Teacher Tenure/Unions/Government/Pensions

[macrockett]

Doc and Sashimi, agree with what you both have to say. The only point I will make is this: sooner or later, as the resources dry up, and they will, I can see it as clear as a blue sky on a cloudless day, more and more people will realize what we did months ago. As they begin to question the wisdom of building that school we will see who is held in high esteem.

On another note, unless you are reading as much as I am, you probably aren't aware that there is talk of reducing principal on many of the homes that are in some process of foreclosure or will be. About 25% of all mortgages are now under water with no signs of abating at the moment. The speculation is that as the Fed pulls back from buying the MBSs, FNM and FRE will step in, and to facilitate the relief of principal on those mortgages, the treasury was forced to lift the cap on FNM and FRE by providing an unlimited amount of funds.

Finally, our treasury is projected to issue 2.5 trillion in new debt (treasury securities) in 2010. Enjoy.

[Arch]

Did I hear or mishear that there's approximately 295 TRILLION dollars on the line in the mortgage game...?

If that number is correct, how in the world will the public who owns those loans FIND that money over the terms of the loans? That just seems impossible to me, given the crappy state of or economy today and our inability to 'generate' wealth and income without using some smoke and mirror accounting trick... ie: Our ability to PRODUCE as a nation is Kaput.

That's what keeps me up at night, trying to figure out just where the hell we are headed... IMF bailout possibly when the sh!t finally hits the fan?

[asmodeus]

you probably aren't aware that there is talk of reducing principal on many of the homes that are in some process of foreclosure or will be.

This would be the most disappointing thing to those of us who like to think of ourselves as responsible. We will reach the point where honest people lose faith in the system, and will begin evading taxes or start acting irresponsibly because everyone else seems to be benefiting from such behavior. Heck, our current Treasury Secretary is an admitted tax cheat! Our "leaders" haven't said one thing about PERSONAL responsibility. The financial crisis is Wall Street's fault. The health care crisis is the insurance companies' fault. The CTA crisis is white people's fault.

Unfortunately, the number of takers has increased so fast compared to the givers, it will be extremely difficult to stem the tide. The number of people expecting various handouts has increased exponentially. And people who cannot support themselves or their growing number of kids are having a disproportionate impact on future policies via their votes. In my opinion, class warfare is going to get real ugly in coming years.

[asmodeus]

Did I hear or mishear that there's approximately 295 TRILLION dollars on the line in the mortgage game...?

That seems high -- I thought I had read that the total value of real estate in the US was 14 trillion. But when you look at even 14 trillion, that is an enormous number. Let's say half of that was tied up in mortgages, many of which were 0% down. It's not hard to imagine that people pulled out trillions of equity to fund their consumption, and when that money was all spent, the lenders all went bust (and were subsequently bailed out by the taxpayers who will face a huge bill in the future).

There are two simple solutions, neither of which is politically appealing: One, require 20% minimum down payment on any mortgage. This basic principle--having some commitment to the loan, some skin in the game-- seemed to work fine for decades. Alternatively, mortgages should be recourse loans...that is, if you default, you cannot turn in your keys and walk away. You should be subject to garnishment of wages, or have liens attached to other assets.

Instead, even though everyone with a brain knows that over-borrowing was the prime cause of the meltdown, what is the administration's current policy? Encourage more people, through the FHA, to buy houses with 3% down. It's insane.

[macrockett]

Jan 7, 2010 0:52:50 GMT -6 Arch said:

Did I hear or mishear that there's approximately 295 TRILLION dollars on the line in the mortgage game...?

If that number is correct, how in the world will the public who owns those loans FIND that money over the terms of the loans? That just seems impossible to me, given the crappy state of or economy today and our inability to 'generate' wealth and income without using some smoke and mirror accounting trick... ie: Our ability to PRODUCE as a nation is Kaput.

That's what keeps me up at night, trying to figure out just where the hell we are headed... IMF bailout possibly when the sh!t finally hits the fan?

------------------------------------
Arch, for household real estate go to the Fed Flow of Funds report, page 104 and you can see that households have about 18T in real estate. www.federalreserve.gov/releases/z1/Current/z1.pdf

There are, however, over $500T in outstanding derivatives. At the peak prior to the collapse there were over $650T in outstanding derivatives.

The best example of the "unwinding" that had to take place was Lehman Bros. which is still in the process of doing so. AIG was also a real mess due to the CDSs they issued (Credit default swaps).

[Arch]

OK, Maybe it was the derivatives number I heard.. it was something about what 'banks' had on the line and there was also a talk of toxic assets and the mortgage market in general. Thanks for the clarification.

[macrockett]

online.wsj.com/article/SB126300214621122539.html?mod=article-outset-box#printMode

JANUARY 9, 2010

Wages Still Under Pressure
Rising Tide of Unemployed Lets Employers Keep Lid on Pay Amid Productivity Gains

By SARA MURRAY

Wages of U.S. employees are generally stagnant and likely to remain so as the pool of unemployed workers helps employers keep wages from rising even as productivity, or output per hour of work, soars.

Many employers have lifted salary freezes, but raise budgets remain small. Here's how managers can grab a bigger slice of the raise pie for their teams. WSJ's Lee Hawkins reports.

Average hourly earnings for private-sector production and nonsupervisory workers, who account for about four-fifths of people on private payrolls outside farming, rose three cents in December from November to $18.80 before adjusting for inflation, the Labor Department said Friday.

In the past year, hourly wages have risen 2.2%, not enough to offset the 2.3% increase in the Consumer Price Index from November of 2008 to November 2009.


"There may be pockets of the labor market...where we do see some upward pressure," such as for highly skilled workers, said Steven Davis of the University of Chicago Booth School of Business. "But I don't see any reason in the recent reports to expect strong growth in real [inflation-adjusted] wages."

Other broader measures of wages tell a similar story. Average weekly earnings rose by $1 to $624.16, just 1.9% higher than a year earlier. The government's broadest compensation measure, the Employment Cost Index, which tracks wages and benefits for private and government workers, was up 1.5% in the 12 months ended in September, the most recent data available. But there are some signs of change.


"After very weak growth earlier in 2009, wages now appear to be growing modestly," economist Heidi Shierholz of the left-leaning Economic Policy Institute said Friday.

Separately, the Federal Reserve said Friday that consumer credit, which covers most consumer loans except those for real estate, fell at an 8.5% annual rate in November, reflecting both lack of consumer appetite for borrowing and more tight-fisted lenders. Revolving credit, primarily credit cards, declined at a steep 18.5% annual rate. Non-revolving credit, covering loans for everything from recreational vehicles to education, fell at a 2.9% annual rate.

For those in state and local-government jobs, the worst could be yet to come. "The whole state sector of the economy is probably going to be in worse shape," said labor economist David Card of the University of California at Berkeley, whose own salary has been cut 10%. "That's normally been a kind of supporting factor for the middle class: Police jobs, firemen, teachers, all those jobs are getting completely threatened."

Firefighters in Las Vegas agreed to a wage freeze in June in exchange for maintaining health benefits, said Capt. Dean Fletcher, president of International Association of Firefighters Local 1285. Now the city, its revenues suffering, is asking firefighters to take an 8% pay cut in their next contract. "It's the younger guys that start out at a smaller salary that are pinching to make ends meet," he said. "They were probably banking on a cost-of-living raise."
[Wages]

In Vermont, the union representing 6,500 state government workers, from nurses to snow-plow drivers, recently agreed to a 3% pay cut for two years, effective in July.

Some employers, relieved that the economy isn't as bad as feared, are restoring wage cuts or abandoning wage freezes.

Just 14% of companies said they are planning across-the-board wage freezes this year, compared with 30% who did so last year, according to a recent survey of 350 midsize and large U.S. companies by Mercer LLC, a consulting firm.

At DENSO International America Inc., which makes car components, seven U.S. locations that trimmed hours or salaries during the recession have restored them. At the North American headquarters in Southfield, Mich., salary cuts of 5% to 10% were restored on Jan. 1.

