Teacher Tenure/Unions/Government/Pensions

[macrockett]

He's back, now with approval ratings of 60%. Yes, Chris Christie has 60% approval at the same time he is reducing spending. Why? Personally I think it is his honesty, a rare character trait in government (just my opinion of course). Others might say the citizens of the New Jersey are finally figuring out where all those $$ being spent came from....their pockets.

www.cnbc.com/id/15840232?video=1596337304&play=1



SEPTEMBER 21, 2010 Wall Street Journal

The Christie Example
New Jersey government workers should have 401(k) plans instead of pensions.

New Jersey Governor Chris Christie has become the national pacesetter in state fiscal reform, and he's once again lighting up Youtube with his defense of taxpayers against the appetites of government-employee unions. The plan he announced last week to reform public pensions is crucial to saving the Garden State from economic calamity, but it falls short on one crucial part of long-term reform.

New Jersey has officially run up unfunded liabilities of $46 billion in its pension plan and $67 billion in its medical plan, though some estimates put the shortfalls much higher. Absent reform, the Republican Governor says the unfunded pension liabilities alone will explode to more than $180 billion over the next 30 years.

Most notably Mr. Christie's plan includes a rollback of the fraudulent 9% pension increase that triggered recent civil charges brought by the Securities and Exchange Commission. Without the money to pay for enhanced benefits, and unwilling to suggest even higher tax rates, legislators cooked the books in 2001 by pretending that the pension funds had more assets than they actually did, and therefore could cover larger payments. The fraud was repeated in various state bond offerings. Unions like to cast benefit hikes as sacred promises on the part of taxpayers. But in this case they are more accurately viewed as offenses that would draw prison terms if committed by anyone in private business.

Mr. Christie's plan would eliminate automatic cost of living adjustment (COLA) increases for both current and future retirees. And he'd raise employee contribution levels to the retirement plans and make it harder to get disability benefits, which have become a cottage industry of fraud. Other proposals include lowering the expected returns in the pension funds from 8.25% annually to a somewhat more realistic 7.5%.

When it comes to medical benefits, the Governor would provide state workers with a plan similar to what federal employees enjoy now—more options, but also more responsibility for paying the bills. State workers would pay 30% of health costs, up from an average of 8% now. Retirees wouldn't have to pay higher premiums but would accept higher co-pays.

Far from being onerous, these changes are consistent with current standards across private industry. The Christie plan would eliminate a major chunk of the state's unfunded liabilities, and for that he deserves kudos. And if he can convince today's legislators (most of them Democrats) to right the wrongs of their predecessors, he will justly earn the cheers of Garden State taxpayers.

But missing from the Christie proposal is the most important reform for the long-term: shifting government workers from pensions to 401(k)-style plans that have become the norm among private workers. This type of structural reform would prevent future politicians from simply repeating the mistakes of the past and returning to padding pensions when taxpayers are paying less attention.

Government pension systems are inherently flawed because the politicians who bestow benefits upon state workers are the same politicians who seek votes and campaign contributions from the unions representing these workers. When it's time to negotiate the benefits, the politicians and unions are often sitting on the same side of the table, facing no one representing the taxpayers.

As large pools of money controlled by politicians or their agents, pension funds are also magnets for corruption, with a history of pay-to-play scandals in various states. They allow ambitious politicians to use pension holdings in public companies not as levers to demand better returns, but as weapons to force shareholder money to serve political agendas.

Defined-contribution systems such as 401(k) plans create healthier incentives all around. Accounts are controlled by the individual workers, not pension fund bosses. Relying on the growth of their investment accounts to fund retirement, government workers have their interests aligned with those of private workers: Everyone wants a thriving economy.

Governor Christie has previously promoted the use of 401(k)-style plans for government workers, but Democrats resisted and he apparently concluded the cause is hopeless. But other states have introduced such programs in gradual fashion, say, for new hires, or perhaps offering a hybrid plan of a limited pension combined with a 401(k). By dropping the issue without a fight, Mr. Christie has given away too much even before the unions get to the table.
Printed in The Wall Street Journal, page 13

[macrockett]

www.chicagotribune.com/news/elections/ct-met-quinn-union-endorsement-20100921,0,785460.story
chicagotribune.com
Quinn defends bringing budget chief to union endorsement interview
Deal reached with AFSCME two days after group's backing

By Monique Garcia, Tribune Reporter

8:24 PM CDT, September 21, 2010
Advertisement
Click here to find out more!

Gov. Pat Quinn on Tuesday defended bringing his state budget director to a political meeting in which he sought the endorsement of the state's largest employee union, saying the top aide needed to be in the room in case any technical questions came up.

Budget director David Vaught's appearance with Quinn before leaders of the American Federation of State, County and Municipal Employees came as Vaught was in the midst of negotiating budget cuts that included discussions about whether union workers could lose their jobs.

Quinn's mixing of politics and state business drew raised eyebrows from a reform group and scorching criticism from Republican governor challenger Bill Brady.

Brady, a state senator from Bloomington, said the situation is particularly troubling because the union endorsed Quinn just two days before his administration struck a tentative agreement that would prevent union layoffs until mid-2012 — a deal Vaught helped negotiate.

"This smacks so much of pay-to-play, and it's scandalous," said Brady, who called on Quinn not to go through with the deal. "Let's let this election play out and the next governor manage the state's resources with the flexibility he needs without some contract that was put together in the timing of an endorsement."

Quinn dismissed Brady's allegations as "a lot of baloney" and said the deal he cut is about saving money by having the union cut health care costs and deferring scheduled pay raises in exchange for freezing layoffs and facility closings until June 2012.

The governor added that Vaught was on "personal time" and did not speak when he appeared before union leaders on Aug. 31, when both Quinn and Brady were interviewed as part of the union's endorsement process.

"He's the budget director. I have him come with me to many meetings for technical advice on budget questions that come up," Quinn said. "He didn't answer any questions. He didn't speak at all. … He was there to give me budget figures that I might need. That's all he did."

But Cynthia Canary, director of the Illinois Campaign for Political Reform, said Vaught's appearance "definitely blurs the line" between government and political work.

"In any governor's administration, one assumes that his Cabinet-level positions are people who are also strong personal political supporters," Canary said. "So it's not unusual to see these people also play a political role."

The controversy is the latest in which Quinn's campaign has seeped into his administration. His chief of staff resigned in August after a state inspector general found that he improperly sent three campaign e-mails while on state time.

Earlier this year, questions arose after Quinn rewrote legislation to help the Teamsters at the McCormick Place convention center after receiving a $75,000 political donation from the union.

Last year, Quinn blamed a "naive" aide for trying to sell interest groups "face time" with him in exchange for hosting $15,000 fundraising events during the spring legislative session.

Brady and Quinn made their comments after a closed-door forum before a Chicago business group.

[e-mail]

Copyright © 2010, Chicago Tribune

[macrockett]

www.chicagotribune.com/news/opinion/editorials/ct-edit-quinn-0920-20100920,0,1309516.story
chicagotribune.com
Selling out Illinois

8:25 PM CDT, September 20, 2010
Advertisement

We don't know whom voters will choose as their next governor. Whoever that is, though, could be hamstrung by a terrible deal that Gov. Pat Quinn's administration is preparing to sign with the state's largest employee union. Under the tentative agreement, Quinn would agree not to lay off any of 50,000 unionized state workers, or close any facilities where they work, until at least mid-2012. That's about one-third of the way through the next gubernatorial term.

This fiasco, first reported Monday by Greg Hinz of Crain's Chicago Business, comes barely a week after the union that would benefit, the American Federation of State, County and Municipal Employees, endorsed Quinn for governor.

Governor Quinn, you cannot sell out Illinois taxpayers by committing them to payroll expenditures they may not be able to sustain. You cannot tie the hands of a future governor with a no-layoffs mandate. And you cannot consort in any such deal, in the wake of the union's endorsement of you, without inviting voters to conclude it was for your benefit, not theirs.

The governor's office doesn't want us to characterize this deal as the outrage that it is. We're supposed to focus instead on concessions AFSCME has made or will make. An agreement sealed Sept. 13 supposedly will save the state $70 million in employee health costs. This subsequent agreement supposedly would require AFSCME to accept another $50 million in state savings. A spokeswoman for Quinn's budget director says the state hopes to raise that number to $100 million.

