Teacher Tenure/Unions/Government/Pensions

[doctorwho]

Apr 8, 2010 8:57:24 GMT -6 asmodeus said:

Doc,

Do know why your company apparently wasn't covered by the Pension Benefit Guaranty Corp? Did they not want to pay the premiums? I know the PBGC doesn't pay at 100% but it seems like it would have been better than a lump sum.

self insured- self funded as are many corps -- I wish I had paid better attention to why not under PBGC- but many are not. Not something I was knowledgeable of at the time I started - as most kids of 21 likely are not -- sad lesson.

yes any % would have been better.

[macrockett]

online.wsj.com/article/SB10001424052702304017404575166201937283866.html#printMode

How to Cut Government Pay
All the U.S. has to do is follow Ireland's example.

By ALEX J. POLLOCK

Government employees on average have higher pay and bigger benefits than the private-sector employees who support them with taxes. This has become a well known fact.

When private firms run extended losses—spending more money than they take in—their employees must share in the necessary adjustments. But how about when governments spend much more than they take in, running huge and extended deficits? What should happen then? This is something Americans who work in private companies might consider while they file their tax returns over the next week.

Ireland shows the way.

Having had a long run of high growth and success, Ireland has now had a severe bust, the deflation of a housing bubble, and a financial crisis. Plus, its government is running big deficits. Sound familiar?

In response, the current Irish government budget takes these steps (translating from euros to dollars and rounding):

• Government employees' salaries up to $40,000 will be reduced by 5%.

• The next $54,000 of salary will be reduced by 7.5%.

• The next $74,000 of salary will be reduced by 10%.

When these tranches are added together, this gets you up to salaries of $168,000. Government salaries over this amount may be subject to marginal reductions of as much as 15%.

This looks like a very sensible plan for nonmilitary government employees.

Ireland has already worked out the plan. All the U.S. has to do is implement it.

Mr. Pollock is a resident fellow at the American Enterprise Institute.

www.cnbc.com/id/15840232?video=1462891237&play=1

[macrockett]

www.chicagotribune.com/news/opinion/editorials/ct-edit-florida-20100412,0,157630.story
chicagotribune.com
Florida’s bold move

April 12, 2010

In the wee hours of Friday morning, long after most of us were asleep, Florida's lawmakers made dramatic changes to their state's education system. They took reform to a new level.

The most significant piece of legislation eliminates tenure protection for teachers. Newly hired teachers would work on an annual contract that can be renewed each year. The bill also does away with lockstep annual raises. Teachers' pay no longer would be bumped based simply on how long they've worked, and how many graduate degrees they've obtained. Instead, their pay would depend on the achievement of their students. The more improvement their students make in the classroom, the more money teachers take home. Already tenured teachers keep their job protection.

The legislature's move has teachers unions up in arms. Andy Ford, the president of the Florida Education Association, told Education Week that his group would work to shake up the make-up of the legislature. "We're looking toward the November elections, where we'd repeal and reform the legislation, if we can change some seats in the Senate and the House," Ford said.

Despite enormous pressure, legislators have sent a message that they're committed to breathtaking reform. Their boldness is refreshing, a template we hope Illinois emulates.

Florida finished fourth in the first round of Race to the Top, the Obama administration's challenge grant intended to spur reform. That's one spot ahead of Illinois. In its Race to the Top application, Florida said participating school systems would base layoffs more on teacher effectiveness than on seniority.

Now lawmakers there have pushed through wholesale changes in the way teachers are evaluated and rewarded for their work.

Gov. Charlie Crist, who initially indicated he would sign the bill, is waffling. Crist, who is running in a Republican primary for the U.S. Senate against Florida House Speaker Marco Rubio, told reporters on Friday that he hasn't decided if he will sign the legislation. Top lawmakers could wind up negotiating some changes with the governor.

But how refreshing it is to see a legislature act with such conviction to shake up the status quo!

Illinois is making some progress, but change here is still coming in fits and starts. There's plenty of work to be done to improve the environment for charter schools, to overhaul teacher tenure, to assure the success of turnaround schools, to see that good teachers are led by excellent principals.

Florida, bravo! You're forcing real change. Let's hope people in Illinois learn something.

Copyright © 2010, Chicago Tribune

[Arch]

Instead of rising up to the challenge to say HEY, YEAH, WE SHOULD MAKE SURE THESE KIDS LEARN.... they point towards the November elections in hopes of undoing it.

Sad.

[macrockett]

online.wsj.com/article/SB10001424052702303828304575180270979668714.html?mod=WSJ_newsreel_opinion#printMode

APRIL 13, 2010

Reaganism, New Jersey Style
Mr. Christie knows he needs to put the hard choices before the state's citizens, and to speak to them as adults.

By WILLIAM MCGURN

If you think that Snooki getting socked in the kisser during an episode of "Jersey Shore" epitomizes life in the Garden State, you haven't been paying attention. The best reality show on television today isn't running on MTV. It's in Trenton, where Gov. Chris Christie is offering the voters a dose of Reagan Republicanism—with a Jersey twist.

When he was elected back in November, Mr. Christie's victory was thought to augur growing disenchantment with Barack Obama. For the former federal prosecutor, however, his victory was primarily about local disenchantment with New Jersey's overtaxed economy and spendthrift government. Now he is in the thick of what will probably be the defining moment of his governorship: the attempt to enshrine his vision for the future in the state budget.

Budgets are serious business, but it's been a long time since anyone in New Jersey has been serious about the budget. This year, gross mismanagement and accumulated fictions have left state taxpayers a $10.7 billion gap on a total state budget of $29.3 billion. Mr. Christie's answer is simple: "a smaller government that lives within its means."

