and you would glean not only is early education not a benefit to children it is a waste of taxpayer money.

The Newport School Board needs to do some research into the issue and voters should reject full day kindergarten this spring. If parents and educators want to really help children, some real sacrifices are going to need to be made. Parents are going to have to put their children first. Teachers are going to have to put the interests of the children ahead of the status quo, education fads and the teachers union. Good teachers are going to have to confront bad teachers. Reading, writing and arithmetic must be the primary focus and must be mastered before teaching education fads such as diversity and global warming. When children master the basics children will succeed in mastering subjects such as science and history.

Cathy




The following piece appears in the Eagle Times.

Board backs all-day kindergarten


Money would come from surplus

By ARCHIE MOUNTAIN, Staff Writer
Thursday, January 08, 2009 8:28 PM

NEWPORT -- The Newport School Board voted 3-1 Thursday night to offer a voluntary all-day kindergarten program to the students of Newport as a pilot program for one year starting with the next school year.

If approved by voters, money for the program, estimated to cost $80,000, would come from surplus funds, if any, at the end of the current fiscal year on June 30, and/or donations.

The actual wording for the warrant article for the March school meeting will be finalized before the public hearing on the proposed 2009-10 school budget.

If the article passes and money is available, it will not lock in Newport to funding the full-day kindergarten for more than the next school year. Money after the one-year pilot test would have to be approved by voters.

According to Brannigan, the $80,000 would provide money for one additional teacher plus benefits along with setting up one additional classroom.

Two other kindergarten warrant article options were not approved by the board.

One asked that the school district be authorized to expand the kindergarten program to offer full-day kindergarten when money becomes available.

A second would have authorized a school district vote to appropriate from surplus funds, if any, the sum of $120,000 to offer full-day kindergarten.

Although he is a strong supporter of all-day kindergarten, school board member John LaRock voted against the article favored by the other three board members.

"I believe it sends a message that the board does not support all-day kindergarten. I am not in favor of the article as it reads. I think we will receive criticism. We are sneaking in the back door," he stated.

LaRock said at a retreat last summer the board said very clearly it would pursue full-day kindergarten. "Doing No. 3 alone is not making a statement," he added. LaRock was referencing the article that eventually gained the board's support Thursday night,.

At the suggestion of Jeff Kessler, a member of the Newport Budget Advisory Committee, the board agreed to add in the words "and/or donations" if the entire $80,000 was not available from a budget surplus in June.

There was also a fourth option presented to the board by Brannigan and Business Administrator Jim Vezina. It would have sought authorization to appropriate from the State Adequate Education Grant a half-day call back program to support kindergarten students who need an academic booster program.

"We would be trying to give students extra help," Brannigan said.

Other articles were also discussed that would utilize surplus money, if passed. The importance of placing the kindergarten article ahead of the others was emphasized. If the first special article on the warrant passes and uses all the surplus funds available, there would be no money left to fund any of the others.

Thought of the Day: "Obama Says Sacrifice Needed to Fix Economy, Some Promises Must Be Delayed..." Most people who voted against Obama already knew that he would never be able to fulfill his campaign promises. I just feel sorry for the individuals who actually believed them to be true.

An Example of Why Good Teachers Leave The Profession.

The attached story is an example of why a good teacher I know left the profession. Our friend Todd loved teaching and loved history. But over time he kept seeing history being rewritten in history textbooks. This was being done to push the agenda of the teachers union and the liberal agenda. He tried to fight it but could not so he left a profession that he felt was not acting in an ethical manor.

At one point in college I decided to be a teacher as well but the academic courses were such a joke that a junior high student could have passed the courses. After taking a couple of courses I switched majors to a more challenging major.

Cathy



President Bush Tried to Rein In Fan and Fred
Democrats and the media have the housing story wrong.
By KARL ROVE

Mythmaking is in full swing as the Bush administration prepares to leave town. Among the more prominent is the assertion that the housing meltdown resulted from unbridled capitalism under a president opposed to all regulation.

Like most myths, this is entertaining but fictional. In reality, Fannie Mae and Freddie Mac were among the principal culprits of the housing crisis, and Mr. Bush wanted to rein them in before things got out of hand.

Rather than a failure of capitalism, the housing meltdown shows what's likely to happen when government grants special privileges to favored private entities that facilitate bad actors and lousy practices.

Fannie and Freddie are "government-sponsored enterprises" (GSEs), chartered by Congress. As such, they had an implicit promise of taxpayer backing and could borrow money at rates well below competitors.

Because of this, the Bush administration warned in the budget it issued in April 2001 that Fannie and Freddie were too large and overleveraged. Their failure "could cause strong repercussions in financial markets, affecting federally insured entities and economic activity" well beyond housing.

Mr. Bush wanted to limit systemic risk by raising the GSEs' capital requirements, compelling preapproval of new activities, and limiting the size of their portfolios. Why should government regulate banks, credit unions and savings and loans, but not GSEs? Mr. Bush wanted the GSEs to be treated just like their private-sector competitors.

But the GSEs fought back. They didn't want to see the Bush reforms enacted, because that would level the playing field for their competitors. Congress finally did pass the Bush reforms, but in 2008, after Fannie and Freddie collapsed.