We'll see. But saving $120 million, or $170 million, won't justify selling out state government's ability to manage a budget some $13 billion in the red. The savings, if they materialize, would be roughly 1 percent of that deficit. Yet this deal could block the next governor from taking necessary steps to trim the state workforce or close facilities.

Quinn's Republican opponent, Bill Brady, said Monday that Quinn shouldn't agree "to anything that limits Illinois' flexibility to manage this catastrophe." Brady is correct. Governor Quinn, don't sell out the battered taxpayers of Illinois.

Copyright © 2010, Chicago Tribune

[macrockett]

www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=12999

winsome.cnchost.com/MAC/RisingAbovetheGatheringStorm.pdf (the study)

networkedreadiness.com/gitr/main/analysis/showdatatable.cfm?vno=4.37 (World Economic Forum Assessment Of U.S. in Math and Science...48th...Click on United States for details)

www.cnbc.com/id/15840232?video=1598873617&play=1 (the author of the study on CNBC... not a reassuring interview and he point the finger at the educational structure in our country and parents. The gist on the educational structure, which I agree with, is how we pay teachers, i.e., same pay no matter what you teach. Therefore, there is no incentive for a teacher to specialize in math and science v any other course material. In addition, he points out the amount of money going to administration v teachers.)

News from the National Academies

U.S. COMPETITIVE POSITION HAS FURTHER DECLINED IN PAST FIVE YEARS, REPORT SAYS;

NATION NEEDS SUSTAINED COMMITMENT TO INVESTMENT IN INNOVATION

Sept. 23, 2010 — The outlook for America's ability to compete for quality jobs in the global economy has continued to deteriorate in the last five years, and the nation needs a sustained investment in education and basic research to keep from slipping further, says a new report requested by the presidents of the National Academy of Sciences, National Academy of Engineering, and Institute of Medicine, and authored by members of the committee that wrote the influential 2005 report Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future.

What progress has been made in addressing America's competitiveness challenges came largely as the result of the America COMPETES Act and stimulus package spending advancing its provisions, but both are due to expire soon, warned authors of the new report, Rising Above the Gathering Storm, Revisited: Rapidly Approaching Category 5.

"The Gathering Storm effort once again finds itself at a tipping point," said Norman R. Augustine, one of the new report's authors and chair of the original Gathering Storm committee. "Addressing America's competitiveness challenge is an undertaking that will require many years, if not decades." The new report assesses changes in America's competitive status since the release of Gathering Storm and the degree to which its recommendations have been implemented.

The report's authors concluded that the nation's competitive outlook has worsened since 2005, when Gathering Storm issued its call to strengthen K-12 education and double the federal basic-research budget. While progress has been made in certain areas, the latitude to fix the problems being confronted has been severely diminished by the economic recession and the growth of the national debt over this period from $8 trillion to $13 trillion, the report says. Moreover, other nations have been markedly progressing, thereby affecting America's relative ability to compete for new factories, research laboratories, and jobs.

The report notes many indications that the United States' competitive capacity is slipping, including the following:

* In 2009, 51 percent of U.S. patents were awarded to non-U.S. companies.
* China has replaced the U.S. as the world's number one high-technology exporter and is now second in the world in publication of biomedical research articles.
* Between 1996 and 1999, 157 new drugs were approved in the United States. In a corresponding period 10 years later, the number dropped to 74.
* Almost one-third of U.S. manufacturing companies responding to a recent survey say they are suffering from some level of skills shortage.

In addition, in spite of occasional bright spots, the nation's education system has shown little sign of improvement, particularly in math and science, the report says. According to the ACT College Readiness Report, 78 percent of U.S. high school graduates in 2008 did not meet readiness benchmark levels for one or more entry-level college courses in mathematics, science, reading, and English, the report notes. And the World Economic Forum ranks the U.S. 48th in the quality of its math and science education.

In 2007 Congress passed the America COMPETES Act, which authorized many recommendations from the Gathering Storm report. But most of the Act's measures went unfunded until the stimulus package was passed early in 2009, a package that increased total federal funding for K-12 education, provided scholarships for future math and science teachers, and funded the Advanced Research Projects Agency-Energy, which is dedicated to supporting transformational basic research on energy.

However, the America COMPETES Act is set to expire this year, and its funding -- which came from the stimulus package, presumed to be a one-time initiative -- is also nearing expiration. In order to sustain the progress that has begun, the report says, it will be necessary to both reauthorize the America COMPETES Act and "institutionalize" oversight and funding of Gathering Storm recommendations -- or others that accomplish the same purpose -- so that funding and policy changes will routinely be considered in future years' legislative processes.

The report's authors acknowledged the difficulty of carrying out the Gathering Storm recommendations, such as doubling the research budget, in the current fiscal environment. But such investments will need to be made if the nation is to maintain the economic strength to provide health care, social security, national security, and other basic services to its citizens, they said.

The study was funded by the National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. These three organizations, together with the National Research Council, make up the National Academies. They are private, nonprofit institutions that provide science, technology, and health policy advice under a congressional charter. The Research Council is the principal operating agency of the National Academy of Sciences and the National Academy of Engineering. A roster of report authors follows.

[macrockett]

The battle for the future (you can still dvr this on Fox at 11PM tonight)
(http://www.post-trib.com/lifestyles/2740210,jstossel0926.article)

September 26, 2010

BY JOHN STOSSEL

For most of the life of America, and when it grew fastest, government spent just a few hundred dollars per person. Today, the federal government alone spends $10,000. Politicians talk about cuts, but the cuts rarely happen. The political class always needs more.

I see the pressure. All day, Congress listens to people who say they need and deserve help.

The cost of any one program per taxpayer is small, but the benefits are concentrated on well-organized interest groups. It's tough for a weak politician to say no.

But maybe things are changing. Rep. Paul Ryan, R-Wis., believes that "more and more people in America are beginning to wake up to the fact that this thing is coming unglued."

I asked Ryan why his colleagues say it's OK to spend more. Are they just stupid? Don't they care? Or are they pandering for votes?

"Pandering could be a part of it," he said. "But ... they believe that the government should be far larger." They are taught that by the progressives who rule academia, like Columbia University professor Marc Lamont Hill.

"We have to make sure that the most vulnerable people are always protected," Hill says. "Everyone benefits when we pay a little bit more to create universal health care. Everyone benefits when we pay a little more to have better public education systems."

Progressives use the word "we" too often. When I argued that "we" and "government" are not the same, he said, "We always talk about the government like it's this monster in the hills that comes down and hands things out and takes our tax money."

Well, yes.

Those are "libertarian fairytales," Hill says. "In real life, the government is us."

Government is not "us." Well, it's us in the sense that we pay the bills. But it ain't us. It's them, the policy elite and their patrons.

What percent of the economy does Hill think government should be?

"For me, housing, health care and education, in addition to national defense, are things that the government must provide for people. So if that means 20 percent, I'm OK with it. If it means 30 percent, I'm OK with it. I don't think it'll ever get that big."

Give me a break. It's already at 40 percent!

All that spending is taken from your and my pockets -- some in taxes, much in sneakier ways like government borrowing. The national debt -- now $13 trillion -- simply represents future taxes or the erosion of the dollar.

Yet progressives want us to pay more. One woman activist told our camera, "It costs to live in a civilized society and we all need to pay our fair share."

Our "fair share" sounds good. Progressives say taking from the rich to help the poor is fair.

I put that to Arthur Brooks, who heads the American Enterprise Institute.

"No, the fairest system is the one that rewards the makers in society as opposed to rewarding the takers in society."

Brooks wrote "The Battle," which argues that the fight between free enterprise and big government will shape our future.

"The way that our culture is moving now is toward more redistribution, toward more progressive taxation, exempting more people from paying anything and loading more of the taxes onto the very top earners in our society."

But it seems "kind" to take it away from wealthier people and give it to those who need it more.

"Actually, it's not," Brooks says. "The government does not create wealth. It uses wealth that's been created by the private sector."

He warns that "Americans are in open rebellion today because the government is threatening to take us from a maker nation into taker-nation status."