"The economic situation, at least for the short term, was going to seriously impact our business, and we needed to implement various countermeasures to help prevent further loss," said Bridgette LaRose Gollinger, a company spokeswoman.

"We still need to be vigilant in managing budgets and expenses as we can't be certain what will happen in the next year," she added.

AARP, the lobby for older Americans, recently reimbursed employees for the five furlough days they were required to take last year and reinstated employer-match to 401(k) retirement plans it had suspended. Drew Nannis, a spokesman, said, "We did some belt-tightening and as a result at the end of the year found ourselves in a stronger economic position than I think we had expected."

Highly skilled, and thus highly valued, workers will be among the first to see wages improve. In an October survey, 65% of companies said that they were worried about holding onto their best, most skilled employees, according to a survey of 201 human-resources executives by consultants Towers Watson.
—Sarah Needleman contributed to this article.

Write to Sara Murray at [e-mail]

[macrockett]

Isn't this the tail wagging the dog? Where is Congress on this? They sure love beating up on the Bank CEOs, etc., but when it comes to productivity and accountability in education they appear to be M.I.A.

January 13, 2010
Union Chief Seeks to Overhaul Teacher Evaluation Process
By STEVEN GREENHOUSE

WASHINGTON — Facing criticism that her union makes it too hard to get rid of bad teachers, Randi Weingarten, president of the American Federation of Teachers, on Tuesday announced a union-backed effort to develop a new model for how public school teachers should be evaluated, promoted and removed.

The effort will be run by Kenneth R. Feinberg, the federal government’s special master for executive compensation.

In a speech at the National Press Club, Ms. Weingarten sought to present a more flexible, cooperative face for her union as she announced Mr. Feinberg’s new role and called for sweeping changes in how school districts evaluate teachers and work with teachers’ unions.

She scoffed at the predominant method of evaluating teachers — visiting their classroom a few minutes each year and then giving an evaluation at year-end. Instead, she proposed a system of year-round evaluations as part of an effort to improve teaching and weed out ineffective teachers.

For years, her union and the larger National Education Association have been attacked by many conservatives and parents, who say those unions protect bad teachers, gum up the disciplinary process and resist change.

“We need to set high standards for students and teachers,” Ms. Weingarten said. “This is the time to shed the old conflicts and come together.”

“Our system of evaluating teachers has never been adequate,” she said, adding that for too long it “has failed to achieve what must be our goal: continuously improving” teaching.

In some states, teachers have been criticized for opposing the use of student test scores to evaluate teachers. Ms. Weingarten said she was receptive to that, but she added that many other factors should be used, including classroom observations, portfolio reviews, self-evaluations, appraisals of lesson plans, as well as students’ written work, projects and presentations.

She said student test scores should also be considered, not by comparing last year’s test scores with this year’s, but by assessing whether a teacher’s students had shown improvement in the classroom during the school year.

Ms. Weingarten called for new “due process” procedures that might make it easier and faster to remove poorly performing teachers. Critics of the teachers’ federation expressed skepticism, however, about whether it would ultimately agree to the far-reaching changes Ms. Weingarten proposed.
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After all what a great job in LA Unified School District... and kuddos to the State commission which I suspect has significant union influence.


Judge orders L.A. Unified teacher to be fired
January 12, 2010 | 12:24 pm

A Los Angeles County Superior Court judge ordered this morning that a city school district teacher who was removed from the classroom and has been paid to do nothing for more than seven years be dismissed within two weeks.

Matthew Kim, a former special education teacher at Grant High School, was accused of touching co-workers' breasts and making improper advances and comments toward students. He was fired by the L.A. Unified School Board of Education in 2003, but a state commission that has final say on teacher dismissals overturned the firing.

The district then appealed that decision and has been fighting to terminate him ever since. In the meantime, the district has continued to pay Kim, who was born with severe cerebral palsy and is confined to a wheelchair. Because of the district's longstanding interpretation of the teachers contract, Kim has not been given any duties while he has been outside the classroom.

A Times story in May 2009 found that Kim was one of about 160 district employees who have been "housed" while accusations against them are investigated or their terminations are contested.

Judge David P. Yaffe said the Times exposed the issue and it has become "an embarrassment."

Yaffe ordered the Commission on Professional Competence to allow the district to fire Kim by Jan. 26. If he is later reinstated, the district will give Kim back pay with interest.

Kim has denied any improper behavior and his attorney said he may file a petition to the court of appeal.

L.A. Unified has spent more than $2 million in legal fees and salary on the Kim case.

-- Jason Song

[macrockett]

Listen to the video from CNBC about the pension promises made in CA, in 1999, that are now bankrupting the State. See how quickly the liability is growing. In the end, there will be nothing left for anything else in the budget. As an irony, see if you recognize Phil Angelides name in the video, currently presiding over the FCIC inquiry into the financial crisis.


www.cnbc.com/id/15840232?video=1385302669&play=1

The gist of the video is exactly what is happening in Illinois right now. Just as the educational system is being crowded out of the budget in CA, the same is happening right here. State payments to the University of Illinois, for example, aren't being made right now.

www.chicagotribune.com/news/elections/chi-u-of-i-cuts-06-jan06,0,4418645.story
-------------------------------------
In the below editorial the Tribune had a graphic showing 2010 estimated total pension obligations reaching $95 billion. Unfortunately they didn't reprint it in the article online.

www.chicagotribune.com/news/elections/chi-0103edit1jan03,0,89697.story
chicagotribune.com
Splurge. Borrow. Repeat.

January 3, 2010

You're a deadbeat, an astonishing $4.9 billion overdue in paying your bills. You owe much of that for services that were provided many months ago by people who, day in and day out, care for your ailing, handicapped and often helpless fellow citizens.

You're also -- sorry to be blunt -- inept. You repeatedly spend more than you earn and borrow to fill the gap. This year you'll outspend your income by some $12 billion.

In the process you've embraced debts that could plague your descendants after you're dead and gone. Examples: You've bizarrely promised your workers some $80 billion more in pension payouts than you can afford. What's more, you've promised them additional billions that you don't have for their health care after they retire.

Sure, you can delude yourself and pretend these obligations belong not to you but to your faceless state government. That's bogus. State government is really a checking account; it collects, and spends, tax dollars. If you're an Illinois citizen, these massive shortfalls are your obligations.

Halt right there. Ask yourself how many more billions in debt you'll blithely take on in the near future -- if you don't immediately change how you do business. That may mean you have to fire some people you hired to manage your money and provide for your most vulnerable fellow citizens.

Your money managers are the politicians who run Illinois. Many of them have failed you spectacularly. What will you do now?

-- -- --

Your state is in dreadful shape financially -- well on its way to being New Michigan or, worse, New California. Don't take our word. Here's what Moody's Investors Service said Dec. 8, citing a lack of political willpower here to fix deficits as reason for downgrading Illinois' bonds. That downgrade can only make all the borrowing more expensive for taxpayers. Among states, only California's bonds now are rated lower. A heavy paragraph with a gloomy message:

"Moody's also has revised the outlook for (Illinois general obligation bond) and related ratings to negative, reflecting the continuing likelihood of large structural budget deficits, growing negative year-end fund balances, strained operating fund liquidity and mounting pressure from pension and retiree health benefit obligations."

Yet as 2010 dawns, many of your pols have an incredible deal for you: Yes, they've made you insolvent -- that means you can't pay your bills as they come due -- but they promise to make everything spiffy if you re-elect them. They will pay down your debts, which they manufactured in your name. To that end, they want you to hand them even more of your income in . . . taxes.

-- -- --

We have watched those politicians in recent years create ever more obligations for taxpayers -- yet also spent citizens' money in ways that defy common sense. Many public officials are so terrified of bucking public employees unions and other interest groups that they've ducked crucial decisions: to reduce pension benefits for future state hires, to move Medicaid patients to managed care, to demand consolidation of small school districts, to outsource costly internal functions like janitorial and food services . . . The list of money-saving moves private companies long ago would have made goes on and on.

