Author: Larry Littlefield

The Truthful Actuaries On Pensions

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Is everyone reading Pension Tsunami?  Then you know enough about what is coming that you don’t have to hear it from me. But let me summarize a few articles from one of the places being hit first, so others who haven’t been reading can be prepared to face what is coming. Much of the recent discussion in California centered on an admission by the chief actuary of CalPERS, the California public employees pension fund, in a seminar sponsored by the Public Retirement Journal, that California’s defined benefit pensions are “not sustainable,” as reported on a blog by a pension expert.

“We are facing decades without significant turnarounds in assets, decades of — what I, my personal words, nobody else’s — unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) …unsustainable pension costs,” he said. “We’ve got to find some other solutions.” The head of the League of California Cities told the seminar that “pension benefits are ‘just unsustainable’ in their current form and difficult to defend politically” to non-public employees. Another actuary pointed out “that two-tier plans do not save much money, even after several decades” because “costs from the untouchable high-benefit first tier, a vested right protected by contract law, continue to grow” and motivation to enact lower tiers for new hires are “political in nature,” attempts to pretend existing public employees have contributed shared sacrifice when they haven’t. The reaction is a Tsunami all its own.

The Democrats on Energy: A Possible Disgrace

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The route to power in the era of Generation Greed has been to promise something for nothing, and to provide handy rationalizations to feed the entitlement of those receiving it. So Republicans have handed out tax breaks and promised to cut “spending,” but in fact have increased spending on everyone other than the poor, minorities, immigrants, and those living in older central cities. And so the Democrats promise fiscal and environmental sustainability, without any sacrifice or any inconvenience for anyone other than “the corporations” or “the rich.” In the end both parties sacrifice the future, and the children and grandchildren who will live in it. For Democrats and the environment, you saw this in former Vice President Al Gore’s run for President in 2000, when he did his best to hide his environmental credentials. And now you see it in the debate over an energy policy, in which the Democratic Congress may be poised to do to President Obama’s number one priority, self described, what a previous Democratic Congress did to former President Carter’s number one priority: energy.

I believe this is not only a crime but also a blunder, because politics are changing. Not everyone in Generation Greed is greedy, just the majority of those who make the most noise. And everyone younger is having their future destroyed by inaction, not just in an environmental sense, which not everyone can agree on, but in a national security and economic sense, because of the effect of our dependence on foreign oil. I believe a key moment in the last Presidential campaign occurred when candidates Clinton and McCain proposed the usual pandering give away – suspending the gas tax – and President Obama called it what it was. Apparently the Democrats still need to learn what that meant. So, apparently, does President Obama.

The Waterfront Commission: Beware the Backwater

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As a shorthand, when describing why data on local governments has to be aggregated at the county level to be comparable, I generally note that whereas in other locations a single county may have a county government, municipalities and townships, school districts, and other special districts, New York City only has two local governments: the City of New York and the Port Authority of New York and New Jersey. But Census Bureau data actually includes a third local government for New York City: the Waterfront Commission of New York Harbor. I generally don’t bother to mention it, or include it within my tabulations, on the grounds that it is too tiny and meaningless to bother with. I never knew what it was, but I figured that it was just some backwater with no useful function where sinecures were provided for political hacks.

A new report alleges pretty much what I had assumed, but also alleges the Waterfront Commission has an actual function. According to the New York Times it “portrayed the agency as a patronage-laden favor bank where staff members took cars for personal use, a boat that was bought with federal money to fend off a ‘waterborne attack’ was used primarily to ferry V.I.P.’s during Fleet Week, and friends got friends jobs with high salaries and little work.” But it also asserted its corruption and incompetence left us vulnerable to terrorism. That I’m not so sure of. I’ll bet anything worth doing is actually done by someone else.

Special Tax Deals: A Little Good News

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One of New York’s cycles of ever-increasing unearned privilege and injustice is the granting of special tax exemptions, exclusions, and benefits every time the economy is up (when doing so doesn’t require immediate and thus obvious sacrifices by those who don’t matter), and increasing tax rates every time the economy turns down (due to “circumstances beyond our control”). This bi-partisan policy is politically efficient: it shifts the cost of government to those who matter less, and forces them to pay for services and benefits for those who matter more.

Recently, however, there has been a partial retraction. The special $400 check to those rich enough to be able to own their homes is gone. And the special double income tax for the self-employed is gone for those earning $100,000 or less. I’ll give credit to the Freelancer’s Union and Councilmember Yassky for reducing the Unincorporated Business Tax, and remove blame from Mayor Bloomberg for the $400 check, accordingly.

359 Hours in 365 Days

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It’s my birthday, and the end of my second year of commuting to work by bicycle, sometimes three but generally four times each week. This year I had one of those bicycle speedometer/odometer/clocks, and it showed me something surprising. In 365 days I’ve ridden on the bicycle for 359 hours, nearly one hour per day, not for the sake of doing so, but simply to get from here to there and back. What a great deal riding a bicycle to work has been! Until I actually tried it and found a way to work around the usual objections – work clothing, sweat, weather, traffic—it hadn’t seemed practical to me. Now, good health seems impractical without it. How else would it be possible for an overweight, middle-aged non-athlete, with a sedentary office job, a family and other responsibilities, to get that much exercise, nearly an hour per day? No way that I can think of. Not without taking time and/or money from something else. I’m not sure I’ve ever done something so time and cost efficient, relative to the alternatives.