Americans in "open rebellion"? I'm skeptical. The tea party movement is wonderful, but it takes strength to say no to government freebies. When I've said to tea partiers, "We should cut Medicare, eliminate agriculture subsidies, kill entire federal agencies," the enthusiasm usually fades from their eyes.

I hope that I am wrong and Brooks is right.


For more Stossel, see...
Stossel Series on Education: Six videos now on you tube

www.youtube.com/watch?v=gSobWdLy03c&feature=player_embedded Video 1...then 5 more in sequence on you tube)

[macrockett]

More discussion of 8+% pension projections .....illusion

www.cnbc.com/id/15840232?video=1599193247&play=1 (Sept 24, CNBC Doug Cliggitt, Credit Suisse, listen to first 3 minuites)

www.cnbc.com/id/15840232?video=1602199741&play=1 (Sept 28, CNBC--Bill Gross, Pimco--listen to most of this video and to Gross' advise to "get outside the United States)

Gross' outlook: www.pimco.com/Pages/Gross%20Sept%20On%20the%20Course%20to%20a%20New%20Normal.aspx

Note: The below article deals with yet more shenanigans played by actuaries to "misrepresent" actual liabilities.

September 17, 2010 Wall Street Journal
The Illusion of Pension Savings
By MARY WILLIAMS WALSH

Earlier this year, Illinois said it had found a way to save billions of dollars. It would slash the pensions of workers it had not yet hired. The real-world savings would not materialize for decades, of course, but thanks to an actuarial trick, the state could start counting the savings this year and use it to help balance its budget.

Actuaries, including some who serve on the profession’s governing boards, got wind of what Illinois was doing and began to look more closely. Many thought Illinois was using an unorthodox maneuver to starve its pension fund of billions of dollars, while papering over a widening gap between what it owed and how much it had. Alarmed, they began looking for a way to discourage Illinois’s method before other states could adopt it.

They are too late. The maneuver, and techniques that have similar effects, are already in use in Rhode Island, Texas, Ohio, Arkansas and a number of other places, allowing those states to harvest savings today by imposing cuts on workers in the future.

Texas saved millions of dollars this year after raising its retirement age for future hires and barring them from counting unused sick leave in their pensions. More savings will appear in coming years. Rhode Island also raised its retirement age for future retirees last year, after being told it could save $90 million in the first year alone.

Actuaries have been using the method for years, it turns out, but nobody noticed, in part because official documents usually describe it in language few can understand.

The technique is fairly innocuous in normal times, allowing governments to smooth out their labor costs over many years. But it becomes much riskier when pension funds have big shortfalls, when they need several decades to pay down their losses and when they are cutting benefits for future workers — precisely the conditions that exist today.

“In a plan that is not well funded, I wouldn’t recommend it,” said Norm Jones, chief actuary for Gabriel Roeder Smith & Company, an actuarial firm that helps Illinois and a number of other states that have adopted the method. He said the firm’s actuaries informed officials of the risks and it was the officials’ decision to use the technique.

Struggling states and cities need to save money, but they run into legal problems if they tamper with the pensions their current workers are building up year by year. So most places have opted to let current workers and retirees go unscathed. Colorado, Minnesota and South Dakota are the exceptions, dialing back cost-of-living increases for people who have already retired. All three states have reaped meaningful savings right away, and all three are being sued.

Cuts for workers not yet hired do not save much money in the present — but that’s where actuaries can work their magic. They capture the future savings for use today by assuming, in essence, that 100 percent of today’s work force is already earning tomorrow’s skimpier benefits. When used in actuarial calculations, that assumption has a powerful effect. It reduces the amount a government must put into its workers’ pension fund every year.

That saves the government money. But it undermines the pension fund, which must still pay the richer benefits of today’s retirees. And because the calculations are esoteric, it is hard for anyone except a seasoned actuary to see what is going on.

“Responsible funding methods do not work this way,” said Jeremy Gold, an independent actuary in New York who has been outspoken about the distortions built into pension numbers. He said the technique was much like the mortgages with very low teaser rates that proliferated during the housing bubble.

“You aren’t paying down your principal,” Mr. Gold said. “You’re not even keeping up with the interest. You are actually increasing your debt every year.”

Dubious pension numbers in Illinois are not easily shrugged off after a warning shot fired by the Securities and Exchange Commission in August. The S.E.C. accused New Jersey of securities fraud, saying the state had manipulated its pension numbers to look like a better credit risk, while selling some $26 billion worth of bonds. The S.E.C. had never before taken action against a state. Now the commission is flexing its muscles, unleashing a team of specialized enforcement officials to look for more misleading public pension numbers.

An official with the S.E.C. declined to comment on Illinois’s maneuver. Commission rules bar officials from discussing investigations or revealing whether one might be in progress. Kelly Kraft, a spokeswoman for the Illinois Governor’s Office of Management and Budget, said the S.E.C. had not contacted the state and officials were confident that their disclosures were complete and accurate.

Officials in Rhode Island did not respond to phone calls seeking information about how the state achieved its pension savings. In other states, including Texas and Arkansas, officials said they were confident they were in compliance with the relevant statutes.

Actuaries must disclose their methods and assumptions, but this one has been hidden in plain view because it often goes by the name of a method that is widely used and is accepted by the Governmental Accounting Standards Board.

The technique falls into a family of complex and subtle calculations called “cost methods,” which actuaries use to spread pension costs over many years. Few outside of the profession know how the cost methods work or what their names mean.

Illinois issued public documents this year naming its cost method as one that did not permit the cost of future employees’ benefits to be factored into the current year’s contributions. The apparent contradiction caught actuaries’ attention.

Sandor Goldstein, an actuary in Springfield, Ill., who helps the state operate some of the pension funds in its big system, acknowledges that Illinois’s disclosures are “somewhat misleading.”

Mr. Goldstein made his remarks in a letter requested by the state, after an article in The New York Times raised questions about Illinois’s numbers. He recommended that the state clarify its disclosures.

He also said he had warned the state that its funding method “may not be an appropriate one.”

Mr. Jones, of Gabriel Roeder Smith, said Illinois’s disclosures might be “an incomplete description of the process,” but added that state officials “were probably trying not to get into a lot of technical detail that would be poorly understood anyway.”

Illinois’s pension funds are more fragile than most, but their survival is essential to thousands of people. The state’s teachers and certain other workers do not participate in Social Security, so for them, the pension fund is their only source of retirement income.

Frank Todisco, senior pension fellow at the American Academy of Actuaries, declined to comment on the situation in Illinois, but said the Actuarial Standards Board was working on revised standards that, if adopted, would clarify actuarial assumptions and lead to more detailed descriptions of risk.

“It’s a deliberative process,” he said. “We have to follow due process, and that sometimes takes a long time from start to finish.”

It can easily take several years to revise an actuarial standard. That may not be fast enough to help Illinois’s pension system, which continues to sink.

“When you’re in a deep hole, it’s a long way out,” said Mr. Jones.

[macrockett]

video.newyork.cbslocal.com/global/video/flash/popupplayer.asp?vt1=v&clipFormat=flv&clipId1=5151170&at1=News&h1=NJ&rnd=65432355 (CBS video)

Christie Announces Sweeping N.J. Education Reform
Governor Ready To Test Teachers In Reading And Math

September 28, 2010 11:30 PM

Reporting Marcia Kramer

OLD BRIDGE, N.J. (CBS 2) — Determined to turn New Jersey’s education system on its head, Gov. Chris Christie on Tuesday unveiled a tough-love reform package that will make classroom achievement — not seniority or tenure — the basis for pay hikes and career advancement in Garden State public schools.

Christie is turning his take-no-prisoner’s style to the classroom, demanding a top to bottom overhaul of how New Jersey students learn and teachers teach. And that means undoing tenure, seniority and other union work rules.

“We cannot wait. Your children are sitting in these classrooms today. We cannot wait to make it better,” Christie told CBS 2’s Marcia Kramer.

Unqualified teachers will feel the lash. The governor is demanding that teachers in kindergarten through fifth grade actually pass tests in reading and math in order to be certified.

“It might lead to the firing of lousy teachers and bad principals who hurt our children,” Christie said.