However quaint that may sound, when you have to cut nearly $11 billion in state spending to get there, you are going to get a lot of yelling and screaming. Most comes from the New Jersey Education Association, hollering that "the children" will be hurt by Mr. Christie's proposals for teachers to accept a one-year wage freeze and begin contributing something toward their health plans. What makes the battle interesting is the way Mr. Christie is throwing the old chestnuts back at his critics.

Here are a few examples, culled from his budget address, public meetings and radio appearances:

The children will be the ones to suffer from your education cuts. "The real question is, who's for the kids, and who's for their raises? This isn't about the kids. Let's dispense with that portion of the argument. Don't let them tell you that ever again while they are reaching into your pockets."

Your policies favor the rich. "We have the worst unemployment in the region and the highest taxes in America, and that's no coincidence."

Why not renew the 'millionaire's tax'? "The top 1% of taxpayers in New Jersey pay 40% of the income tax. In addition, we've got a situation where that tax applies to small businesses. I'm simply not going to put my foot on the back of the neck of small business while I want them to try to grow jobs by giving more revenue to New Jersey."

Budget cuts are unfair. "The special interests have already begun to scream their favorite word—which, coincidentally, is my 9-year-old son's favorite word when we are making him do something he knows is right but does not want to do—'unfair.' . . . One state retiree, 49 years old, paid, over the course of his entire career, a total of $124,000 towards his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments over his life, and nearly $500,000 for health care benefits—a total of $3.8 million on a $120,000 investment. Is that fair?"

State budget cuts only shift the pain to our towns. "[L]et's remember this, in 2009 the private sector in New Jersey lost 121,000 jobs. In 2009, municipalities and school boards added 11,300 jobs. Now that's just outrageous. And they're going to have to start to lay some people off, not continue to hire at the pace they hired in 2009 in the middle of a recession."

Isn't your talk of 'stopping the tax madness' just another 'Read My Lips' promise? "[Mine is] much better than 'Read my lips.' I'm sorry, it's just much better. Much stronger. . . . It's gonna be how my governorship will rise or fall. I'm not signing a tax increase."

In some ways, Mr. Christie can speak bluntly precisely because the state is such a mess. Indeed, that's one reason he won election in a blue state. The challenge remains daunting: No governor has yet succeeded in turning around a state as overtaxed and overspent as New Jersey. Indiana under Gov. Mitch Daniels probably comes closest, but Indiana was not nearly as bad as New Jersey.

If he is to survive the headlines about budget cuts and pull New Jersey back to prosperity, Mr. Christie knows he needs to put the hard choices before the state's citizens, and to speak to them as adults. He's doing just that. One reporter for the Newark Star-Ledger summed up Mr. Christie's rhetoric this way: "[F]inally we have a governor who is as teed off as the rest of us at how government spending and taxes have skyrocketed over the past decade."

It's far too early to declare Mr. Christie's Jersey-style Reaganism a success. But it's the one reality show truly worth watching.

Write to [e-mail]
------------------------------------------------------------------------

CNBC interview with Christie this AM:

www.cnbc.com/id/15840232?video=1467606589&play=1

[macrockett]

online.wsj.com/article/SB10001424052702304222504575173801155100646.html?mod=WSJ_Opinion_LEFTTopOpinion#printMode

APRIL 13, 2010

It's Time to Restrict Private Equity
Too often employees are the losers in leveraged buyouts.

By RICHARD L. TRUMKA

The Simmons Bedding Company, manufacturer of the famous Beautyrest mattresses, has finally been flipped one time too many. This story carries an important message for financial reform, now under consideration in the U.S. Senate.

Sold seven times in 20 years from one private investment firm to another, last fall the 133-year-old company filed for bankruptcy and laid off 1,000 workers. Simmons is a textbook example of a dangerous trend in which brand-name companies are turned into gambling chips by leveraged buyout ("private equity") dealmakers. And it's a prime example of why the Senate must directly challenge private equity's wealth extraction business model in order to rein in the casino economy.

Private-equity funds are leveraged private pools of capital that benefit from extensive tax subsidies. They are unregulated and shrouded in secrecy, and they extract big profits while the companies, their employees and many of their investors lose. In the Simmons case, the leveraged buyout firm that brought the company to bankruptcy walked away with $77 million in profits on top of hundreds of millions of dollars in special dividends. The Wall Street investment banks that arranged the deals pulled down big money, too. Meanwhile, a thousand employees lost their livelihoods, the company's bondholders lost more than $500 million, and a value-creating American company was in effect pawned for cash.

Simmons is hardly the exception. Linens 'n Things, KB Toys and Mervyns are all brand-name companies that went bankrupt because they could not keep up with the debt burdens that resulted from leveraged buyouts. In fact, of the 163 nonfinancial companies that went bankrupt last year, nearly half were backed by leveraged buyout firms.

Under current law, private investment vehicles—hedge funds, leveraged-buyout and venture-capital funds—function with virtually no oversight. Despite managing trillions of dollars and employing millions of Americans, they operate as a shadow financial system—in secret, free to take on outsized risks, and make huge bets with no outside supervision. Approximately $1 trillion in leveraged buyout loans were issued in 2006 and 2007, the height of the leveraged buyout bubble. In December 2008, the Boston Consulting Group predicted that almost half of companies owned by leveraged buyout firms are likely to default, resulting in massive job losses and further pressure on our fragile economy.

Reform is essential, and transparency would be a good start. The Securities and Exchange Commission must have full access to information about private investment funds and the authority to require them to provide disclosures to investors, prospective investors, trading partners and creditors.

Comprehensive regulation of the shadow financial system is equally necessary to prevent the buildup of systemic risk like that which brought our economy to the brink of financial ruin.