One result of the pols' chronic refusal to respect the public's money as if it was their own: Officials of this state, and too many county governments, deliver greater loyalty and more secure futures to their public employees than they deliver to the citizens who pay their salaries. That's unjust.

-- -- --

Illinois pols cannot ask for more in taxes until they reform how they spend the tens of billions they already collect each year. Trouble is, many of the candidates for governor and for legislative seats see more revenue as the paramount remedy.

That is, having dug a deep hole, they want to fill it with more of your tax dollars -- while simultaneously digging the hole deeper.

Gov. Pat Quinn, meeting with the Tribune editorial board, opened a discussion of the state budget with a narrow statement that the General Assembly "needs to address the revenue issue." Hiking taxes is Quinn's Job One. His primary election opponent, Comptroller Dan Hynes, wants a tax-raising constitutional amendment that couldn't produce a cent of new revenue until 2011.

Candidate Andrew McKenna, by contrast, often blends into his answers the sobering phrase, "Given the resources we have . . ." He would freeze spending at 2006 levels for a few years in order to pay down Illinois' huge debts and unfunded obligations. Dan Proft, one of McKenna's Republican opponents, would halve the state income tax, shave billions in spending immediately -- and then forbid future spending hikes that exceed the rate of population growth plus inflation. State Sen. Kirk Dillard talks of raising revenue by encouraging employment -- his Project Green Tape would cut the cost of doing business by streamlining regulatory processes, re-examining fee increases from the Rod Blagojevich era and recalibrating Illinois' unemployment and worker's compensation taxes. Jim Ryan, a fourth Republican, realistically observes that, "We need a governor capable of saying 'No.' " That governor, Ryan says, is in for a "fight."

What suffuses these comments is a businesslike understanding that McKenna put succinctly: The people of Illinois deserve to be told that, "Every day, we're living beyond our means. . . . The old preconceptions have to be thrown out."

-- -- --

Those preconceptions include the notion that Illinois citizens exist for the primary purpose of supporting 7,000 governments, about 2,000 more than in any other state. In the 21st century, taxpayers are supporting a vast architecture of Illinois governments engineered for the needs of the 19th -- obsolete townships, tiny sewer districts that should merge into larger ones, mosquito abatement and other so-called special districts.

Another loopy preconception that needs to be jettisoned: That Illinois can sustain itself by continuing to borrow. Today's Illinois borrows from future generations by burying them in debt, and in effect borrows from its own suppliers and providers by not paying them money they're owed. Today's Illinois even borrows from itself: The sometimes acceptable practice of short-term lending repeatedly has been overused and abused. The result is a Ponzi scheme on speed that pays yesterday's costs with money borrowed today and due back, with interest, tomorrow.

On Feb. 2, Illinois voters have a choice.

We can raise up our little porridge bowls and ask for more of the same.

Or we can demand that public officials aggressively streamline their governments and how they do business.

Wednesday: Corruption, wimpy ethics bills and concentrated power.

Copyright © 2010, Chicago Tribune
---------------------------------------------------------------------------
Just last year the Civic Committee of the Commercial Club of Chicago showed the year end 2008 estimate of the pension liability at $80 billion. See page 8 of the following pdf:

www.civiccommittee.org/initiatives/StateFinance/FacingFacts2009.pdf

[macrockett]

What classifies an entity as a special interest in Washington? You be the judge. Read the three articles below.

online.wsj.com/article/SB10001424052748704281204575003040695279432.html?mod=WSJ_WSJ_US_News_5#printMode

January 7, 2010, 6:23 PM ET

Talking Taxes: Unions, Obama to Discuss Taxing Health Plans

By Laura Meckler

How to pay the bill is among the contentious issues yet to be resolved in the health debate.

President Barack Obama has made clear that, like the Senate, he favors a tax on high-end health insurance plans. In the coming days, union leaders — who fiercely oppose that idea–will get their chance to talk him out of it.

Obama plans to meet with union leaders over the proposal in the next few days, a labor official said. Unions, who are among the Democrats’ most loyal supporters, argue that the plan will punish workers who won excellent health benefits in hard-fought negotiations. Unions have sometimes given up wages in order to get better health care plans.

Many health economists like the idea, though, because it will steer people away from health plans where consumers pay very little for health services and therefore have little incentive to control costs.

Obama made the case for the tax–often called a “Cadillac tax” because it affects high-end insurance–to Democratic House leaders earlier this week. The House did not include this tax in their version of the health bill.

At the White House, labor is expected to be represented by the AFL-CIO, the Service Employees International Union and AFSCME, among others.
----------------------------------------------------------------------------------
www.nytimes.com/2010/01/13/health/policy/13health.html?pagewanted=print

January 13, 2010
Labor Campaigns Against Tax on Health Plans
By ROBERT PEAR and DAVID M. HERSZENHORN

WASHINGTON — Having failed to persuade President Obama to scrap a proposed tax on high-cost health insurance policies, labor leaders took their case Tuesday to Speaker Nancy Pelosi, and they said they received a more favorable response.

“I love the House, and I love the speaker,” Andrew L. Stern, president of the Service Employees International Union, said after the meeting.

House and Senate Democrats are trying to iron out numerous differences in bills passed by the two chambers to expand coverage and rein in health costs.

“We are not ready at this point to get a single bill that we can agree to,” said Representative Louise M. Slaughter, Democrat of New York, the chairwoman of the Rules Committee and a member of the speaker’s leadership team.

House Democrats held a caucus on Tuesday night to figure out how they could finish work on legislation to remake the health care system along the lines proposed by Mr. Obama.

Having devoted much of 2008 to the legislation, senior House Democrats said it could be a political disaster if they failed to pass it in this election year.

But House Democrats made clear on Tuesday that they would not simply accept the Senate’s positions on major issues.

House Democratic leaders said, for example, that they would insist on a single national insurance exchange, where many individuals, families and small businesses could shop for coverage. The Senate bill calls for dozens of state-based exchanges.

And House Democrats said they would also insist on eliminating the exemption from federal antitrust law that health insurance companies have long enjoyed. The House bill would revoke the exemption, while the Senate bill would maintain it. If the exemption is repealed, Democrats said, it would be easier for federal officials to take action against price-fixing or other anticompetitive practices in the health insurance industry.

Under the Senate bill, the federal government would impose a 40 percent tax on the value of employer-sponsored health coverage exceeding $8,500 a year for an individual and $23,000 for a family. The bill would make certain allowances for plans covering retirees 55 and older and workers in high-risk occupations.

Ms. Pelosi noted that the president wanted the tax.

But Representative Jerrold Nadler, Democrat of New York, said: “The view of many progressives is that the tax is unacceptable. It would affect a lot of middle-income people.”

Mr. Nadler said the politics of the tax should worry Democrats. In effect, he said, “the tax tells blue-collar workers that you should pay higher taxes and get lower benefits to help finance coverage for the uninsured.”

The Congressional Budget Office estimates that the tax would raise $149 billion over 10 years.

The House bill would not tax health benefits, and Representative Joe Courtney, Democrat of Connecticut, said that at least 190 House members had signed a letter opposing such a tax.

Mr. Stern, the union president, said that many workers with plans costing more than $23,000 a year did not have luxurious coverage. At a White House meeting on Monday, he said, labor leaders told Mr. Obama that some workers with rather ordinary health plans had to pay very high premiums because insurance companies faced little competition.

Mr. Stern said that many union leaders were concerned more about the formula that would be used to increase the tax thresholds in the future than about the initial thresholds of $8,500 and $23,000. Union leaders said they feared that under the formula in the Senate bill, the tax would hit more and more health plans, which would pass on the cost to more and more workers.

Representative Charles B. Rangel, Democrat of New York and chairman of the Ways and Means Committee, said it would be difficult to win support in the House for the proposed tax on high-cost plans. “That’s going to be a problem,” he said.

Some Democrats had assumed that the House would yield to the Senate on many issues because any changes in the Senate bill could imperil the 60-vote majority needed to overcome opposition from Republican senators.