The governor wants to turn the old seniority system inside out and put quality teaching ahead of lack-luster performance. He will:

* Prohibit salary scales based on seniority

* Grant raises based on classroom performance

* Give tenure based on classroom performance

“We are paying a fortune for something that is not giving our children the hope and the faith and the trust that their tomorrow can be better than their today,” Christie said.

The governor said he would appoint a task force to come up with standards to measure teacher achievement.

Educational experts applauded the governor’s actions.

“He is with excellence in education for everyone by prioritizing teachers — their brilliance, their art and their skills. We will dramatically improve the quality of education of our kids in New Jersey, particularly our neediest ones,” said Derrell Bradford, director of Excellent Education for Everyone.

The governor needs the state Legislature to approve the changes to seniority and tenure. The rest of the things he did by signing executive orders.

A spokesman for the New Jersey Education Association attacked the governor’s plan saying that once again he was “trying to implement education reform without any input from educators.”

[southsidesignmaker]

Gov. Chris Christie is definitely a motivated soul, I suspect he will leave more than a few ruffled feathers in his wake.

Maybe he would consider running Illinois.

[macrockett]

www.myfoxphilly.com/dpp/news/education/Christie_Education_Reform_Proposals_New_Jersey_092910 then click on the video

www.myfoxphilly.com/dpp/news/education/Charter_School_Teachers_Talk_Accountability_092710 another video related to changing education ...click on the video at the page

www.youtube.com/watch?v=72a-9-Wxwfc

Governor Christie Challenges New Jersey Education Establishment

September 29, 2010 @ 8:39 am

Governor’s education reforms challenge the status quo by putting student achievement first, empowering parents and rewarding teachers.

Only days after joining Newark Mayor Cory Booker and Facebook CEO Mark Zuckerberg to announce a bipartisan education reform plan for Newark schools, Governor Chris Christie continued to provide the strong leadership needed to advance a reform agenda for public education throughout the State of New Jersey.

Speaking with families and community leaders at a town hall in Old Bridge, Governor Chris Christie unveiled the first pieces of a far-reaching reform agenda to improve New Jersey public schools by challenging the status quo and transforming a system that has fallen short of the needs of parents and children.

Despite some of the highest levels of education spending in the entire nation, New Jersey’s public schools continue to confront a critical achievement gap that shortchanges our children.

For example, the achievement gap between wealthy and low-income 8th graders in math is nearly the same as it was 19 years ago; the gap between at-risk 4th graders and those not at-risk has remained nearly unchanged over the past 13 years.

Likewise, New Jersey’s education system has failed to prepare vast numbers of students with the critical skills required to be competitive in college or the workforce.

In 2009, nearly 30 percent of all 8th graders statewide lacked basic math skills.

Governor Christie’s Reform Agenda will bring necessary and long overdue reform to the public education system by making teacher effectiveness and student achievement the driving forces behind public policies and practices. The first step toward innovation in the public school system means focusing on accountability.

“As a proud product of New Jersey’s public schools, I want nothing more than to see our public education system give our children the quality education they deserve,” said Governor Christie. “Yet, if we are to be successful in our reform efforts, we must be honest about our shortcomings, candid about our failures, and open to the necessary reforms that are crucial to bringing positive change and innovation to our classrooms, no matter their zip code.

“For too long we have accepted low expectations and failure – particularly in our urban school districts – which has stolen hope from generations of New Jersey families. Today, we begin to put an end to the cycle of inaction by challenging the status quo, demanding more for our children and restoring the promise of a brighter future for every one of our communities,” Governor Christie concluded.

Governor Christie is proposing reforms to reward innovative and effective teaching, expand opportunities for New Jersey’s best teachers, and put student achievement at the center of educator evaluations.

Governor Christie is challenging the education establishment with reforms to:

* Promote Innovative and Effective Teaching by Valuing Student Achievement Over Seniority.

* Demand Accountability and Results for New Jersey’s Children with Data-Supported Evaluations.

* Expand Opportunities for Great Teachers to Succeed.

* Ensure Our Children Have Well-Prepared Teachers.

Governor Christie also recognizes that through empowerment, parents can becomes better advocates for quality education for their children and increase accountability in our schools.

The Governor’s reforms will work to:

* Engage Families in Their Children’s Education with Improved Access to Information.

* Improve Outreach and Communications Efforts to Parents and Families.

Additional details of Governor Christie’s Reform Proposals for education outlined today can be found as a PDF attachment to this release.

Also, a copy of Executive Order 42 can be found attached to this email. Executive Order 42 establishes the New Jersey Educator Effectiveness Task Force, which is further detailed in the subsequent fact sheet on the Christie Reform Agenda.

Governor Christie’s Reform Proposals for Education [pdf 285kB] [1]

Executive Order 42 [pdf 20kB] [2]

Article printed from Gov Monitor: www.thegovmonitor.com

URL to article: www.thegovmonitor.com/world_news/united_states/governor-christie-challenges-new-jersey-education-establishment-39423.html

URLs in this post:

[1] Governor Christie’s Reform Proposals for Education [pdf 285kB]: www.state.nj.us/governor/news/news/552010/pdf/EO-42.pdf/20100928_edu_ra.pdf

[2] Executive Order 42 [pdf 20kB]: www.state.nj.us/governor/news/news/552010/pdf/EO-42.pdf

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September 26, 2010, 2:06 PM ET

WSJ/NBC Survey: A C- Grade for Schools

A new WSJ/NBC News poll shows Americans give the nation’s public schools a GPA of 1.8 – not failing, but clearly in need of remediation.

Peter Gorman, Charlotte-Mecklenburg Schools superintendent, left, and U.S. Secretary of Education Arne Duncan talk on the way out of Sterling Elementary School in Charlotte, N.C. on Sept. 15. (AP Photo/John D. Simmons, The Charlotte Observer)

Asked to grade the nation’s public schools using the common scale for students – A, B, C, D and F – only 2% of those surveyed gave them an A; 17% a B; almost half, 45%, said C; 25% a D, and 7% said F. Asked about the schools in their own communities, respondents handed out better grades: an overall GPA of 2.3, with 13% giving an A; 32% a B; 27% a C; 15% a D, and 9% an F.

Nearly six in 10 said the nation’s public schools need major changes if not an overhaul, while 41% said they were working well or that some changes were needed.

With education front and center in many election campaigns across the country and as Davis Guggenheim’s much-publicized film “Waiting for Superman” rolls out, the state of the nation’s schools is once again in the spotlight.

The WSJ/NBC survey showed that elected officials and parents were most often viewed as a cause of the problem, with 53% citing elected officials and 50% citing parents. Teachers unions came in next, 41%. (For full results, click here and here.)

Education Secretary Arne Duncan, appearing on NBC’s Meet the Press” today, said the statistics weren’t pretty: “When you see us being 20th in math and science, we’ve fallen one generation from first to ninth in college graduates. That’s unacceptable. We’re paying a terrible price today with a tough economy because we’ve lost our way educationally. That’s why we’re pushing so hard for reform.”

Just what kind of “reform” would be acceptable to voters is unclear, but 75% of those surveyed in the WSJ/NBC poll said big improvements could be made by recruiting and retaining better teachers. Some 64% cited smaller classes; 54% said an annual competency test for teachers; and 48% said spending more money on education. About half said big improvements could be made by requiring students to pass standardized tests before moving up a grade, while 39% said a stricter set of national education standards would yield big improvements—a drop from earlier surveys.

Not so clear-cut: 30% said financial rewards for the best teachers would produce a big improvement—with about the same portion saying an increase in the number of charter schools would do so.

[macrockett]

Investment assumptions? Suspect. The testimonials just keep coming. This time, Frederick “Shad” Rowe, chairman of Greenbrier Partners Fund and former chairman of the Texas Pension Review Board:

finance.yahoo.com/video/marketnews-19148628/rowe-says-public-pensions-need-to-cut-return-assumptions-video-22009723

[macrockett]

I know there are many teachers out there who have passion when it comes to educating our kids. There is no doubt about it. But I wonder how many wish they were working in a different system? A system where they are rewarded for the passion, drive and ideas they bring to the table and had the freedom to express them without rocking the boat in some way....