The House of Representatives took some positive steps toward regulating the private-equity industry late last year, but didn't go far enough. Similarly, the Senate bill put forth by Banking Committee Chairman Chris Dodd falls far short on the regulation of private investment funds.

Meanwhile, more jobs are being lost and workers hurt. When their plans to squeeze employees to gain higher profits fail, private-equity firms often walk away.

In February, Connecticut-based private-equity firm Brynwood Partners shut down the 77-year-old Stella D'Oro bakery in Bronx, New York, after a labor ruling sided with workers protesting a massive pay cut. In the latest example, the private-equity firm that owns clothier Hugo Boss in suburban Cleveland tried to slash wages. When the workers resisted, the firm announced plans to move operations—including its 375 jobs—overseas.

It's time to bring the shadow financial system into the light of day. It's time for Congress to stand up to these firms that gamble with working people's retirement money and insist that they provide the public with full disclosure and essential oversight.

Mr. Trumka is president of the 11.5 million member AFL-CIO.
_________________________________________________
There is a great deal of irony here. See the following article from August 20, 2009
_________________________________________________

Aug. 20 (Bloomberg) -- U.S. pension funds contributed to the record $1.2 trillion that private-equity firms raised this decade. Three of the biggest investors, state pensions in California, Oregon and Washington, plunked down at least $53.8 billion. So far, they only have dwindling paper profits and a lot less cash to show the millions of policemen, teachers and other civil servants in their retirement plans.

The California Public Employees’ Retirement System, the Washington State Investment Board and the Oregon Public Employees’ Retirement Fund -- among the few pension managers to disclose details of their investments -- had recouped just $22.1 billion in cash by the end of 2008 from buyout funds started since 2000, according to data compiled by Bloomberg. That amounts to a shortfall of 59 percent. In total, they haven’t reaped a paper gain from funds formed in the past seven years.

The wisdom of those investment decisions hangs on the remaining value private-equity firms assign to companies they snapped up in 2006 and 2007, during the peak of the buyout boom. For the California, Oregon and Washington plans, that figure totaled $15.8 billion at the beginning of the year.

While some investors say they’re confident the private- equity industry’s traditional practice of taking over companies will pay off, others have been shaken by a credit contraction that froze deal-making, eroded the value of the assets on private-equity firms’ books and prevented them from cashing out in public share sales.

‘Can’t Eat IRRs’

Now pension managers on both ends of the spectrum are looking skeptically at the so-called internal rate of return buyout firms calculate to gauge their results.

“I work for over 400,000 employees, and they can’t eat IRRs,” said Gary Bruebaker, the chief investment officer of the Washington State Investment Board. “At the end of the day, I care about how much do I give you, and how much money do I get back.”

Private-equity firms pool money from so-called limited partners -- pension funds, endowments, wealthy families and sovereign wealth funds -- and use that cash, along with money borrowed from banks, for corporate takeovers. The buyout managers aim to boost profits through cost cuts, acquisitions or added lines of business, then reap a return for themselves and their investors in a public stock offering or a sale to another buyer.

The buyout firms also levy fees, typically 2 percent of the assets they oversee annually and 20 percent of profits from successful investments. That’s helped make the titans of the industry into billionaires.

Avago IPO

Stephen Schwarzman, the 62-year-old co-founder and chairman of Blackstone Group LP, the biggest private-equity firm, ranked 261st on the 2009 Forbes list of the world’s richest people, with an estimated net worth of $2.5 billion. KKR & Co. LP co- founder Henry Kravis, 65, topped that with $3 billion, while Carlyle Group co-founder David Rubenstein, 60, weighed in at $1.4 billion.

Buyout managers, and some pension funds, downplay their cash returns so far this decade and counsel patience, saying that investments often look worse in the years immediately after they’re made. Blackstone’s Schwarzman told backers on an Aug. 6 conference call he expected his New York-based firm to take some of its companies public in 2010. KKR, also in New York, sold shares in Avago Technologies Ltd. through an IPO earlier this month, raising $648 million.

Harvard’s Sales

Pension funds also say that over time, private-equity returns compare favorably to the Standard & Poor’s 500 Index, which declined 28 percent from the beginning of 2000 through the end of last year. Bruebaker says his Washington fund had an 8.2 percent average annual gain from its buyout investments in the past 10 years, compared with a 3.9 percent drop in the S&P.

While investors can sell publicly traded stocks as needed, buyout funds keep money tied up for years, said Steven Kaplan, a professor at the University of Chicago’s Booth School of Business.

“With private equity, you’re taking on a liquidity risk, which people did miscalculate,” said Kaplan, who has studied takeover returns.

University endowments and philanthropic foundations hurt by the worst economic crisis since the Great Depression have struggled to sell their stakes in private-equity funds to raise cash. Investors including Harvard University, in Cambridge, Massachusetts, planned to raise more than $100 billion through so-called secondary sales of limited partnership interests, some at discounts of at least 50 percent, people familiar with the effort said last year.

‘Money in the Ground’

Rubenstein, of Washington-based Carlyle, acknowledges that the buyout industry faces tough questions.

“People have a lot of money in the ground and today it’s probably not worth what they had intended, but a turn-around in valuations is now beginning,” Rubenstein said in an interview. “You’ll probably see general partners and limited partners focused more on multiples of equity rather than just IRRs.”

Representatives of Washington, Calpers and Oregon all said they remain committed to private equity, and pointed to the long-term nature of the investments.

“The market is in a trough,” Oregon spokesman James Sinks said. “The picture would’ve looked different at the end of 2007.” Calpers spokesman Clark McKinley noted that Calpers in June raised its target commitment to private equity to 14 percent of assets from 10 percent.

“That’s an affirmation of our confidence in the asset class,” he said.

Schwarzman and Kravis declined to comment for this article.