The largely unreported story is that to fend off regulation, the GSEs engaged in a lobbying frenzy. They hired high-profile Democrats and Republicans and spent $170 million on lobbying over the past decade. They also constructed an elaborate network of state and local lobbyists to pressure members of Congress.

When Republican Richard Shelby of Alabama, then chairman of the Senate Banking Committee, pushed for comprehensive GSE reform in 2005, Democrat Sen. Chris Dodd of Connecticut successfully threatened a filibuster. Later, after Fannie and Freddie collapsed, Mr. Dodd asked, "Why weren't we doing more?" He then voted for the Bush reforms that he once called "ill-advised."

But Mr. Dodd wasn't the only Democrat to heap abuse on the Bush reforms. Rep. Barney Frank of Massachusetts defended Fannie and Freddie as "fundamentally sound" and labeled the president's proposals as "inane." He later voted for the reforms. Sen. Charles Schumer of New York dismissed Mr. Bush's "safety and soundness concerns" as "a straw man." "If it ain't broke, don't fix it," was the helpful advice of both Sen. Thomas Carper of Delaware and Rep. Maxine Waters of California. Rep. Gregory Meeks of New York berated a Bush official at a hearing, saying, "I am just pissed off" at the administration for raising the issue.

Democrats had ready allies among lenders accustomed to GSEs buying their risky mortgages. For example, Angelo Mozilo, CEO of Countrywide Financial, complained that "an overly cumbersome regulatory process" would "reduce, or even eliminate, the incentives for the GSEs and their primary market partners."

It took Fannie and Freddie over three decades to acquire $2 trillion in mortgages and mortgage-backed securities. Together, they held $2.1 trillion in 2000. By 2005, the two GSEs held $4 trillion, up 92% in just five years. By 2008, they'd grown another 24%, to nearly $5 trillion. They held almost half of all American mortgages.

The more the president pushed for reform, the more they bought. Peter Wallison of the American Enterprise Institute and Charles Calomiris of the Columbia Business School suggest $1 trillion of this debt was subprime and "liar loans," almost all bought between 2005 and 2007. This bulk-up in risky paper made it possible for banks to lend imprudently on a massive scale.

Some critics blame Mr. Bush because he supported broadening homeownership. But Mr. Bush's goal was for people to own homes they could afford, not ones made accessible by reckless lenders who off-loaded their risk to GSEs.

The housing meltdown is largely a story of greed and irresponsibility made possible by government privilege. If Democrats had granted the Bush administration the regulatory powers it sought, the housing crisis wouldn't be nearly as severe and the economy as a whole would be better off.

That's why some mythmakers are so intent on denying that Mr. Bush worked to rein in the GSEs. But facts are stubborn things, as Ronald Reagan used to say, and in this instance, the facts support Mr. Bush and offer a harsh judgment on key Democrats. Perhaps that explains why so many in the media haven't told the real story.

Mr. Rove is the former senior adviser and deputy chief of staff to President George W. Bush.

The following piece appeared in the Wall Street Journal.

Bills That Must Be Stopped.

Please contact your senators and representatives to express your displeasure with these bills. If you can get down to Concord Tuesday to speak out against these bills please do so. Two bills will take away our right to find out how governments are spending our tax dollars the other bill will make it more difficult to hold a private vote when requested during town hall meetings. I would hope all of our Senators and Representatives are intelligent enough not to take away taxpayer liberties. Please be sure to share this with friends and family outside this group.

Thank you to the Coalition Of New Hampshire Taxpayers for keeping us informed of such critical issues. If these bills are passed it will give tax-eaters the opportunity to waste even more of our tax dollars while hiding where the money is spent.

Cathy



Acountability for 91-A (HB 135)

Saturday, January 10th, 2009
January 2009
HB 0135 would make government accountable for not complying with 91-A Right to Know Laws
CNHT feels that the passage of this bill would be beneficial to the taxpayer.
Read the full text of the bill here:
http://www.gencourt.state.nh.us/legislation/2009/hb0135.html
PLEASE ATTEND THIS HEARING TO EXPRESS YOUR SUPPORT FOR THIS BILL
HB0135 will be heard on January 14, 2009 at 2:00 [...]

Right to Know law under assault (HB 53)

Saturday, January 10th, 2009
January 2009
HB 0053 would exempt certain government agencies from having to release information under the RSA 91-A “Right to Know” law.
CNHT feels that the passage of this bill would not be in the best interest of the taxpayer.
Read the full text of the bill here:
http://www.gencourt.state.nh.us/legislation/2009/hb0053.html
PLEASE ATTEND THE HEARING TO EXPRESS YOUR OPPOSITION TO THIS BILL.
HB0053 [...]

Private voting under assault (HB 72)

Saturday, January 10th, 2009
January 2009
HB 0072 would increase the number of people needed to request secret vote at town meetings in some cases to as many as 50, from 5 as previous law provides.
CNHT feels that the passage of this bill would not be in the best interest of the taxpayer.
Read the full text of the bill here:
http://www.gencourt.state.nh.us/legislation/2009/hb0072.html
PLEASE [...]

Thought of the Day (Yet another reason for school choice) - "Teacher allegedly seduces boy, 13; had sex more than 300" times..." My question is why wasn't she fired? Oh yeah duh the Union.