As long as the current system of education remains intact, spending more money than virtually anywhere in the world, yet producing results that are lower than the majority of the developed countries in the world, according to OECD and other studies, progress will remain illusive.

OCTOBER 5, 2010

Speak Up on D.C. Schools, Mr. President
The president remains silent about the fate of Michelle Rhee, the successful chancellor of public schools in the nation's capital.

By WILLIAM MCGURN

That deafening roar you hear—that's the sound of Barack Obama's silence on the future of school reform in the District of Columbia. And if he doesn't break it soon, he may become the first president in two decades to have left Washington's children with fewer chances for a good school than when he started.

This week President Obama will be out campaigning on the differences between the Republicans and Democrats on education. The primary thrust of his argument—which he repeated yesterday—is that Republicans want to cut education spending. Which may be a harder sell coming on the heels of his admission last week on NBC's "Today" show that "the fact is that our per-pupil spending has gone up during the last couple of decades even as results have gone down."

This debate over education is now coming to a head in Washington. In the first months after he took office, Mr. Obama kept quiet when Sen. Dick Durbin (D., Ill.) killed off a popular voucher program that allowed low-income D.C. moms and dads to send their kids to the same kind of schools where the president sends his own daughters (Sidwell Friends). This was followed by the president's silence last month during the D.C. Democratic primary, in which the mayor who appointed the district's reform-minded schools chancellor, Michelle Rhee, went down to defeat.

Even now, when Ms. Rhee's fate—and that of D.C. school reform—hangs in the balance, Mr. Obama remains mute. This from the same president who shows no such shyness when interjecting himself into, say, a complaint about Boston police, a dispute over an Islamic Center in Manhattan, or the mass firing of teachers at a troubled high school in Central Falls, R.I. Why so reticent about an issue affecting the future of thousands of African-American children?

President Obama hasn't been shy about local issues from the Cambridge police to the World Trade Center mosque. Why the silence about the fate of education reform in Washington?

"No one in Washington has more political capital than Barack Obama," says Jeanne Allen, president of the Center for Education Reform, a Washington D.C., nonprofit that advocates for changes in public K-12 education. "All he has to do is to say two simple sentences. First, 'I support anyone who gives D.C. parents more options and more accountability.' Second, 'We need to keep D.C. on the path of reform with a schools chancellor like Michelle Rhee.'"

For all his education rhetoric, Mr. Obama's reluctance here has a long party pedigree. While D.C. reforms have been embraced and promoted by individual Democrats such as Connecticut's Sen. Joe Lieberman and California's Dianne Feinstein, the impetus for reform has come from the GOP. In fact, D.C. school reform didn't really start until Republicans took control of the House in 1994.

The following year, the newly Republican Congress sent Bill Clinton a voucher proposal for D.C. It would eventually be dropped in the face of his veto threat (a threat he made good on three years later, on another D.C. voucher proposal). Nevertheless, in that first battle Republicans did succeed in getting through a provision for D.C. charter schools.

A few years later the pattern repeated itself. National Republican leaders again came together with local Democrats such as Mayor Anthony Williams and City Councilman Kevin Chavous, not to mention local advocates such as Virginia Walden-Ford of D.C. Parents for School Choice. Together they helped push a voucher bill through Congress. This time it went to the desk of a president who would sign it: George W. Bush. Building on this momentum, in 2007 a newly elected local Democrat, Mayor Adrian Fenty, named Ms. Rhee as schools chancellor.

Today it's all in limbo. Ever since Ms. Rhee's patron lost his primary, word is that Secretary of Education Arne Duncan has been working behind the scenes to ensure Ms. Rhee stays on as chancellor, or that she is replaced by someone with equal commitment to reform. The fact, however, is that whatever magic Mr. Duncan might perform "behind the scenes" is no match for what his boss might do by speaking publicly.

Surely the wind is at his back. In the past, Mr. Obama has himself spoken honestly about the obstacles to reform, including the close relationship between the teachers unions and his party. This past weekend, Mr. Chavous, now head of the Black Alliance for Educational Opportunity, published an open letter in the New York Times saying it's time for the president to walk the walk. Along with the recent release of "Waiting for 'Superman,'" Davis Guggenheim's superb new film on the children robbed of their dreams by the failing public school system, it all adds to the sense that the moment for Mr. Obama to make himself heard is now.

"All presidents have the bully pulpit," says Mr. Chavous. "This president in particular has the power to change hearts and minds instantly."

But will he?

Write to [e-mail]

[macrockett]

This is what you call the Court punting the decision down the road. It is about public unions owning the playing field, or the State in this case.

latimes.com/news/local/la-me-1005-furlough-20101005,0,5338158.story
latimes.com
California Supreme Court upholds unpaid furloughs for more than 200,000 state workers
Unions hail part of the ruling that said the governor lacks unilateral authority to cut work weeks and pay. The governor says it upholds 'the state's actions to protect taxpayers.'

By Maura Dolan and Shane Goldmacher, Los Angeles Times

October 5, 2010
Advertisement

The California Supreme Court on Monday unanimously upheld unpaid furloughs for more than 200,000 state employees during the last fiscal year but ruled that a governor lacks unilateral authority to reduce work weeks and pay for state workers.

Although the ruling spares the state from having to reimburse workers for reduced pay during the first year of furloughs, it requires future governors to have the consent of the unions or the Legislature before forcing mandatory unpaid days off.

Both Gov. Arnold Schwarzenegger and labor unions declared a degree of victory in the decision.

Schwarzenegger hailed the ruling in a statement because it "upholds the state's actions to protect taxpayers and ensure we live within our means."

Anne Giese, a union attorney who argued the case before the high court, said she was heartened the court limited the governor's powers going forward.

"In all my years, I've never gotten a loss that felt so good," said Giese, who represents the state's largest public employee union, Service Employees International Local 1000, which counts nearly 100,000 members. "The governor does not have the authority that he thought he had."

In recent months, Schwarzenegger has successfully used the threat of furloughs as a bargaining chip in labor negotiations. Six labor units earlier this year agreed to curb new worker pensions, partly in exchange for immunity from furloughs. The governor has now lost that point of leverage.

Monday's decision was the first by the state high court to address disputes between the governor and state workers over orders that cut the pay of state employees. More than 30 lawsuits have been filed challenging the unpaid furloughs, and lower court rulings have been mixed.

Lawyers for state employees argued that only the Legislature could cut employee pay, while the governor insisted he had unilateral authority in such cases.

In the decision written by Chief Justice Ronald M. George, the court said the furlough order implemented in 2009 was valid because legislators subsequently approved a budget measure that reflected the governor's order.

The legislative action "validated the Governor's furlough program here at issue," the court said.

Senate President Pro Tem Darrell Steinberg (D-Sacramento) said he was "disappointed with the decision" and its reasoning.

"It was a very bad situation and we had no other choice," Steinberg said of the 2009 budget that counted the financial savings from the furloughs. "It was certainly not our intention to ratify the legality of unilateral furloughs."

By ruling that the governor lacks unilateral authority to furlough, the court also placed in doubt three-day-a-month furloughs in effect since August. With California dragging into the fiscal year without a spending plan, Schwarzenegger declared a state of emergency in late July and imposed the forced days off.

Those furloughs are illegal, but the Legislature could approve them retroactively to make them valid, said an attorney for state workers.

"Right now they are illegal," said Gerald A. James, who argued the case for California's professional engineers. "The Legislature needs to pass a state budget, and it will be interesting to see what they do."

Another issue in the pending state spending plan — already the tardiest in modern state history – is finding budget savings in the prison system. The correctional guards union, which represents more than 35,000 workers, is operating without a contract and is the only labor union that has refused to collectively bargain with the Schwarzenegger administration.

Steinberg said Monday the court decision Monday "would help determine what language is necessary" in the budget to achieve a 10% reduction in employee compensation, whether by approval of furloughs or other means.

"We'll be talking about that over the next 24 hours," he said.

In another decision, the court also ruled unanimously that Schwarzenegger acted legally when he vetoed nearly $500 million in spending last year for social service programs. Democratic legislators had challenged those vetoes.