‘A Snapshot’

“We are hopefully toward the end of the absolute worst recession of our lifetimes,” said Washington’s Bruebaker. “If you take a snapshot right now, things might not look good. These are 10- to 12-year investments and we believe they’ll be much better than what we see today.”

Bruebaker’s fund and the Oregon Public Employees’ Retirement Fund warmed to buyouts during the 1980s, and Calpers joined in 1990. Today, among U.S. pension plans, Calpers is the largest investor in private-equity funds, while Washington and Oregon are the third- and fourth-biggest, respectively, according to San Francisco-based consulting firm Probitas Partners Inc.

The three state funds, which serve more than 2 million people, collectively more than doubled their buyout commitments in 2005, to $8 billion from $3.1 billion. They ramped up even more the next year, when commitments climbed to $18.7 billion, the data show.

Chrysler, TXU

All told, private-equity firms raked in $1.2 trillion from 2000 through 2008, according to London-based researcher Preqin Ltd. The influx of money, coupled with cheap debt-funding from Wall Street banks eager to collect fees, fueled record-setting takeovers. Nine of the 10 biggest deals were announced from 2005 to mid-2007 as buyout firms acquired the likes of hotel operator Hilton Hotels Corp. and power producer TXU Corp.

The buyouts ground to a halt after the subprime-mortgage market collapsed in late-2007, extinguishing investor demand for high-yield, high-risk debt. The dollar value of deals has dwindled to $42.2 billion so far this year from $212.2 billion in 2008, according to data compiled by Bloomberg.

Private-equity firms unable to cash out of investments have spent much of the credit crisis reworking the capital structures of their debt-laden companies. Chrysler LLC, the carmaker that Cerberus Capital Management LP bought in 2007 for $7.4 billion, and doormaker Masonite International Corp., which KKR purchased in 2005 for C$3 billion ($2.4 billion), filed for bankruptcy this year.

Marked-to-Market

At the same time, changes in accounting rules have cast a spotlight on the current value of private-equity investments.

The Financial Accounting Standards Board’s so-called Statement No. 157, which went into effect at the end of 2007, requires investors, including private-equity managers, to gauge the fair value of holdings that aren’t traded. While most buyout firms typically carried their investments at cost, FAS 157 mandates quarterly assessments of current value.

Such marking-to-market means private-equity funds must tell investors how much their stakes are worth at that moment, even if the managers are planning to hang onto them for years.

“Getting carried away by looking at mark-to-market in my personal view can lead you to an incorrect conclusion for the longer term,” Blackstone’s Schwarzman said on the Aug. 6 conference call.

Blackstone spokesman Peter Rose says it’s premature to judge recent investments, such as those made by the $21.7 billion fund the firm set up in 2007.

‘Profound Losses’

Schwarzman, who created Blackstone in 1985 with Peter G. Peterson, has said their unspent capital -- about $29 billion -- will enable them to buy companies at depressed prices and generate profits as the global economy recovers.

Others see signs that the private-equity business is undergoing a transformation. Carlyle’s Rubenstein predicted that deals in the current environment will be smaller and less reliant on debt. Individual funds already being marketed to investors won’t top $10 billion, and subsequent efforts won’t exceed $5 billion to $6 billion, he said.

“These are major structural changes taking place,” said Dayton Carr, founder of VCFA Group, a New York-based firm that buys interests in private-equity and venture-capital funds. “The basic economy has had huge issues. A lot of the funds will be smaller.”

The upheaval is reflected in the attitudes of pension-fund investors, who are watching and waiting for cash to come in the door.

“When managers are forced to put a hard value on their holdings, we’re seeing some profound losses,” said William Atwood, the executive director of the Illinois State Board of Investment, an $9 billion pension fund. “The rubber hits the road when cash is returned.”

To contact the reporters on this story: Jason Kelly in New York at [e-mail]; Jonathan Keehner in New York at [e-mail].
Last Updated: August 20, 2009 00:01 EDT

[macrockett]

How do political parties stay in power?

Among other things they buy votes. One of the latest is Obama's executive order, that took effect yesterday, allows agencies of the federal government discretion over requiring collective bargaining contracts for construction contracts. Essentially, requiring that the contractor be a union shop.

www.whitehouse.gov/the_press_office/executiveorderuseofprojectlaboragreementsforfederalconstructionprojects/

APRIL 14, 2010

Crony Contracts
Want federal business? Better be a union shop.
There's almost a direct correlation these days between the Obama Administration's complaints about "special interests" and its own fealty to such interests. Consider its latest decree that federal contractors must be union shops.

The federal rule, which went live yesterday, implements an executive order President Obama signed within weeks of taking office. It encourages federal agencies to require "project labor agreements" for all construction projects larger than $25 million. This means that only contractors that agree to union representation are eligible for work financed by the U.S. taxpayer.

Only 15% of the nation's construction workers are unionized, so from now on the other 85% will have to forgo federal work for having exercised their right to not join a union. This is a raw display of political favoritism, and at the expense of an industry experiencing 27% unemployment. "This is nothing but a sop to the White House's big donors," says Brett McMahon, vice president at Miller & Long Concrete Construction, a nonunion contractor. "We've seen this so many times now, and how many times does it have the union label? Every time."

It's also a rotten deal for taxpayers. White House economist Jared Bernstein blogged that these agreements "significantly enhance the economy and efficiency of Federal Construction projects." In fact, the carve-outs put an end to open, competitive federal bidding, which means higher project costs. They also mean taxpayers must finance the benefits and work rules of union members.

Mr. Bernstein could check all this with the Department of Veterans Affairs, which last year commissioned an independent study showing the Obama project labor agreements would likely raise the VA's construction costs for hospitals by as much as 9% in three of five markets—Denver, New Orleans and Orlando. In two others, New York and San Francisco, the study predicted a mixture of small cost increases and small cost savings.