But Ms. Slaughter said, “It is as hard for us to find 218 votes in the House as for the Senate to find 60.”

At their caucus, House Democrats said, they felt pressure to make concessions to get a deal on health care. “A lot of people think we have a gun to our head and don’t like it very much,” said Representative Anthony Weiner, Democrat of New York.

Ms. Slaughter said “it is really critical” to have a single national insurance exchange managed by the federal government. “If you leave that up to the states,” she said, “some states will not do what we are asking them to do.”

The National Association of Insurance Commissioners took a different view. In a letter to Ms. Pelosi, the association said that states should retain primary responsibility for regulating insurance, and that insurance exchanges should be “established and administered at the state level, with the flexibility to meet the needs of our local markets and consumers.”

While Democrats tried to work out their differences on Tuesday, the Senate Republican leader, Mitch McConnell of Kentucky, said, “We are going to do everything we can to stop this bill.”

“I have great hope that enough Democrats are going to wake up and say we should not thumb our noses at the American people and cram this down their throats, no matter what they think,” Mr. McConnell said. “It’s an act of incredible arrogance.”

Steven Greenhouse contributed reporting.
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online.wsj.com/article/SB10001424052748704281204575003040695279432.html?mod=WSJ_hps_MIDDLEThirdNews

JANUARY 15, 2010

Unions Cut Special Deal on Health Taxes

By LAURA MECKLER And NAFTALI BENDAVID

Democratic negotiators acceded to union demands for a scaled-back tax on high-end health-insurance plans, exempting union contracts from the tax until 2018, five years beyond the start date for other workers.

The deal helped Democrats clear a key hurdle, but the reduced tax added to the pressure to find new revenue to pay for their health bill, which is designed to give coverage to tens of millions of uninsured Americans. Negotiators were considering increasing the financial hit on drug makers, nursing homes and medical-device makers, according to people familiar with the discussions.

The tax on high-value insurance plans was included in the Senate's version of the bill but not the House's, and has been one of the main unresolved issues as Democrats work to combine measures passed by the two chambers late last year.

Unions, as well as many House Democrats, are fiercely opposed to the tax on "Cadillac" insurance plans, which they say will hit many middle-class workers and undermine benefits won by unions.

President Barack Obama has supported the measure as a way to pay for the legislation and control overall health-care spending. The changes mean that the tax will raise about $90 billion over 10 years, down from $149 billion in the Senate bill, labor officials said.

Mr. Obama traveled to Capitol Hill to reassure House Democrats who feared a vote for the bill would be politically damaging. "I know how big a lift this has been. I see the polls," Mr. Obama said. He promised to wage a "great campaign from one end of the country to the other to sell the legislation to the public should it become law.

Republicans seized on the delay for unionized workers to say the deal was unfair to workers not in unions, who would be forced to pay the tax five years earlier, starting in 2013.

"The White House and congressional Democrats are picking one group of workers over another," said Antonia Ferrier, spokeswoman for Republican House Minority Leader John Boehner. "If this sounds discriminatory, well it is."

J.P. Fielder, a spokesman for the U.S. Chamber of Commerce, said that like the unions, the business community didn't like the tax and supported scaling it back. But he said it seemed unfair for unionized workers to be exempted for five years when others were not.

In addition to softening the tax on high-end plans, Democrats plan to increase subsidies for lower earners to buy health insurance. To pay for such changes, Democrats are considering levying an additional $10 billion in fees on medical-device makers, for a total of $30 billion over 10 years. But it wasn't a done deal as the House was showing resistance.

Congressional negotiators have also told drug makers they were considering decreasing reimbursements under government health programs or increasing fees by an additional $10 billion over a decade, beyond the $80 billion in concessions the industry agreed to last year, according to people familiar with the negotiations. And lawmakers are looking to push fees on nursing homes past the $14.6 billion over a decade that is in the Senate version.

The union deal comes as the White House and congressional leaders pressed to reach a final agreement on key parts of health-care legislation by the weekend. Top congressional Democrats negotiated with the president into the night Thursday, the second consecutive day of lengthy talks. They hoped to have an agreement ready for assessment by the Congressional Budget Office as soon as Friday.

Issues that have yet to be resolved, aides said, included how to structure the new exchanges where Americans would buy coverage, how much to increase the Medicare payroll tax and how to handle restrictions on abortion coverage.

Union leaders pressed their case for the changes on the high-end insurance tax at two White House meetings this week, including a two-hour session with Mr. Obama.

The dispute threatened to drive a wedge between the White House and unions, which strongly backed Mr. Obama's presidential campaign. The president of the AFL-CIO, Richard Trumka, this week suggested that without changes to this provision, unions might be less likely to help Democrats on the ballot this fall and Republicans could take back the House. Another union threatened to pull support for the health bill, Mr. Obama's top legislative priority.

After Thursday's agreement, labor leaders had warm words for the president and said they would promote the deal among Democrats.

Under the Senate bill, health insurers would have paid a 40% tax on premiums that exceed $8,500 annually for individuals, or $23,000 for family plans. The agreement reached Thursday raises those thresholds slightly, to $8,900 for individuals and $24,000 for families, with annual increases tied to one point above the Consumer Price Index, labor and White House officials said.
Journal Community

* discuss

“ When did unions become the third branch of Congress that Democrats need their approval in these negotiations? ”

—Matthew Stuebe

The threshold increases further if health-care costs rise faster than predicted between now and 2013, when the tax takes effect, officials said. In addition, the value of dental and vision benefits wouldn't count toward the thresholds, and the threshold would rise further for plans where premiums were higher because the work force was older or had more women. There are also adjustments for 17 states with particularly high health costs.

In addition, union officials said that under the agreement, companies with unionized work forces could buy their health coverage beginning in 2017 through the new exchange, which had been designed to serve individuals and small businesses. White House officials suggested that wasn't a done deal but said that over time they wanted to open the exchange to more people.

Both labor and White House officials described the delay in applying the tax to Cadillac plans as a transition and said many of the other changes apply to all workers.

"We think we've done a great job for all working Americans out there and that includes union members," Mr. Trumka said.
—Jonathan D. Rockoff and Janet Adamy contributed to this article.
-----------------------------------------------------------------------------------
Well what do you think? That took about a week to get settled. Access to the President, the Speaker of the House, the Senate. Done deal.

The question is, who gets stuck with the shortfall in revenue? Or does it just become another unfunded liability...

The point is unions have special access because they are special. They are organized and they vote, primarily for democrats. Locally you saw that in the race for the Illinois State House between Senger and McGuire. McGuire, formerly of the Teachers Union was funded by Madigan and Co. as I am sure you know.

Unions are no different than any other special interest or lobbyist. They all seek the same thing, an advantage over others. Usually a monetary advantage. Defined Benefit pensions for sure are the goose that laid the golden egg, especially if they have a cost of living increase every year. Cadillac health care is second, especially plans that include coverage in retirement . Tenure and salaries are third.

A few days ago GM ramped up an electric battery plant in Michigan. GM kicked in a few bucks and the Department of Energy, et al, is giving them a grant of about $241 million. Imagine that!

www.businessgreen.com/business-green/news/2255661/gm-power-volt-battery-plant

online.wsj.com/public/resources/documents/st_PLUGIN0908_20090805.html

One other thing to keep in mind. How many small businesses in the US have been helped by our government?

[doctorwho]

Jan 14, 2010 22:06:45 GMT -6 macrockett said:

What classifies an entity as a special interest in Washington? You be the judge. Read the three articles below.

online.wsj.com/article/SB10001424052748704281204575003040695279432.html?mod=WSJ_WSJ_US_News_5#printMode

January 7, 2010, 6:23 PM ET

Talking Taxes: Unions, Obama to Discuss Taxing Health Plans

By Laura Meckler

How to pay the bill is among the contentious issues yet to be resolved in the health debate.

President Barack Obama has made clear that, like the Senate, he favors a tax on high-end health insurance plans. In the coming days, union leaders — who fiercely oppose that idea–will get their chance to talk him out of it.