[e-mail]

[e-mail]

Copyright © 2010, Los Angeles Times

[macrockett]

A few items from September I missed:

www.washingtonpost.com/wp-dyn/content/video/2010/09/15/VI2010091501504.html?sid=ST2010100506245 VIDEO from Bloomberg (discusses Illinois)


`Death Spiral' Besets State Pensions as Benefits Grow
By Dunstan McNichol - Sep 15, 2010

U.S. state pensions such as Illinois, Kansas and New Jersey are in a “death spiral,” with assets at many insufficient to cover benefits, payouts consuming a growing portion of resources and costs rising twice as fast as investment gains.

Less than half the 50 state retirement systems had assets to pay for 80 percent of promised benefits in their 2009 fiscal years, according to data compiled for the Cities and Debt Briefing hosted by Bloomberg Link in New York today. Two years earlier, only 19 missed the mark. Illinois covered just 50.6 percent of benefits last year, the lowest so-called funded ratio, which actuaries say shouldn’t be less than 80 percent.

Benefits paid by funds in at least 14 states equaled more than 10 percent of assets in the fiscal year, the figures show. In 2007, none exceeded the threshold. The growing burden prompted Colorado, Minnesota, Michigan and other states to trim benefits for millions of teachers and government workers. It also forced fund managers to keep money in short-term low-return investments to pay benefits, reducing chances pensions can earn their way back to financial health.

“Once you get into that dynamic, you’re in a death spiral,” said Michael Aronstein, who manages the $295 million Marketfield Fund of stocks as chief investment strategist at Oscar Gruss & Son, a New York brokerage. “There’s no financial or return solution.”

‘Different Era’

The largest Illinois pension, the $33 billion Illinois Teachers’ Retirement System, paid $3.7 billion of benefits in the year ended June 30, 2009. That’s 13 percent of its assets at the time, up from 8 percent two years earlier, according to annual reports and Dave Urbanek, its spokesman. The New York State system, the best-funded in the Bloomberg data at 107.4 percent, paid out 7 percent of its assets in fiscal 2009.

“Part of the problem with pensions today is they were designed in a different era,” Richard Ciccarone, managing director of McDonnell Investment Management LLC, said at the Cities and Debt Briefing. “When our economy slows we no longer have the economic base to pay the pensions.”

At June 30, 2010, after the Illinois fund’s investments had gained 13 percent and lawmakers borrowed $3.5 billion to shore up the system, benefits in the fiscal year had risen to $3.9 billion, according to Urbanek, or 12 percent of assets.

‘Too Harsh’

Lawmakers in Illinois, which, with California, has the lowest credit rating from Moody’s Investors Service of any state, were unwilling to approve another bond sale, for $3.7 billion, this fiscal year. As a result, the pension may sell $3 billion of assets to cover benefits, Urbanek said.

“Death spiral is too harsh a language,” he said. “It’s a concern, but we’re not on life-support.”
REALLY?
Selling assets, reducing services and cutting costs such as pension contributions are tactics states are using to confront what a June 29 report by the Center on Budget and Policy Priorities, a Washington-based research group, said was a record $140 billion combined budget deficit this fiscal year.

Lawmakers are willing to anger taxpayers and retirees to show investors who buy more than $400 billion of state and local debt a year that something is being done to stem rising costs.

Benefits Growth

Benefits paid by the 100 largest public pensions in the five years that ended June 30 grew an average of 8 percent annually, calculations based on U.S. Census Bureau reports show. In that period, the median annualized investment return was about 3 percent for public funds with more than $5 billion of assets, said an August report from Wilshire Associates, an investment adviser in Santa Monica, California.

The U.S. recession and stock-market collapse drained about $835 billion of value from the 100 largest public funds, according to the Census Bureau. As a result, benefit payments by those funds amounted to 7.5 percent of assets in the 12 months ended June 30, 2009, up from about 5 percent two years earlier, the census figures show.

Even an investment rebound in the year that ended June 30, 2010, when Wilshire reported the median return on public retirement funds was about 13 percent, did little to alter the trend. Funds in at least eight states that reported investment results for the fiscal year still spent more than 10 percent of their assets on benefits, Bloomberg data show.

Asset Outflow

“The fact such a large portion of assets is flowing out each year really challenges the longevity of these funds,” said Joshua Rauh, who teaches finance at Northwestern University in Evanston, Illinois. He projected retirement accounts in his and other states would run out of money within a decade. “It will be a crash landing,” he said.

The rising share of assets consumed by benefits is “interesting” but misleading, said Keith Brainard, research director of the Baton Rouge, Louisiana-based National Association of State Retirement Administrators. He pointed to the offsetting effect of annual payments into funds made by workers and state governments.
DON'T BELIEVE IT.
“Employer contributions tend to fluctuate, but employee contributions are remarkably steady,” he said.

From 1998 to 2008, the most recent full statistics from the Census Bureau, state and local government payments into retirement funds almost doubled to $82 billion. Over the period, worker contributions rose 70 percent to $37 billion.

130 Percent

During the same decade, however, benefits paid increased by 130 percent to $175 billion. Payments from the 100 largest public funds grew by another 9 percent during the first three quarters of the 2010 fiscal year compared to the first three quarters of 2009, according to the census.

The $11 billion Kansas Public Employees Retirement System had the seventh-lowest funded ratio in Bloomberg’s ranking at 63.7 percent in 2009. It paid out benefits equal to 10 percent of its assets in the fiscal year, double the rate of 2007, fund records show.

The pension’s funded ratio fell from 70.8 percent two years earlier and is projected to drop to 41 percent by 2015, according to a February report to state lawmakers. Another market decline could jeopardize the fund, the report said.

“Preservation of sufficient cash flow to fund current benefits may become paramount,” it said, which could constrain investment strategies and make it harder to achieve assumed returns.

Payments Skipped

The problem is magnified in states where officials skipped billions of dollars of contributions.

New Jersey Governor Chris Christie, 48, a Republican who took office in January, withheld $3.1 billion of payments in his first budget to cope with a record $10.7 billion deficit. Since 2004, the state has made only $2.7 billion of the $11.9 billion in scheduled contributions, according to bond-sale documents.

New Jersey’s $68 billion retirement system had a funded ratio of 66.1 percent in the Bloomberg data, the 11th-lowest. The state in August settled Securities and Exchange Commission claims that it failed to disclose the extent of its underfunding in documents for $26 billion in bond sales from 2001 to 2007. It didn’t admit wrongdoing.

Benefit payments are projected at 11.4 percent of available pension assets during this budget year, even after a 14 percent investment gain in the fiscal period that ended June 30, New Jersey records show.

Teachers Pension

Payouts by the New Jersey Teachers Pension and Annuity Fund, which serves about 236,000 working and retired educators, grew to $2.8 billion from $1 billion in the 10 years through 2009, an average annual increase of about 10.4 percent, its yearly reports show. Over the period, holdings returned an annualized 2.3 percent, according to the state’s Division of Investment.

Retiree benefits last year amounted to 11.2 percent of the fund’s $25 billion value, compared to 3 percent a decade earlier. Payments are on track to exceed 11 percent of assets again this year, state budget documents say.

To remain healthy, the New Jersey teachers fund should pay out no more than 9 percent of its assets each year, Scott Porter, of the Philadelphia office of Milliman Inc., the fund’s actuary, told trustees in February. He said benefit costs will rise to $4 billion a year within a decade, making it questionable the state will achieve its assumed 8.25 percent annual investment gain.

“As baby boomers retire and the benefit payments increase, that’s going to keep the market value of assets from growing substantially,” he said.

Lower Benefits Proposed

With such prospects, U.S. governors and lawmakers are proposing lower benefits. Colorado, Minnesota and Michigan are in court defending cuts, including a reduction in annual cost- of-living increases imposed on retirees during the last year.

In Connecticut, where benefit payments rose to $2.7 billion this year from $2.1 billion in 2007 as assets lost almost $5 billion in value, outgoing governor Jodi Rell wants to eliminate guaranteed pension payments for future employees. New Jersey’s Christie plans to revoke a 9 percent increase in benefits awarded in 2001.

Advocates for pensioners say such strategies illegally renege on promises to workers. Politicians themselves caused the problem by failing to make required payments, they say.