The study reported "strong evidence to suggest that the result of a PLA [project labor agreement] that dictates work rules, double benefits, team structure and activities on non-union type contractors will be that production costs will increase—given these union-related requirements." It also rebutted a favorite liberal argument that such agreements lead to less labor strife, noting that there are "many examples for projects where there have been strikes but also no strikes—unrelated to whether or not a PLA is in place."

The Veterans study mirrors academic work showing that project labor agreements raise the costs of construction by 10% to 20%. The Beacon Hill Institute at Boston's Suffolk University in 2006 investigated the costs of building 126 Boston-area schools. It found project labor agreements raised winning bids for school construction projects by 12% and actual construction costs by 14%.

Boston's Big Dig, Seattle's Safeco field, Los Angeles's Eastside Reservoir project, the San Francisco airport, Detroit's Comerica Park—all were built under PLAs marked by embarrassing cost overruns. We'd list more, but newsprint is expensive.

The White House went out of its way to note that the Supreme Court has upheld such agreements in the past, suggesting it has a guilty conscience. In fact, the High Court has never ruled on the legality of these agreements under federal competitive bidding laws. Industry groups are now threatening legal action to defend the rights of workers who will be denied employment for the crime of not sporting Obama-Biden bumper stickers. It's a fight worth having.
--------------------------------------------------------------------------------
In fairness to the unions, another example: Both parties are guilty of allowing the carried interest rules.

For an explanation of carried interest, see : www.investopedia.com/terms/c/carriedinterest.asp

But for the special carve out in the law for fat cats, this practice, used by hedge funds and others, would be taxed at ordinary income rates.

In the mean time, regular tax payers, like most of us, pay the bill.

[macrockett]

online.wsj.com/article/SB10001424052702303695604575182194114434812.html#printMode

APRIL 14, 2010

Andy's Labors
'A little more unemployment but a lot more equality.'

Andy Stern has picked a good time to head for the exits. The president of the Service Employees International Union—otherwise known as the most powerful labor chief in America—is expected to step down later this week, two years before the end of his term, on a high note for his union and the "progressive" agenda. The job is going to be a lot less fun from here on out.

In future histories of America's metamorphosis into a European-style entitlement state, Mr. Stern will deserve prominent mention. As union rolls were falling, Mr. Stern used his 14 years atop the SEIU to slow the decline, nearly doubling the size of his outfit—to 1.8 million members.

But more than that, Mr. Stern showed how a diminished union movement could use its coffers to turn the Democratic Party into a wholly owned subsidiary (see above). During the 2008 electoral cycle, his union championed Barack Obama early and devoted at least $85 million to get him into the White House and to elect huge Democratic majorities in both houses of Congress. No other group spent more on either party than the SEIU.

Mr. Stern got his money's worth. In a Weekend Interview in these pages a month after the election, he listed his top priorities, in this order: A "massive" stimulus for the economy and the car industry, universal health care and a "card check" bill to ease unionization. The next Administration needs to find ways "to share the wealth differently," he said, through higher taxes and wider unionization.

In short, turn America into France. "Western Europe, as much as we used to make fun of it, has made different trade-offs which may have ended with a little more unemployment but a lot more equality," he said.

On all those policy priorities, save for "card check," Big Labor got its way. Having tilted the Democratic consensus on health reform leftward, Mr. Stern came through for the President by bringing Wal-Mart CEO Mike Duke on board behind ObamaCare. First, he spent years making Wal-Mart a Democratic piñata, then he promised relief if the company would do what he wanted.

Two of his closest aides have also taken critical Administration jobs: Patrick Gaspard as the political director at the White House, and Craig Becker, who needed a recess appointment to get a seat on the National Labor Relations Board.

Now clouds are gathering. The SEIU is $85 million in debt and laying off workers, promising to crimp Mr. Stern's lavish political spending. Various fights that Mr. Stern picked with other unions and his own locals are sapping resources and time. Government investigators are poring over allegations of corruption involving SEIU officials, while its connections (and $62,828 in donations last year) to the disgraced activist group Acorn have come under scrutiny. The Justice Department is looking into Mr. Stern's political activities to see whether he should have registered as a lobbyist. Democrats are also headed for losses in midterm elections.

A good time to leave, in other words, and after 37 years at the SEIU Mr. Stern can claim a full pension and lifetime health benefits. But at 59, he's not the retiring type. President Obama named him in February to the deficit-reduction commission, on which he can stump for a value-added tax, leading perhaps to an Administration job. He's certainly earned it.

See ya Andy...

[macrockett]

online.wsj.com/article/SB10001424052702303348504575184120546772244.html?KEYWORDS=christie#printMode

online.wsj.com/video/jer-nj-governor-takes-on-teachers-union/C067B957-C0BF-45CB-9AF5-829A6ACB50BA.html?KEYWORDS=christie (video with WSJ)

APRIL 17, 2010

New Jersey's 'Failed Experiment'
The new governor is on a mission to make his state competitive again in attracting people and capital.

By JAMES FREEMAN

"I said all during the campaign last year that I was going to govern as if I was a one-termer," explains New Jersey Governor Chris Christie on a visit this week to the Journal's editorial board. "And everybody felt that it was just stuff you say during a campaign to sound good. I think after the first 12 weeks, given the stuff I've done, they figure: 'He's just crazy enough to do it.'"

Call it crazy, or just call it sensible: Mr. Christie is on a mission to make New Jersey competitive once again in the contest to attract people and capital. During last fall's campaign, while his opponent obliquely criticized Mr. Christie's size, some Republicans worried that their candidate was squishy—that he wasn't serious about cutting spending and reining in taxes. Turns out they were wrong.