Obama plans to meet with union leaders over the proposal in the next few days, a labor official said. Unions, who are among the Democrats’ most loyal supporters, argue that the plan will punish workers who won excellent health benefits in hard-fought negotiations. Unions have sometimes given up wages in order to get better health care plans.

Many health economists like the idea, though, because it will steer people away from health plans where consumers pay very little for health services and therefore have little incentive to control costs.

Obama made the case for the tax–often called a “Cadillac tax” because it affects high-end insurance–to Democratic House leaders earlier this week. The House did not include this tax in their version of the health bill.

At the White House, labor is expected to be represented by the AFL-CIO, the Service Employees International Union and AFSCME, among others.
----------------------------------------------------------------------------------
www.nytimes.com/2010/01/13/health/policy/13health.html?pagewanted=print

January 13, 2010
Labor Campaigns Against Tax on Health Plans
By ROBERT PEAR and DAVID M. HERSZENHORN

WASHINGTON — Having failed to persuade President Obama to scrap a proposed tax on high-cost health insurance policies, labor leaders took their case Tuesday to Speaker Nancy Pelosi, and they said they received a more favorable response.

“I love the House, and I love the speaker,” Andrew L. Stern, president of the Service Employees International Union, said after the meeting.

House and Senate Democrats are trying to iron out numerous differences in bills passed by the two chambers to expand coverage and rein in health costs.

“We are not ready at this point to get a single bill that we can agree to,” said Representative Louise M. Slaughter, Democrat of New York, the chairwoman of the Rules Committee and a member of the speaker’s leadership team.

House Democrats held a caucus on Tuesday night to figure out how they could finish work on legislation to remake the health care system along the lines proposed by Mr. Obama.

Having devoted much of 2008 to the legislation, senior House Democrats said it could be a political disaster if they failed to pass it in this election year.

But House Democrats made clear on Tuesday that they would not simply accept the Senate’s positions on major issues.

House Democratic leaders said, for example, that they would insist on a single national insurance exchange, where many individuals, families and small businesses could shop for coverage. The Senate bill calls for dozens of state-based exchanges.

And House Democrats said they would also insist on eliminating the exemption from federal antitrust law that health insurance companies have long enjoyed. The House bill would revoke the exemption, while the Senate bill would maintain it. If the exemption is repealed, Democrats said, it would be easier for federal officials to take action against price-fixing or other anticompetitive practices in the health insurance industry.

Under the Senate bill, the federal government would impose a 40 percent tax on the value of employer-sponsored health coverage exceeding $8,500 a year for an individual and $23,000 for a family. The bill would make certain allowances for plans covering retirees 55 and older and workers in high-risk occupations.

Ms. Pelosi noted that the president wanted the tax.

But Representative Jerrold Nadler, Democrat of New York, said: “The view of many progressives is that the tax is unacceptable. It would affect a lot of middle-income people.”

Mr. Nadler said the politics of the tax should worry Democrats. In effect, he said, “the tax tells blue-collar workers that you should pay higher taxes and get lower benefits to help finance coverage for the uninsured.”

The Congressional Budget Office estimates that the tax would raise $149 billion over 10 years.

The House bill would not tax health benefits, and Representative Joe Courtney, Democrat of Connecticut, said that at least 190 House members had signed a letter opposing such a tax.

Mr. Stern, the union president, said that many workers with plans costing more than $23,000 a year did not have luxurious coverage. At a White House meeting on Monday, he said, labor leaders told Mr. Obama that some workers with rather ordinary health plans had to pay very high premiums because insurance companies faced little competition.

Mr. Stern said that many union leaders were concerned more about the formula that would be used to increase the tax thresholds in the future than about the initial thresholds of $8,500 and $23,000. Union leaders said they feared that under the formula in the Senate bill, the tax would hit more and more health plans, which would pass on the cost to more and more workers.

Representative Charles B. Rangel, Democrat of New York and chairman of the Ways and Means Committee, said it would be difficult to win support in the House for the proposed tax on high-cost plans. “That’s going to be a problem,” he said.

Some Democrats had assumed that the House would yield to the Senate on many issues because any changes in the Senate bill could imperil the 60-vote majority needed to overcome opposition from Republican senators.

But Ms. Slaughter said, “It is as hard for us to find 218 votes in the House as for the Senate to find 60.”

At their caucus, House Democrats said, they felt pressure to make concessions to get a deal on health care. “A lot of people think we have a gun to our head and don’t like it very much,” said Representative Anthony Weiner, Democrat of New York.

Ms. Slaughter said “it is really critical” to have a single national insurance exchange managed by the federal government. “If you leave that up to the states,” she said, “some states will not do what we are asking them to do.”

The National Association of Insurance Commissioners took a different view. In a letter to Ms. Pelosi, the association said that states should retain primary responsibility for regulating insurance, and that insurance exchanges should be “established and administered at the state level, with the flexibility to meet the needs of our local markets and consumers.”

While Democrats tried to work out their differences on Tuesday, the Senate Republican leader, Mitch McConnell of Kentucky, said, “We are going to do everything we can to stop this bill.”

“I have great hope that enough Democrats are going to wake up and say we should not thumb our noses at the American people and cram this down their throats, no matter what they think,” Mr. McConnell said. “It’s an act of incredible arrogance.”

Steven Greenhouse contributed reporting.
----------------------------------------------------------
online.wsj.com/article/SB10001424052748704281204575003040695279432.html?mod=WSJ_hps_MIDDLEThirdNews

JANUARY 15, 2010

Unions Cut Special Deal on Health Taxes

By LAURA MECKLER And NAFTALI BENDAVID

Democratic negotiators acceded to union demands for a scaled-back tax on high-end health-insurance plans, exempting union contracts from the tax until 2018, five years beyond the start date for other workers.

The deal helped Democrats clear a key hurdle, but the reduced tax added to the pressure to find new revenue to pay for their health bill, which is designed to give coverage to tens of millions of uninsured Americans. Negotiators were considering increasing the financial hit on drug makers, nursing homes and medical-device makers, according to people familiar with the discussions.

The tax on high-value insurance plans was included in the Senate's version of the bill but not the House's, and has been one of the main unresolved issues as Democrats work to combine measures passed by the two chambers late last year.

Unions, as well as many House Democrats, are fiercely opposed to the tax on "Cadillac" insurance plans, which they say will hit many middle-class workers and undermine benefits won by unions.

President Barack Obama has supported the measure as a way to pay for the legislation and control overall health-care spending. The changes mean that the tax will raise about $90 billion over 10 years, down from $149 billion in the Senate bill, labor officials said.

Mr. Obama traveled to Capitol Hill to reassure House Democrats who feared a vote for the bill would be politically damaging. "I know how big a lift this has been. I see the polls," Mr. Obama said. He promised to wage a "great campaign from one end of the country to the other to sell the legislation to the public should it become law.

Republicans seized on the delay for unionized workers to say the deal was unfair to workers not in unions, who would be forced to pay the tax five years earlier, starting in 2013.

"The White House and congressional Democrats are picking one group of workers over another," said Antonia Ferrier, spokeswoman for Republican House Minority Leader John Boehner. "If this sounds discriminatory, well it is."

J.P. Fielder, a spokesman for the U.S. Chamber of Commerce, said that like the unions, the business community didn't like the tax and supported scaling it back. But he said it seemed unfair for unionized workers to be exempted for five years when others were not.

In addition to softening the tax on high-end plans, Democrats plan to increase subsidies for lower earners to buy health insurance. To pay for such changes, Democrats are considering levying an additional $10 billion in fees on medical-device makers, for a total of $30 billion over 10 years. But it wasn't a done deal as the House was showing resistance.

Congressional negotiators have also told drug makers they were considering decreasing reimbursements under government health programs or increasing fees by an additional $10 billion over a decade, beyond the $80 billion in concessions the industry agreed to last year, according to people familiar with the negotiations. And lawmakers are looking to push fees on nursing homes past the $14.6 billion over a decade that is in the Senate version.