“This has been in motion for a long time,” said John Stember, a partner at Stember Feinstein Doyle Payne & Cordes in Pittsburgh, which represents retirees in six states challenging rollbacks.

“The state is making a compelling argument based on a set of facts it’s confronted with now, but that it didn’t necessarily have to be confronted by,” he said.

To contact the reporter on this story: Dunstan McNichol in Trenton, New Jersey, at [e-mail]

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Bloomberg

`Silent Heart Attack' for Pensions Driven by Yields
By John Detrixhe - Sep 14, 2010

Corporate pension plans in the U.S. are falling behind future payouts to retirees by the most in a decade amid a slowing economy and the lowest bond yields on record.

The gap between the assets of the 100 largest company pensions and their projected liabilities widened by $108 billion in August from the previous month to a $459.8 billion deficit, actuarial and consulting firm Milliman Inc. said today in a statement.

The shortfall is “like a silent heart attack,” said Kenneth Hackel, president of research and consulting firm CT Capital LLC. “People aren’t recognizing the symptoms until the patient falls on the ground.”

Corporate pension plans are a casualty of Federal Reserve efforts to keep interest rates low to prevent the economy from slipping back into recession. As AA rated company bond yields, a benchmark in determining future liabilities, last month reached the lowest ever, obligations increased $91 billion to $1.54 trillion, Seattle-based Milliman said, without disclosing company names.

AA corporate bond yields fell to 2.81 percent last month from 3.9 percent at the end of 2009, according to Bank of America Merrill Lynch index data. That compares with the average of 5.8 percent in 2008.

While lower bond yields help companies borrow cash more cheaply, the “dark side” of the “low-yield environment that is projected to persist over the near term” is that companies may have to divert more money to their pension plans or make riskier investments, such as leveraged loans, real estate and private-equity, Fitch Ratings said Aug. 23 in a report.

‘Major Hit’

Contributions to the 100 biggest corporate pension plans increased to $54.5 billion in 2009 from $29.5 billion the previous year and compares with an average of $38.7 billion for the prior five years, Milliman said in an April report. Companies may have to spend even more cash to fund their pensions, Hackel said.

“It’s a major, major hit for companies to take,” said Hackel of Alpine, New Jersey-based CT Capital. “Sponsors are going to need to step up their contributions massively.”

Corporate pension plans have deteriorated since the fall of 2008 as the worst financial crisis since the Great Depression caused investments to plunge, eroding the value of pension assets. The Standard & Poor’s 500 Index lost 37 percent that year, while U.S. corporate bonds lost 10.9 percent.

‘Liability Losses’

While the S&P rallied 26.5 percent in 2009 and company debt gained 26 percent, boosting pension asset values, declining bond yields have increased the projected benefit obligations.

“Liability losses could dwarf even good investment gains,” said John Ehrhardt, a principal and consulting actuary in New York with Milliman. “It’s a cash flow issue, it’s a drag on earnings when you look at the accounting numbers, and it’s a hit to your balance sheet, which can cause all kinds of problems about loan covenants and everything else.”

The assets of corporate pensions relative to their deficits, known as the funded ratio, fell to 70.1 percent in August, also the lowest in at least 10 years, from 75.6 percent the month before, according to the Milliman 100 Pension Funding Index. Pension plan assets declined $17 billion last month to $1.076 trillion, a loss of 1.12 percent. The median expected monthly return for plans in the index is 0.65 percent for 2010, a yearly return of 8.1 percent.

Pension Protection

The Pension Protection Act of 2006 requires companies to increase pension-fund assets gradually to put them on firmer financial footing, reducing the chances the government will have to take them over for failing. President Barack Obama signed pension relief legislation in June giving companies more time to meet the standards.

“Recently enacted pension relief will defer ‘paying the pension piper’ to some extent,” Fitch analysts Mark Oline, John Culver and James Rizzo wrote in the Aug. 23 report. “Allowing issuers to defer funding can lead companies to dig even deeper holes that can result in putting both pensioners and bondholders at greater risk.”

The U.S. central bank has kept its target overnight lending rate in a range of zero to 0.25 percent since December 2008 in a bid to spur the economy. The Fed’s preferred gauge for the trend of inflation -- the core personal-consumption expenditures price index, minus food and energy -- rose at an annual rate of 1.4 percent in July, below the central bank’s target for inflation of 1.7 percent to 2 percent.

“Companies will take a hard look at the ‘conservative’ fixed-income part of their portfolios as assets are rolled over into lower coupon bonds and further capital gains are no longer realistic,” Fitch said in the report. “A deflationary environment would extend the period of low yields and the challenges of achieving adequate returns.”

To contact the reporter on this story: John Detrixhe in New York at [e-mail]

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[macrockett]

Both videos below, again, discuss the unreasonable expectation of 8+ % returns for pension investments, which hasn't been a reality, on average, for over ten years now.

www.cnbc.com/id/15840232?video=1608773672&play=1 (cnbc VIDEO discussing the article below)

see also ( www.edchoice.org/Research/Reports/Trouble-Brewing--The-Disaster-of-California-State-Pensions.aspx ) the study by The Foundation for Educational Choice

www.cnbc.com/id/15840232?video=1608790324&play=1

Washington Post

Amid backlash and budget deficits, government workers' pensions are targets

By Michael A. Fletcher
Washington Post Staff Writer
Wednesday, October 6, 2010; 2:45 AM

PHILADELPHIA - Faced with deep budget deficits and overextended pension plans, state and local leaders are increasingly looking to trim the lucrative retirement benefits that have long been associated with government employment.

Public employees are facing a backlash that has intensified with the nation's economic woes, union leaders say, because of their good job security, generous health-care and pension benefits, and right to retire long before most private-sector workers.

In California, where an estimated 80 cents out of every government dollar goes to employee pay and benefits, Gov. Arnold Schwarzenegger (R) has proposed a two-tier system of pensions that offers new state workers reduced benefits with tighter retirement formulas. He also wants state workers to kick in higher pension contributions to help deal with California's staggering deficit.

New Jersey Gov. Chris Christie (R) calls reform of public employee pensions essential to fixing the state's enormous fiscal problems. Michigan Gov. Jennifer M. Gran-holm (D) recently signed a change to her state's teacher pensions that increases employee contributions. Illinois has pushed back the retirement age for new employees. Detailing his agenda for New York, Democratic gubernatorial nominee Andrew M. Cuomo has said, "We simply can't afford to pay benefits and pensions that are out of line with economic reality."

Locally, a special commission is scheduled to meet Thursday in Annapolis to examine options for Maryland's $34 billion pension fund, which is just 65 percent funded and has been called a "credit challenge" by Moody's. The state has not yet gone after public employees; neither has Virginia, where the state pension fund is projected to be underfunded in the near future.

Here in Philadelphia, Mayor Michael Nutter has proposed ending a popular pension enhancement called the Deferred Retirement Option Plan, which has allowed many city workers to walk away from their jobs with six-figure payments in addition to their pensions.

"Government workers are the new privileged class," said James E. MacDougald, a retired business executive who formed a research and activist group, Free Enterprise Nation, to call attention to the financial burden posed by government workers.
Benefits to envy

The move to curtail retirement benefits for public-sector workers is fueled both by stark budget realities and by the resentment felt by private-sector workers who have seen their pay diminish in recent years.

Public employment was once viewed as less rewarding than work in the private sector, but that has changed. State and local government employees earn an average of $39.74 an hour in wages and benefits, about 45 percent more than private-sector workers, whose total compensation averages $27.64 an hour, according to the Labor Department.

The difference reflects the higher proportion of professional jobs in the public sector, the Labor Department says. Government workers tend to be better educated than private-sector workers, unions add. And public employees typically receive better retirement benefits than their private-sector counterparts.

The vast majority of private workers rely on defined-contribution retirement plans such as 401(k)s, while 84 percent of public-sector workers have access to guaranteed pensions, which are more expensive to employers.

Mayors, governors and other political leaders have long avoided cutting the benefits of government workers, whom they often rely on for political support. But now the benefits are often seen as overly generous in a time of scarce resources.