The Health Care Reform Problem: Interests Not Ideology

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I have now heard and read all over the media that Congress is having difficulty passing a health care reform measure because Republicans and Democrats have become more ideologically cohesive internally, and therefore in greater conflict with each other, making bi-partisan cooperation more difficult. I do not believe for a moment this is true. Ideologies are points of view about what would be best, or fairest, for everyone. The political parties are not cohesive advancers of such ideologies, they are servants of powerful interests. And it is powerful interests that benefit from things as they are, even as inequity grows, the economy is wrecked, and the future borrowed against, that are blocking health care reform – unless the “reform” would be a system that rewards the powerful and diminishes the future even more. Want proof? How about Democrats in opposition to progressive taxation (and in favor of regressive taxation), and Republicans against curbing government spending? Well, that’s what we have.

Fiscal 2007 Education Finance Data from the Census Bureau

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The U.S. Census Bureau has released elementary and secondary school finance data for fiscal year 2007, and I’m pleased to see one publication has already covered it and done a computation or two.  My contribution is summarized in the attached three spreadsheets. The numbers are available, and anyone is free to interpret them.

My main finding is that FY 2007 is the year that New York City public school spending, very low a decade earlier, went over the moon, soaring to an extreme high of $19,336 per student (all future figures on that basis), compared with the national average of $11,556. It is almost as high as the Downstate Suburban average of $20,120, and is far above the average for New Jersey ($18,094) and Massachusetts ($14,422). Even adjusting downward for the higher general wage rate here (in the private sector excluding the Finance and Insurance sector), New York City came in at $14,129, still a solid 22.3% above the national average and just below the Downstate Suburbs ($14,767) and New Jersey ($14,876) though well below Upstate New York ($15,632). That adjustment cuts Massachusetts to $12,764. For instructional spending alone NYC is now higher than any of those areas, meaning that funding is no longer an excuse for any educational deficiencies in the city – far from it. From FY 2002, the last budget before Bloomberg, to FY 2007, however, New York City’s extra spending did not go to administration, no matter what you hear, nor for the most part to higher teacher pay or smaller class sizes. It went to soaring spending on debts and employee benefits such as pensions and retiree health care, a shift the city had in common with other areas. Contract spending also rose.

Spreading Disappointment in the Wake of Generation Greed

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Let me call your attention to a post on The Housing Bubble Blog and a comment made in response. A 30-something person is dismayed when a couple in their 50s/60s buys a house, rents it out, keeps the rent and stops making mortgage payments, leaving their tenants at risk of eviction. “I’m frankly disturbed by the situation. I think it’s really shady for someone (in this situation) to be taking money from a renter and not put it toward the mortgage. Every month, they have been taking that money knowing they are not using it to make their house payments. I just think it’s wrong and puts the renters in a bad position…I can see why they would want to do this to help themselves, but again, it’s affecting the whole neighborhood. As far as how I feel personally/morally about the whole situation (and the fact that this is happening all over America) is that people really disappoint me.”

Now these circumstances are specific, but the response of one commenter could apply to much else in this era. What happens when most people, and particularly younger generations, realize they are getting robbed and start thinking like this?

The Manhattan Bridge Redux

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The Manhattan Bridge opened for subway service in 1915, and from that point to the early 1980s carried more Brooklynites to work in Manhattan than any other piece of infrastructure. In the 1950s, engineers recommended that tunnels be built to take the subway trains off the bridge and eliminate the stress of having heavy trains pass over it and flex it. Then in the 1970s, with a huge share of the city tax base dedicated to debt and pensions, the parts of the bridge that allowed it to flex were left to rust and corrode, leading to cracking and deterioration. As a result, half the bridge was closed to subway traffic for nearly 20 years, severely degrading subway service around the southern rim of Brooklyn, from Bay Ridge and Sunset Park in the west to Sheepshead Bay, Midwood, and Flatbush to the east. While at City Planning, I produced data that showed that these neighborhoods had a falling share of people commuting to work by subway, and falling income, relative to other areas of Brooklyn that did not rely on the bridge. Somehow no Brooklyn politicians ever noticed all the extra time required to get work, and the extra crowding. For the limited number of people who matter it wasn’t an issue. SUV parking was more important. A whole generation passed with many people never knowing what subway service in Brooklyn was supposed go be like.

Proposals to connect the BMT tracks from DeKalb to the Rutgers Street Tunnel (which carries the F), to reduce the traffic over the bridge and provide an alternative in case of future outages, were scrapped because of the massive prices contractors charge the MTA. Eventually, the bridge was fully reopened to subway traffic. But as the person who was then identified as the only one in favor of that project, I was not happy to have an architect I’ve corresponded with over the years call my attention to this video.

New York’s Medicaid Fraud Settlement: Somebody’s Getting Cheated

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It was widely reported today that New York State and New York City have agreed to pay the federal government $332 million and $100 million respectively, to give back money fraudulently billed to Medicaid for school health services. By billing Medicaid, the school districts involved saved money, because the federal government covered half the cost. According to the settlement, the state gave false guidance to the school districts on what could be billed to Medicaid.

The question I have is this: why is New York City the only local government contributing to the settlement? If all the fraud was in New York City, and much of it will be paid for by state taxes collected elsewhere, then residents elsewhere in the state have something to complain about. But what if school districts throughout the state used this ruse to shift costs to the federal government? Then New York City residents are paying other people's share. Anyone want to guess which is more likely?