The union deal comes as the White House and congressional leaders pressed to reach a final agreement on key parts of health-care legislation by the weekend. Top congressional Democrats negotiated with the president into the night Thursday, the second consecutive day of lengthy talks. They hoped to have an agreement ready for assessment by the Congressional Budget Office as soon as Friday.

Issues that have yet to be resolved, aides said, included how to structure the new exchanges where Americans would buy coverage, how much to increase the Medicare payroll tax and how to handle restrictions on abortion coverage.

Union leaders pressed their case for the changes on the high-end insurance tax at two White House meetings this week, including a two-hour session with Mr. Obama.

The dispute threatened to drive a wedge between the White House and unions, which strongly backed Mr. Obama's presidential campaign. The president of the AFL-CIO, Richard Trumka, this week suggested that without changes to this provision, unions might be less likely to help Democrats on the ballot this fall and Republicans could take back the House. Another union threatened to pull support for the health bill, Mr. Obama's top legislative priority.

After Thursday's agreement, labor leaders had warm words for the president and said they would promote the deal among Democrats.

Under the Senate bill, health insurers would have paid a 40% tax on premiums that exceed $8,500 annually for individuals, or $23,000 for family plans. The agreement reached Thursday raises those thresholds slightly, to $8,900 for individuals and $24,000 for families, with annual increases tied to one point above the Consumer Price Index, labor and White House officials said.
Journal Community

* discuss

“ When did unions become the third branch of Congress that Democrats need their approval in these negotiations? ”

—Matthew Stuebe

The threshold increases further if health-care costs rise faster than predicted between now and 2013, when the tax takes effect, officials said. In addition, the value of dental and vision benefits wouldn't count toward the thresholds, and the threshold would rise further for plans where premiums were higher because the work force was older or had more women. There are also adjustments for 17 states with particularly high health costs.

In addition, union officials said that under the agreement, companies with unionized work forces could buy their health coverage beginning in 2017 through the new exchange, which had been designed to serve individuals and small businesses. White House officials suggested that wasn't a done deal but said that over time they wanted to open the exchange to more people.

Both labor and White House officials described the delay in applying the tax to Cadillac plans as a transition and said many of the other changes apply to all workers.

"We think we've done a great job for all working Americans out there and that includes union members," Mr. Trumka said.
—Jonathan D. Rockoff and Janet Adamy contributed to this article.
-----------------------------------------------------------------------------------
Well what do you think? That took about a week to get settled. Access to the President, the Speaker of the House, the Senate. Done deal.

The question is, who gets stuck with the shortfall in revenue? Or does it just become another unfunded liability...

The point is unions have special access because they are special. They are organized and they vote, primarily for democrats. Locally you saw that in the race for the Illinois State House between Senger and McGuire. McGuire, formerly of the Teachers Union was funded by Madigan and Co. as I am sure you know.

Unions are no different than any other special interest or lobbyist. They all seek the same thing, an advantage over others. Usually a monetary advantage. Defined Benefit pensions for sure are the goose that laid the golden egg, especially if they have a cost of living increase every year. Cadillac health care is second, especially plans that include coverage in retirement . Tenure and salaries are third.

A few days ago GM ramped up an electric battery plant in Michigan. GM kicked in a few bucks and the Department of Energy, et al, is giving them a grant of about $241 million. Imagine that!

www.businessgreen.com/business-green/news/2255661/gm-power-volt-battery-plant

online.wsj.com/public/resources/documents/st_PLUGIN0908_20090805.html

One other thing to keep in mind. How many small businesses in the US have been helped by our government?

i just hope those looking at this, if it is shoved down our throats, also consider not only the value of the plan- but what some of us already pay towards the plan each month. For instance my plan is pretty good, but not as good as 10 years ago -- however my contribution has gone from $0 to well over $600/month. Want to make sure they don't just tax on the value of the plan...

Can't believe this whole process being done behnd closed doors- Chicago politics has truly come to the White House

[macrockett]

Here is a followup video on my last post about the unions ability to get an exemption from the taxes coming on health care (: www.cnbc.com/id/15840232?video=1386724678&play=1

The comment I have is the government rep in the debate says these were "pre-negotiated" contracts. My question is, I didn't know government negotiated contracts for the private sector union employees as well. In addition, I am unaware of labor contracts covering a period of 8 years as mentioned in the video. If it walks like a duck, quacks like a duck...

[Arch]

Jan 15, 2010 14:29:51 GMT -6 macrockett said:

Here is a followup video on my last post about the unions ability to get an exemption from the taxes coming on health care (: www.cnbc.com/id/15840232?video=1386724678&play=1

The comment I have is the government rep in the debate says these were "pre-negotiated" contracts. My question is, I didn't know government negotiated contracts for the private sector union employees as well. In addition, I am unaware of labor contracts covering a period of 8 years as mentioned in the video. If it walks like a duck, quacks like a duck...

This walks like a duck, quacks like a duck... which means we're f----d.

[macrockett]

I have to say, I love the internet. It has provided us with unparalleled transparency (except for detailed information about our school district of course). I was following up on my latest topic here about the excise tax on health care plans, and the unions success in carving out an exception for itself.

I decided to go to the NEA site to see what they had to say about it. Here is one item of interest:

Federal Legislative Updates

News from Capitol Hill. . .


January 15, 2010
Agreement Reached On Health Care Excise Tax That Will Make The Bill Fair To Working Families!


Tell Congress: Let’s Finish Reform Right

Yesterday, NEA President Dennis Van Roekel and other labor leaders concluded a days-long intense negotiation with the White House and reached a tentative agreement on the controversial excise tax on higher cost health plans. The deal makes the bill fair to working families and brings us one step closer to meeting our goal of increasing the number of people who have access to quality, affordable health care.

With this agreement reached, work can now continue to pass needed health reform.

This agreement would not have been possible without the strong message sent by NEA activists across the country to Congress and the President making very clear our strong opposition to the excise tax. In the past week alone, NEA cyberlobbyists sent over 45,000 e-mails to Congress and President Obama opposing the tax. Thank you for your efforts on this most important issue.

We still need your help to make sure Congress passes a good reform bill. This has been a long fight and it’s not over yet. We must continue to encourage the House and Senate to support a bill that makes quality health care more affordable and accessible for all working families.

Tell Congress to finish the job and deliver a health reform bill that meets the needs of America’s families. [insert alert #]

Why Health Insurance Reform is Important

* The bill under consideration goes a long way toward giving quality, affordable health care to more than 30 million Americans in this country – many of whom are children.
* Health care is an education issue. Our 3.2 million members educate our nation’s children. Students who come to school healthy and ready to learn will one day be prepared to be contributing members to the well-being and prosperity of our nation and the world.
* We cannot close the achievement gaps when so many of our student’s families don’t have job security, health care coverage, or access to living wages and benefits.
* Studies show that poor children (children below the poverty line and likely without health care coverage) are more likely than better-off children to suffer from a wide array of chronic health problems, such as asthma and digestive disorders, that affect school readiness in many ways.

Read more about the excise tax agreement
Watch NEA President Dennis van Roekel’s new video message
Read President Van Roekel’s statement about the excise tax agreement

[macrockett]

I have to say, I love the internet. It has provided us with unparalleled transparency (except for detailed information about our school district of course). I was following up on my latest topic here about the excise tax on health care plans, and the unions success in carving out an exception for itself.

I decided to go to the NEA site to see what they had to say about it. Here is one item of interest:
-------------------------------------------------------------------
www.nea.org/bare/print.html?content=/bare/19449.htm

Federal Legislative Updates

News from Capitol Hill. . .


January 15, 2010
Agreement Reached On Health Care Excise Tax That Will Make The Bill Fair To Working Families!


Tell Congress: Let’s Finish Reform Right

Yesterday, NEA President Dennis Van Roekel and other labor leaders concluded a days-long intense negotiation with the White House and reached a tentative agreement on the controversial excise tax on higher cost health plans. The deal makes the bill fair to working families and brings us one step closer to meeting our goal of increasing the number of people who have access to quality, affordable health care.