Listen to Mr. Christie's take on the state of his state: "We are, I think, the failed experiment in America—the best example of a failed experiment in America—on taxes and bigger government. Over the last eight years, New Jersey increased taxes and fees 115 times." New Jersey's residents now suffer under the nation's highest tax burden. Yet the tax hikes haven't come close to matching increases in spending. Mr. Christie recently introduced a $29.3 billion state budget to eliminate a projected $11 billion deficit for fiscal year 2011.

California and New York have attracted headlines for their budget woes. Yet, as Mr. Christie points out, "Their problems are much smaller than ours as a percentage. [Gov.] David Paterson's talking about an $8.2 billion deficit in New York—I only wish."

After taking office in January, Mr. Christie declared an official state of emergency. This allowed him to freeze $2.2 billion in spending that had already been authorized. Now he needs a Democratic legislature to turn his freeze into an actual cut and to enact the deeper reductions contained in his 2011 budget.

It might well happen. Many Democrats recognize the state's deep-seated fiscal woes. Mr. Christie has already signed into law a bipartisan plan that begins to reform the state's generous benefit system for government workers. Facing unfunded liabilities of $90 billion in pension and medical plans, Mr. Christie worked with lawmakers to change retirement benefits for new workers and to require all new state employees to pay 1.5% of their medical insurance costs. Until now they were paying nothing.

He wants to go further. "We need to move forward to try to make some changes in the pension system for current employees," he says. "There's all kinds of problems in doing that, some legal. . . . You can't take away vested benefits, but the argument of whether increases going forward are actually vested or not is an interesting legal issue that we're going to attempt to challenge. . . ." He adds that the current retirement age for state employees, 62, "needs to be moved up further."

As you can imagine, the Christie agenda is not wildly popular among presidents of government-employee unions. To put it more precisely, Mr. Christie is now in a political street fight with the head of the New Jersey Education Association, the teachers union that spent millions last year to defeat him.

The Journal Editorial Report discusses New Jersey Gov. Chris Christie taking on the state's most powerful union, the teachers, asking them to take a pay freeze that they refuse to accept. Video courtesy of Fox News.

NJEA President Barbara Keshishian visited his office this week to apologize for a recent email sent to thousands of teachers by a union official that included a mock prayer for the governor's death. According to Mr. Christie, the conversation went something like this: He accepted her apology immediately but asked if the email sender would be fired for "doing something that monumentally stupid." When the union chief questioned why the man should be fired, Mr. Christie promptly ended the meeting.

"I'm a product of public schools in New Jersey," Mr. Christie explains, "and I have great admiration for people who commit their lives to teaching, but this isn't about them. This is about a union president who makes $265,000 a year, and her executive director who makes $550,000 a year. This is about a union that has been used to getting its way every time. And they have intimidated governors for the last 30 years."

While the state lost 121,000 jobs last year, education jobs in local school districts soared by more than 11,000. Over the past eight years, according to Mr. Christie, K-12 student enrollment has increased 3% while education jobs have risen by more than 16%. The governor believes cuts in aid to local schools in his budget could be entirely offset if existing teachers would forgo scheduled raises and agree to pay 1.5% of their medical insurance bill for one year, just as new state employees will be required to do every year.

A new Rasmussen poll found that 65% of New Jersey voters agree with him about a one-year pay freeze for teachers. But the teachers union wants to close the budget gap by raising the income tax rate on individuals and small businesses making over $400,000 per year to 10.75% from its current 8.97%.

Mr. Christie doesn't think that state and local budget problems can be fixed without tackling education spending. That's because the state has a hybrid system in which local property taxes fund schools and some of the money is redistributed by the state from affluent areas to poorer communities. According to Mr. Christie, New Jersey taxpayers are spending $22,000 per student in the Newark school system, yet less than a third of these students graduate, proving that more money isn't the answer to better performance. He favors more student choice, which is why he's ramping up approvals for charter schools.

On another front, Mr. Christie is seeking a ballot measure this fall that would amend the state's constitution to limit increases in local property taxes to 2.5% annually. To put this question before voters he needs to win over three-fifths of the state legislature and expects legislators to vote in May or June.

Will New Jersey send a message across the country that state government can be turned around without federal bailouts? "We're such a long way away from a message," Mr. Christie says, "because, you know, the message might be, 'Look at that poor SOB. There he is lying dead on State Street in Trenton. It's over. OK, everybody back to our corners and let's go back to the normal game.' . . . I hope, that if we're successful, [the message] can be . . . that you can do this."

Meanwhile, Mr. Christie has started spreading the news that the Garden State aims to compete once again for businesses, jobs and residents. He notes that for years the state offered a better tax environment than New York, which encouraged city dwellers to discover New Jersey's beautiful suburbs. Mr. Christie says that he recently bumped into former New York Gov. George Pataki, who noted that he'd been shocked to learn that New Jersey now has an even higher burden than its tax-crazy neighbor. "See what happens when you're not looking?" he said to Mr. Pataki. "Snuck right up on ya."

The governor aims to move tax rates back to the glory days before 2004, when politicians lifted the top income tax rate to its current level of almost 9% from roughly 6%. Piled on top of the country's highest property taxes, as well as sales and business income taxes, the increase brought the state to a tipping point where the affluent started to flee in droves. A Boston College study recently noted the outflow of wealthy people from the state in the period 2004-2008. The state has lately been in a vicious spiral of new taxes and fees to make up for the lost revenue, which in turn causes more high-income residents to leave, further reducing tax revenues.