Studies have found the nation's 2,500 public employee pension plans to be underfunded by as much as $3 trillion. Steep investment losses during the recession have left less than half of the state retirement systems adequately funded, according to a recent report by Bloomberg.

Even as they trim vital services, state and local governments are devoting an increasing share of their budgets to paying for employee retirement costs.

Meanwhile, a long-running series of Gallup polls has found slowly eroding support among the public for labor unions, which represent many government employees. That support dipped markedly in the past two years, a decline that Gallup analysts attribute to a belief that President Obama's policies preserved public-sector jobs while private-sector workers endured punishing cuts.

"A lot of people are saying: 'Wait a minute. I lost my benefits, and these guys who work for the city still have theirs,' " said Bill Rubin, an adviser to the president of the American Federation of State, County and Municipal Employees District Council 33 in Philadelphia and a vice chairman of the city's pension fund. "We have to educate people."

Union leaders say their members are being asked to pay for the mistakes made by politicians who chose not to adequately contribute to pension plans and by Wall Street firms whose disastrous bets led to big investment losses.
Philadelphia's problems

Philadelphia's pension plan is only about 45 percent funded, a shortfall that has caused Nutter to question the viability of the guaranteed pensions enjoyed by the city's 24,000 employees. "We can no longer sustain a defined-benefit pension program," he said last month at a conference in New York. "We're trying to move to a defined-contribution plan."

In the meantime, he wants to end the Deferred Retirement Option Plan (DROP), a proposal being weighed by the City Council. A recent study - disputed by Philadelphia's municipal worker unions - found that the program has cost the city's already dangerously depleted pension fund $258 million since its inception 11 years ago.

DROP allows employees to pick a retirement date up to four years in the future. That decision freezes workers' pension benefits but allows them to begin accumulating payments that are set aside in an account that pays 4.5 percent interest while they continue working. When they retire, they get the money in the account and start collecting their monthly pensions.

Many Philadelphia retirees see the payouts as compensation for a career of mediocre pay and raises.

"This allows the working-class and middle-class person to get a little something before they retire," said Dianne Gatson, who retired this year after 24 years, most of them as an analyst in the city's AIDS program.

Gatson, who has a master's degree and is working on her PhD, said her top salary was close to $60,000 a year. When she retired, she received a DROP payment of about $100,000 to go along with her $2,000-a-month pension.

Union leaders say many Philadelphians developed a dim view of the program after learning that some top officials had received or were in line for exorbitant payouts. Half a dozen City Council members are in the program and are eligible to collect a total of $2.3 million, according to local news reports.

Those extreme cases may rile the public, union leaders say, but they do not reflect the benefits received by most workers, whose DROP payments average just over $100,000.

Chuck Donaldson, 62, a retired recreation supervisor who started out as a middle-school English teacher, retired three years ago. He received a DROP payment of $176,000 and a $3,300-a-month pension after a 37-year city career in which he earned a top salary of $63,000 a year.

"I remember a lot of years when we got zero as a raise," he said. "It's all relative. This is nothing like the golden parachutes all those executives get. Although it probably looks pretty good to someone who is not working."

[macrockett]

October 4th, 2010

Ten former San Diego city employees will split $61 million dollars for the rest of their lives. Did they win the lottery? No – they will receive it in payouts from the City of San Diego pension system, according to CFFR’s president Marcia Fritz.

“I was shocked by what I discovered in the City of Bell, and I’m shocked by what I discovered in the City of San Diego. San Diego is just like Bell – only bigger,” said Fritz.

These are just two of several shocking revelations about the City of San Diego’s pension system contained in a report being released this morning. The report was compiled by Fritz – a CPA and the pension expert who revealed the outrageous pension payouts in the City of Bell.

San Diego Councilmember Carl DeMaio will join Fritz at an 11:00 am press conference at City Hall. In addition to discussing the report itself, DeMaio will lay out pension reforms that should immediately be implemented in the City of San Diego.

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Reason Foundation

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Reason Foundation
Report Details Excessive Public Pensions in San Diego

Adam Summers
October 4, 2010, 6:39pm

A new report prepared by California Foundation for Fiscal Responsibility President Marcia Fritz for San Diego Councilman Carl DeMaio details many of the City of San Diego's public employee pension excesses and calls for reforms to the system. Among the City's pension outrages:

* Some pensioners can draw four retirement allowances at the same time
* Some retirees make more in retirement than the current salaries of employees now doing the same jobs
* City politicians "retiring" as young as age 35
* City politicians "double-dipping" by receiving a taxpayer-funded salary on top of a city pension.

From the press release issued by Councilmember DeMaio's office:

City Councilmember Carl DeMaio joined the same pension expert who revealed the excessive pension payouts in the City of Bell to release a report documenting excessive pension payouts to retired city employees in the City of San Diego. DeMaio also released a comprehensive list of pension reforms to end abusive payouts at taxpayers’ expense.

“I was shocked by what I discovered in the City of Bell and am shocked by what I discovered in the City of San Diego. San Diego is just like Bell – only bigger in terms of the total collective cost to taxpayers from these outrageous pension allowances,” said Marcia Fritz, a pension expert with the California Foundation for Fiscal Responsibility.

“These outrageous pension payouts in city government must end,” commented DeMaio. “Before taxpayers are asked to put more of their hard-earned money into this city government, we must enact fundamental reforms to the city’s unaffordable pension system.”

A slide show on the report can be accessed here. Among the findings of the report:

·Getting Four Retirement Checks at Once: Some city retirees are able to receive four separate retirement benefits – including the defined benefit allowance, DROP annuity payments, SPSP 401(k)-style payouts, and preservation of benefits payouts.

· Earning Almost Double in Retirement than While Working for the City: Several city retirees clearly earn considerably more in retirement than those currently working for the City of San Diego. In one case, the city’s former head librarian receives $227,249 as an annual retirement allowance – versus the $139,680 budgeted amount for the current head librarian working for the city.

Worse than that, the $227,249 does not include payouts this former city librarian would receive from another city-funded retirement program known as the Supplemental Pension Savings Program -- where the city has matched up to 6% of many city employees’ salaries for decades.

·Six Figure Pension Payouts: The report found a long list of city retirees earning six-figure pension payments – with the top pension payout hitting a whopping $299,103 – a figure that also does not include payouts under the SPSP retirement program.

·Millions in Total Payouts: Fritz estimated the long-term payouts for the top pensioners in the City of San Diego – showing each is expected to receive between $5 million to $8 million in pension benefits. The top 10 pensioners combined are expected to receive a whopping $ 61 million dollars combined.

·Million Dollar Lump-Sum Payouts: Several city retirees have accumulated million-dollar cash balances under the DROP program, which they can receive as a cash payout or as an annuity payment – all in addition to their annual six-figure pension allowances.

·Cash To Dash: The report revealed that a significant number of city retirees live outside of the State of California and outside the City of San Diego. In fact, only 38% of retirees live in the City of San Diego.

· “Early Risers Club:” The report found city politicians receiving retirement allowances at absurdly young ages. One ex-politician started receiving a pension check at age 35, another at age 39, while three others began collecting pension checks while in their forties.

·“Double-Dip Club”: The report also found several former city politicians receiving, or in line to receive, taxpayer-funded salaries on top of their city pension.

DeMaio used the report to highlight the need for comprehensive pension reforms before any new revenues are consumed by the pension system. DeMaio urged the Mayor and City Council to lead by example through reforming their own pension benefits immediately.

“The city politicians should act immediately by paying a full equal share for the cost of their pension benefits – and future politicians should simply receive a strict 401(k)-style defined contribution system,” proposed DeMaio. “Politicians should not be receiving a massive taxpayer subsidy for these lavish benefits – and they certainly should not be voting on their own pensions.”

DeMaio also offered a list of recommended pension reforms (see page 3 of the press release), including:

*End Supplemental Pension Savings Program (SPSP) pension contributions
*
Eliminate the subsidy for politicians' pensions
*
Eliminate employee pension "offsets," in which the city (i.e., taxpayers) picks up the employee's share of pension contributions in addition to the city's contributions
*
Enact higher employee contribution rates
*
Cap total employee compensation (salary plus benefits) per city classification.

Adam Summers is Policy Analyst