With this agreement reached, work can now continue to pass needed health reform.


This agreement would not have been possible without the strong message sent by NEA activists across the country to Congress and the President making very clear our strong opposition to the excise tax. In the past week alone, NEA cyberlobbyists sent over 45,000 e-mails to Congress and President Obama opposing the tax. Thank you for your efforts on this most important issue.

We still need your help to make sure Congress passes a good reform bill. This has been a long fight and it’s not over yet. We must continue to encourage the House and Senate to support a bill that makes quality health care more affordable and accessible for all working families.

Tell Congress to finish the job and deliver a health reform bill that meets the needs of America’s families. [insert alert #]

Why Health Insurance Reform is Important

* The bill under consideration goes a long way toward giving quality, affordable health care to more than 30 million Americans in this country – many of whom are children.
* Health care is an education issue. Our 3.2 million members educate our nation’s children. Students who come to school healthy and ready to learn will one day be prepared to be contributing members to the well-being and prosperity of our nation and the world.
* We cannot close the achievement gaps when so many of our student’s families don’t have job security, health care coverage, or access to living wages and benefits.
* Studies show that poor children (children below the poverty line and likely without health care coverage) are more likely than better-off children to suffer from a wide array of chronic health problems, such as asthma and digestive disorders, that affect school readiness in many ways.

Read more about the excise tax agreement
Watch NEA President Dennis van Roekel’s new video message
Read President Van Roekel’s statement about the excise tax agreement

© Copyright 2002-2010 National Education Association
--------------------------------------------------------------------------

Then I read this about advocating for higher starting salaries at a time, mind you, that the average private sector worker makes about $40k per year, far less benefits and at a time where people are clamoring to get into teaching! (see my earlier posts on this thread):
--------------------------------------------------------------------------------------
Low teacher pay comes at a high cost for schools and kids, who lose good teachers to better-paying professions. Some 20 percent of new public school teachers leave the profession by the end of the first year, and almost half leave within five years. Pay-related turnover is especially high for minorities, males, and teachers under the age of 30.

Having highly qualified teachers is essential to student success — but who in the future will be lured into a profession with wages that start low and fail to keep pace with comparable careers?

Through its nationwide salary initiative, NEA is advocating for a $40,000 starting salary for all pre-K-12 teachers, and appropriate professional pay for higher education faculty and staff.

------------------------------------------------------------------------------------
I urge you to go to the NEA site and peruse the large volume of information there, to get your own sense of what a juggernaut the NEA is "with its 3.2 million members."

The NEA, along with its membership, is nothing short of a powerful lobby, and they aren't shy about it.

There a few problems I have with that. First, it represents a monopoly on the education of our children in that all homeowners are forced to pay for it through property taxes. Second, other than income taxes, it extracts the largest percentage of my net worth every year. Third, the generous retirement benefits the NEA has forged on behalf of its members are bankrupting many of the states in our country.

Finally, as educated as the membership seems to be, they are virtually clueless about economics and the unsustainable burden they are putting on our country. But don't take my word for it, see what Warren Buffett had to say, in his most recent annual report to shareholders in 2009:

-------------------------------------------------------------------------------------
Pensions:

- “Local governments are going to face far tougher fiscal problems in the future than they have to date. The pension liabilities I talked about in last year’s report will be a huge contributor to these woes. Many cities and states were surely horrified when they inspected the status of their funding at yearend 2008. The gap between assets and a realistic actuarial valuation of present liabilities is simply staggering.” As an example, in Canada, there are already pension problems. Canadian pension fund Caisse de depot et placement du Quebec, lost $39.8B in 2008 alone. Canada’s public sector pension plans are typically guaranteed by the government, which means taxpayers will likely pay for correcting the mistakes made by the funds. Caisse de depot’s losses were primarily due to a currency hedging program and investment in asset-backed commercial paper that went wrong. OMERS (pension for Ontario municipal employees) reported an $8B loss for 2008. Other pensions such as Alberta’s teacher’s pension received billions to help with losses. Unprecedented losses at public sector pensions along with problems from collapsing housing prices, losses in RRSPs, and a wave of retiring/recently-retired baby boomers, pose serious fiscal problems."
----------------------------------------------------------------------------------
While Mr. Buffett uses the Canadian example because it has reached a critical mass sooner than States pensions, he doesn't parse words about the problems here.

investmentblog.wordpress.com/2009/03/02/warren-buffett-berkshire-2008-letter/

His words were echoed by the District Administrator Magazine:

www.districtadministration.com/viewarticle.aspx?articleid=2253

Will Pensions Bankrupt Your District?
State retirement funds are in crisis, and school systems will likely pay more of the bill.
By Kurt Eisele-Dyrli
January 2010

As the superintendent of the St. Mary Parish (La.) Schools since 2004, Don Aguillard faces many fiscal challenges in overseeing the rural district’s 1,500 employees and 10,000 students. But for the 2010-2011 school year, a new and significant financial burden will be added to his annual budget. In an effort to make up a large funding shortfall, Louisiana’s two largest teacher retirement systems will be raising their required employer contribution rates, one from 15.5 percent of salary to 20 percent, the other from 17.6 percent to 24.3 percent. Aguillard estimates the total increase will add between $2.3 million and $2.6 million to his district’s annual budget of $83 million. “ The rates are calculated by each retirement system, and we do not have any power to alter them,” Aguillard says, adding that the sudden rate increases “will have devastating impacts on our operating budget.”

A similar situation exists in nearly every state in the country. The financial state of the nation’s public pension funds—which provide the retirement incomes for all state employees but in most states are dominated by teachers, administrators and other school employees—has gone from bad to worse, and for most it is only projected to worsen in coming decades. A perfect storm of factors has combined in the past year. Long-term trends of insufficient state funding, ever-increasing payment obligations and retirees living longer than ever, coupled with the market crash at the end of 2008, have put most teacher retirement funds on a path to financial disaster.
Worsening a Crisis

Since public pension funds count on investment returns for asset growth—and because the market boom of the 1990s caused many fund managers to make riskier investments and states to reduce their contributions and rely even more heavily on returns—the 2008 stock market decline was catastrophic, pushing what were already declining values in many states off a cliff.

The Iowa state pension fund’s value dropped over $3 billion in the course of the year, putting the total deficit at nearly $5 billion. A recent report by the University of Kansas described that state’s pension fund as “bankrupt,” with a projected shortfall between assets and payout obligations of $8.3 billion in the next 25 years.

In Colorado, the state employee pension fund plummeted in value from $43.1 billion at the end of 2007 to $30.8 billion at the end of 2008, a drop of more than 25 percent, with the state retirement agency acknowledging in a recent report that the fund “cannot invest its way out of” the situation. The New York state retirement fund—which has also been rocked by a kickback scandal that resulted in October in the arrest and guilty pleas of officials in the state comptroller’s office—lost $23 billion over the year. And the largest funds of them all, the California Public Employee Retirement System (CALPERS) and the California State Teacher Retirement System (CALSTRS), together lost a total of $100 billion of their high of $260 billion in assets after the 2008 crash. While they have since regained about $40 billion of the loss as the stock market has rebounded in 2009, the funds are still tens of billions short of future obligations.
"If no changes are made, we will eventually be unable to pay benefits."
-Michael Nehf, executive director, Ohio State Teachers Retirement System

Pension Politics

While the market crash accelerated the problem, many states’ retirement programs were in trouble well before 2008. A 2007 report by the Pew Charitable Trusts’ Center on the States found that the nation’s public pension funds were a total of $731 billion short of obligations—which it admitted was a “conservative figure”—the result of risky investments, chronic state underfunding, and increasing levels of benefit guarantees from legislators. The American Enterprise Institute calculated, based on numbers from the Center for Retirement Research at Boston College and market adjustments from Forbes, that in 2007 only Oregon had funded over 80 percent of its future pension obligations, leaving 49 states with less than 80 percent funding and over a dozen with less than 60 percent. “The tension at the heart of pension politics is the incentive to satisfy today’s claimants in the here and now at the expense of long-term concerns,” says Frederick Hess, AEI director of education policy studies. Legislators are pressured to increase benefits paid but rarely, if ever, to provide adequate future funding, especially not if it involves raising taxes. “Public pension promises are huge and, in many cases, funding is woefully inadequate,” Warren Buffett wrote in a 2008 letter about the subject to Berkshire Hathaway shareholders. “Because the fuse on this time bomb is long, politicians flinch from inflicting tax pain, given that the problems will only become apparent long after these officials have departed.”