With a 9.8% unemployment rate (significantly above neighboring New York), Mr. Christie has plenty of data to make his case that the state's government has put too much of a burden on the private economy. He also is heartened by polls showing public frustration with the cost of the state's lavish programs. "The ones who pay are going to stand up and say, 'Enough already, I can't do it!'"

He needs them to stand up now and support him. While voters seem ready for a new approach to governance, the new governor's personal popularity has suffered a bit amid the acrimony. Mr. Christie says that the teachers union has spent $1.8 million in the last month on media advertising to defeat his budget plan. "That's just the beginning. We're in April. This budget isn't going to pass until June 30."

Still, allowing himself a bit of optimism, he envisions the impact if he succeeds. "What I hope it will do in the end is first and foremost fix New Jersey, and end this myth that you can't take these people on," he says. "I just hope it shows people who have similar ideas to mine that they can do it. You just have to stand up and grit your teeth and know your poll numbers are going to go down—and mine have—but you gotta grit it out because the alternative is unacceptable." He also strongly believes that voters elected him specifically to fight this fight. "They're fed up. They've had enough. In normal circumstances I wouldn't win," he says.

While debates over taxes and spending remain bitter, Mr. Christie has been pleased with an emerging consensus to address the state's regulatory morass. He is now working on a bipartisan bill with Democrats in the state Senate to reduce red tape in Trenton. "We have Democrats who are very interested in wanting to lower regulation because they know . . . it's a no-cost way of trying to spur business growth," he says.

He's tasked his lieutenant governor, Kim Guadagno, with reviewing 800 pages of regulations from the outgoing administration of Democratic Gov. Jon Corzine, regulations Mr. Christie froze upon taking office. On Monday, Ms. Guadagno will issue a report with recommendations on whether to let them go forward. She has already held 31 public meetings with business and government officials to discuss how to improve the state's regulatory climate. "You're not going to have to spend nearly as much money to start your business in New Jersey," says the governor.

And if he is successful in the budget battle of Trenton, the state's residents won't have to spend nearly as much to live there.

Mr. Freeman is assistant editor of the Journal's editorial page.

[macrockett]

online.wsj.com/article/SB10001424052702303491304575188202349173436.html?mod=WSJ_Opinion_MIDDLESecond#printMode

APRIL 16, 2010, 2:22 P.M. ET

Crist Agonistes
Charlie Crist's decision to cave to teachers unions suggests he may run as an independent.

By KIM STRASSEL

Florida Gov. Charlie Crist, flailing in his Senate primary against Marco Rubio, yesterday appeared to lay the groundwork for an independent run. His veto of a sweeping conservative education reform was a public poke in the eye to the Republican Party he claims to want to represent this fall, and is already losing him his last GOP support.

Crist campaign chairman, former Sen. Connie Mack, was so bitter over Mr. Crist's veto of a bill that would have made it easier to fire bad teachers, he quit the campaign. In a terse note, he informed Mr. Crist that his veto was "unsupportable and wrong," noting that it "undermines our education system in Florida and the principles for which I have always stood." The resignation loses Mr. Crist one his most respected backers.

Mr. Crist's decision to cave to teachers unions also earned him a stinging rebuke from former Gov. Jeb Bush, who supported the measure. "By taking this action, Gov. Crist has jeopardized the ability of Florida to build on the progress of the last decade," he said in a statement. Mr. Bush, who had so far kindly refrained from taking sides in the primary, may well now be moved to come out in favor of Mr. Rubio.

The question is whether Mr. Crist cares. Mr. Rubio is now beating him by double digits in the polls for the GOP primary and has raised three times as much money as Mr. Crist in the first quarter. A recent Quinnipiac poll suggested Mr. Crist had a better shot running as an independent in the general election against Mr. Rubio and Democrat Kendrick Meeks. Many therefore viewed yesterday's veto as little more than an opportunistic way for Mr. Crist to break with his party, with an eye to an outside run.

Less certain is whether that veto actually helps him as an independent. The governor's office made a big deal out of the number of comments that had poured in, and claimed the vast majority were opposed to the bill. Then again, the teachers unions had mobilized most of that response. The Florida electorate as a whole has been generally supportive of reform, one reason Mr. Bush was a popular governor. The perception that Mr. Crist's veto was nothing but political maneuvering, combined with a possible party switch, can't sit well with an electorate looking for strong leadership. We may be watching a political career go down in flames.

To read more stories like this one, please subscribe to Political Diary.

[macrockett]

An i and an e make a big difference in politics

[macrockett]

Reality finally hits school districts.

www.msnbc.msn.com/id/3032619/ School Districts Predict Drastic Teacher Cuts

www.msnbc.msn.com/id/3032619/#36696714 US Education Secretary: 300K teachers face possible layoffs

[macrockett]

online.wsj.com/article/SB10001424052748704133804575198141369372302.html#printMode
APRIL 22, 2010

New Jersey Rebellion
A school budget revolt at the polls.

School board elections in New Jersey are normally low-turnout affairs where voters accede to higher education spending. But Tuesday's election results bought a populist revolt that could be a sign of the backlash to come in California, New York and other states where lawmakers are unwilling to change their profligate ways.

To address New Jersey's $11 billion budget deficit, Republican Governor Chris Christie wants to reduce state aid to local school districts, and he urged voters to reject local school budgets in the vast majority of districts where teachers have not agreed to a one-year pay freeze. Predictably, he's earned the wrath of the New Jersey Education Association and its political allies. But New Jersey voters signaled their support for the Governor by defeating 315 of 537, or 59%, of budgets on the ballot this week.

In a typical year, more than 70% of school budgets are approved; the last time voters rejected a majority was 1976. As remarkable was turnout, which was way up Tuesday, rivaling Presidential elections in some counties. Overall, 24% of registered voters turned out, up from 13.4% last year. According to New Jersey School Boards Association data, turnout hadn't topped 18.6% in 27 years.