In addition, teacher pension systems encourage early retirement and have no limit to the number of years in which benefits are paid—and retirees are living longer. This combination is costly, as some retirees collect pensions for as many years as they worked, or in some cases, many more years. The Ohio School Employees Retirement System, for example, is one of five Ohio funds that has lost billions of dollars—one officially cites “infinity” for the length of time it would take to make up the shortfall—and currently has 55 retired school employees receiving benefits who are over 100 years of age. “If no changes are made, we will eventually be unable to pay benefits,” says Michael Nehf, executive director of the Ohio State Teachers Retirement Fund, which lost $24 billion in assets over the year.
Unaffordable or Underfunded?

Are the pensions guaranteed to school employees unaffordable? Or should pensions be maintained by significantly increasing contributions, reducing benefits, or a combination of both? It depends on whom you ask, and in which state. In 2005, California Gov. Arnold Schwarzenegger made his position clear. “We are going to take action and overhaul the political, educational, and financial institutions in the state,” he said in a policy speech. “And a big part of that is reforming our out-of-control government pension system. California passed out some sweetheart pension deals in the past, promising state workers more than it should and more than it could.” The governor’s attempt at overhauling the system by replacing pensions with 401(k)-style private accounts failed, due in part to tremendous opposition from unions including the California School Employees Association, the largest school employee union in the country. Five years later, the fund has a $50 billion unfunded liability.

The private sector has almost completely abandoned the traditional “defined benefit” pension—which nearly all school employees nationwide enjoy and the enormous costs of which crippled sectors like the American automotive industry—in favor of “defined contribution” plans like the 401(k) and other private investment accounts. According to the Center for Retirement Research at Boston College, just 17 percent of all private sector workers in 2007 exclusively had a defined benefit plan for retirement income, down from 62 percent in 1983. Conversely, 63 percent of all private sector workers exclusively relied on a 401(k) defined contribution plan in 2007, compared to 12 percent in 1983, almost an exact reversal.

Perhaps unsurprisingly, teacher unions have the opposite viewpoint of Schwarzenegger and other likeminded critics of pensions, and don’t hesitate to question the legitimacy of claims that a crisis exists. “Pension funds have been around for over 100 years and have weathered every economic crisis during that time, including the Great Depression,” says John Abraham, director of the Member Benefits Department for the American Federation of Teachers. “The writers of these stories are people who want to do nothing less than destroy state governments. That’s what’s driving all this negative press … these tax cutters.” Bill Raabe, director of the Collective Bargaining and Member Advocacy Department at the National Education Association, is also skeptical. “Pension systems, state governments, employers and employees need to look at the whole problem and first ask, “Is our problem real?” says Raabe. “Then, if they decide that it isn’t something created for political reasons, they have to examine the rates of contributions, investments and benefits, and determine what mix of those will solve the problem.”

Costly Solutions for Districts

Union skepticism notwithstanding, proposed solutions to the crisis are moving forward and vary by state, but in most, the proposals are going to cost districts. “We have an advisory committee that has been studying this for months,” says Julie Economaki, spokesperson for the Iowa Public Employees Retirement System, which had an investment return last year of negative 16.27 percent, losing over $3 billion. “It advised the legislature to both increase pension contribution rates and reduce future benefits,” says Economaki, adding that both school employees and districts would have to contribute to the rate increases.
"These changes will have devastating impacts on our operating budget."
-Don Aguillard, superintendent, St. Mary Parish (La.) Schools

The Ohio pension system has recently proposed a number of reforms, including raising the contribution rates for school districts from 14 percent to 16.5 percent of payroll over five years beginning in 2016, and capping the number of years of pension payments at 33.4 years. Similarly, Oregon—often touted as an example of a successful state pension overhaul after 2003 reforms cut retirement benefits to current employees, erasing an unfunded liability of $15.7 billion—is considering a significant increase in employer contributions after the state fund lost $17 billion in the 2008 market crash, possibly doubling school district payments to 25 percent of payroll in the next five years, or even higher, depending on stock market returns.

The state of Vermont is facing a $700 million unfunded liability in its teacher pension system, according to State Treasurer Jeb Spaulding. “People are living longer and living in retirement longer. We’ve seen our benefit payouts increase significantly every year, and they are projected to go up another 50 percent in the next five years,” says Spaulding. A committee including Spaulding has proposed not only raising the retirement age, increasing the number of years required to earn a pension, and reducing benefits to future retirees, but also requiring districts to contribute a percentage of payroll to the pension fund or retiree health plan costs, which they do not currently do in the state. “But adding those costs to districts is controversial, because taxpayers are already under a lot of financial pressure to pay their local property tax, which is the source of that revenue,” says Spaulding, adding that raising those taxes would be a difficult proposition.
Defined Contribution
Numbers:
$731 Billion: total unfunded liability of the nation's public pension systems, 2007 (Pew Center on the States)
$1 Trillion: total unfunded liability, 2009 (Orin Kramer, chairman of the New Jersey Investment Council)
49: Number of states with pension funds that were less than 80 percent funded, 2007 (American Enterprise Institute, Center For Retirement Research at Boston College, Forbes)
$2.73 Trillion: cost of promised pensions, health care and other retirement benefits for all public employees in the next 30 years (Pew Center on the States)

Even more controversial are proposals to dramatically overhaul pension systems by transitioning from defined benefit plans to defined contribution accounts like the 401(k), following the broader trend across the private sector. Reform attempts such as Gov. Schwarzenegger’s in California have largely failed after consistent opposition from unions. According to the Government Accountability Office, only Alaska, Michigan and the District of Columbia exclusively use defined contribution retirement plans for their public employees, and only Indiana and Oregon use a “hybrid” system with both defined benefit and defined contribution accounts. In Iowa, the idea of defined contribution plans “pops up every now and then, but there hasn’t been a serious effort to change,” says Economaki. “But our fund is in better shape than most.”

The political will for such reform could be growing, however. Chicago Public Schools is facing a $475 million deficit that could reach $900 million this year due in part to pension costs, while the Illinois Teachers Retirement System ended its fiscal year with an unfunded liability of $35 billion. Schools CEO Ron Huberman has insisted that “everything is on the table” in addressing the shortfall, including transitioning the teacher pension system to defined contribution plans, which he negotiated for new hires while serving as head of the Chicago Transit Authority.

This notion also made the 2009 New Jersey governor’s race highly significant in the realm of pension politics. The New Jersey Education Association was heavily involved in the election campaign; the state teachers’ union endorsed incumbent Democrat John Corzine, who had sought only minor reforms in the state pension system, which has an unfunded liability of over $34 billion. Republican Chris Christie won the election despite vigorous opposition from the NJEA—which one state senator described as having thrown “everything and the kitchen sink” at the candidate—and his stated intentions to overhaul the public pension system and freeze or make significant cuts in state spending, including pension fund contributions.
An Uncertain Future

Short-term costs will almost certainly increase for districts and states alike, but such proposals won’t satisfy those who believe the pension system is inherently obsolete and prone to vast funding shortfalls. Some levels of financial reforms are nearly inevitable for most states. Now is a critical time for district administrators to stay informed about proposals in their state governments, as coming legislative changes could have huge impacts on their district finances. As Frederick Hess concluded in a recent highly critical report on teacher pensions for the American Enterprise Institute, “Only time will tell whether looming fiscal crises, unaffordable promises and heightened attention to the costs of public pensions will yield a new era in which the electoral rewards for fiscal responsibility [...] rival those of placating impassioned claimants.”

Kurt Eisele-Dyrli is products editor.