Garden State residents pay the highest property taxes in the country, and they are finally saying no to getting soaked. New Jersey is a mainly suburban state, so the rebellion is especially significant as a warning to Democrats, who had come to believe that they have a lock on wealthier northern suburbs because of cultural issues and environmentalism. Suburban voters are fed up with the spending and taxes, even for the sacrosanct subject of education.

The election results are obviously a big setback for the Democratic Party-government union alliance that has ruled Trenton for the past decade. So far, Governor Christie is winning the spending debate. The lesson for other governors is that opposition from public-employee unions is not insurmountable if you can articulate to voters what's at stake.

[macrockett]

If DiVito is correct in his letter to the Tribune, www.illinois.gov/publicincludes/statehome/gov/documents/DiVito%20Letter.pdf , that pension benefits cannot be changed prospectively, I suspect you will see many more layoffs in the ranks of teachers. In addition, intransigence in this area will expedite finding alternative ways to educate our children. Be it thought voucher programs, non union charter schools or using more interactive software v teachers.

As LA Mayor Antonio Villaraigosa recently stated in a WSJ article, "I didn't campaign to reduce the size of our work force and cut services to libraries and parks," Mr. Villaraigosa said. "But the business is not working. We can't sustain the size of this work force at these cost levels."

[macrockett]

APRIL 26, 2010

Unions, States Clash in Race to Top
By NEIL KING JR. And STEPHANIE BANCHERO

The Obama administration's signature education initiative has incited tense showdowns in states across the country as unions and state officials feud over strategies to compete for $3.4 billion in federal funding.

The skirmishes come as states jockey for cash under the administration's Race to the Top program, which seeks to reward states that are pushing to overhaul their education systems.

Applications for the second round are due by June 1, with winners to be chosen in September. Of the 40 states that submitted applications in the first round, only 16 were picked as finalists.

U.S. Education Secretary Arne Duncan ramped up pressure on the unions last month when he cited the advantage of union cooperation in picking just two states—Delaware and Tennessee—as winners in the competition's first round. Those states will share $600 million.

Since the first winners were picked, spats have erupted from Florida to Ohio, Indiana, Minnesota and Colorado over demands that unions agree to proposals on merit pay and teacher evaluation to strengthen the state's chances of winning federal money.

Mr. Duncan said in an interview that he welcomed the friction between union and state officials but warned against states weakening their overhaul plans simply to win buy-ins from unions. "Watered-down proposals with lots of consensus won't win," he said. "And proposals that drive real reform will win."

The Race to the Top program, a centerpiece of Mr. Duncan's push to promote innovation, aims to reward states that are promoting charter schools, tying teacher pay to student performance and implementing systems to track students' progress.

In some states, the atmosphere has grown toxic. Indiana's state school superintendent, Tony Bennett, blamed union obstruction on Thursday for his decision drop out of the federal competition.

The two sides had been snipping at each other for weeks. Earlier this month, Mr. Bennett sent a letter to union leaders, insisting they agree to tie teacher tenure decisions to student test scores. Labor leaders refused, saying they wouldn't support an overhaul they didn't help craft. Mr. Bennett challenged the union leaders to a public summit, and when the largest teacher's union declined, he pulled the plug on the application.

Union leaders said Mr. Bennett was making them a scapegoat for unpopular changes he hasn't been able to implement. "He's been disingenuous and demeaning," said Nate Schnellenberger, president of the Indiana State Teachers Association. "We are willing to discuss meaningful reforms, but we won't participate in a circus."

A similar tussle has broken out in Minnesota, where Republican Gov. Tim Pawlenty has criticized the state teachers' union as obstructionist and challenged the legislature to pass an overhaul package that would change how teachers are licensed and given tenure.

Minnesota's original Race to the Top application was rejected by the state teachers' union, Education Minnesota, and endorsed by only a few local teacher unions. "Our governor takes every chance he can to take shots at the teachers and the teachers unions," said Tom Dooher, president of Education Minnesota. "So there is very low trust in what he is doing."

Instead of overhauling teacher tenure and pay, the Minnesota union wants the state's application to focus heavily on ways to address the state's achievement gap, primarily by increasing programs and teaching hours at the state's worst-performing schools.

"The job of the teachers' union is to protect the union members, but the main role they are playing now is as the primary obstacle to passing any sort of reform," said Brian McClung, Mr. Pawlenty's deputy chief of staff.

In Colorado, the schism is more surprising because the teachers' unions and education leaders worked in tandem to draft the first Race to the Top application. The goodwill broke down this month when the state schools chief, Dwight Jones, wrote an op-ed in the Denver Post arguing the state couldn't win the competition without passage of a controversial bill to overhaul teacher tenure.

The head of the Colorado Education Association, the state teachers' union, which opposes the legislation, charged that Mr. Jones threw teachers "under the bus" and withdrew support for the federal application.

Mr. Jones acknowledged that he took a calculated risk by penning the op-ed. Support from statewide union officials is important to winning, he said, but it's not the only way to prevail. "Our being successful will be determined far more by the actions this state takes to improve student achievement," said Mr. Jones, who still holds out hope union officials will change their minds.

Mr. Jones's sentiments are borne out by an analysis of Race to the Top scoring, which awarded more points for bold teacher reforms than for union support. Most of the 16 state finalists lost far more points on reform efforts than on a lack of union backing. Florida and Illinois had among the weakest union support but still placed fourth and fifth.

At least one state has resorted to offering cash in exchange for signatures. Ohio education officials said recently they would guarantee a minimum level of funding to districts whose local officials and unions support the application. Connecticut education leaders are considering a similar guarantee.

Write to Neil King Jr. at [e-mail]