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DiggSay the words out loud to get a feel for the size of it: Forty-five million, two hundred and six thousand, six hundred and fifty-four dollars, and sixty-one cents. That’s how much the state is behind in payments to your local schools.
When the quarterly payments came due at the end of the year, the state again missed its categorical and grant payments to all 871 Illinois school districts.
This money is supposed to fund projects like school buses, special education, reading programs and early childhood development. But the money’s not coming, instead getting added bill by bill to an already $4.5 billion IOU the state has for services from schools to homeless shelters.
But the same state that’s no longer paying for these programs legally requires them.
Unlike the usual budget bellyaching when political pressure can make money appear, this time is different, said state Rep. Linda Chapa LaVia, D-Aurora. There is no money. "This is not a false alarm. This is not someone pulling a fire drill. This is a fire," Chapa LaVia said.
The West Aurora School District plans to lay off teachers for the second year running. Last year, the district planned to lay off 120 teachers, but ended up only giving 55 the ax. The district didn’t have a change of heart — laying off all 120 would have pushed class sizes past the maximum in the teachers union contract.
There’s a fee the district can pay if they want to go past that limit by laying off more teachers. They’re considering it. "It’s cheaper to pay a premium than to pay a teacher," West Aurora Chief Financial Officer Christi Tyler said.
It’s not that the state is denying it owes this money. The Illinois State Board of Education, like many state agencies, is dutifully sending its vouchers to the comptroller’s office, where … nothing happens.
What usually is a bureaucratic delay where the comptroller gets the voucher and then cuts the check within
It’s Called DEFLATION Folks
by ilene - March 4th, 2010 11:50 pm
Courtesy of Karl Denninger, The Market Ticker
It’s Called DEFLATION Folks
Never mind the man behind the curtain, who won’t utter the word:
The Labor Department reported Thursday that productivity jumped at an annual rate of 6.9 percent in the fourth quarter, even better than an initial estimate of a 6.2 percent growth rate. Unit labor costs fell at a rate of 5.9 percent, a bigger drop than the 4.4 percent decline initially estimated.
In the real world this means:
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Work harder and get more done.
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Get paid less.
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Suck it up, don’t complain, or you’re fired.
That’s all.
And by the way, reduced pay per unit of work spells DEFLATION.
Now here’s the problem: We have huge public-sector labor unions that are resisting this force. Yet this force is exactly what has to happen in order to bring the economy back into balance.
We have "advanced" promises made to these people – $200,000+ pensions and other similar obscenities – even though doing so is a ponzi scheme that is impossible to maintain. We have continually cow-towed and pandered to these unions, including educators, police and fire and all other manner of public sector employees with wage increases that exceed growth in aggregate output per-person when one counts both salary and benefits.
This, of course, cannot continue. It is yet another example of the expanding gap that opens up between two exponential functions – for those who have forgotten my favorite pair chart (two exponential curves, one with a slightly-higher exponent than the other), here it is again:
I understand that everyone wants to avoid taking the pain. I understand that everyone claims that "its not fair!"
None of this changes the facts. You cannot continually offshore your better-paying labor to China for the purpose of being able to have a $30 DVD player, destroying the $40/hour skilled job base and replacing it with $7/hour burger flippers and espresso-shot-pullers, and maintain the ability to commit compound annual growth rates of 5, 6, 7% or more to public-sector employees. Doing so inevitably destroys the tax base necessary to meet those commitments, and once the destruction has occurred it cannot be un-done.
You cannot falsely-report "growth" that is in fact no such thing, but rather is simply the addition of more debt, thereby creating false demand that…
School Bills Due But State Can’t Pay: “There is No Money”; Let the War on Public Unions Begin
by ilene - January 5th, 2010 2:17 am
School Bills Due But State Can’t Pay: "There is No Money"; Let the War on Public Unions Begin
Courtesy of Mish
While the stock market marches on oblivious to the real world, things are rapidly approaching crisis mode in Illinois, and for that matter nearly everywhere you look. Please consider School bills are due, but state won’t pay.
…
Union Battles In Las Vegas, Simi California, Hawaii, Massachusetts
by ilene - December 30th, 2009 3:56 am
Union Battles In Las Vegas, Simi California, Hawaii, Massachusetts
Courtesy of Mish
Union battles over benefits are starting to appear all over the place. Here are a few stories from the past two days.
Las Vegas: City firefighters launch campaign against cutbacks
Las Vegas’ firefighters union has taken a hard stance against the city’s budget cuts, alleging that reductions will hurt emergency responses along with fire insurance rating for homes and businesses.
City officials, meanwhile, said the union is engaging in irresponsible “scare tactics” at a time when the city is facing economic difficulties.
The back-and-forth comes as the city readies for a series of town hall meetings scheduled from January to March to hear resident feedback on what city services are most important.
It also comes as the city is considering back-to-back 8 percent salary rollbacks and freezes for all employees, including firefighters, although a union official declined to comment today on the union’s positions on these wage proposals.
The union has created a Web site as well as a radio advertisement warning that cuts could increase response times, result in fewer people on duty, reduce the city’s ability to respond to disasters and hurt the city’s fire insurance rating, which is at the highest level.
This discussion is just one part of the ongoing wrangling over the city’s budget, which has seen an ever-widening deficit since the economic downturn began.
The city has already cut operating costs, eliminated vacant positions and announced some layoffs. City management has also proposed an 8 percent wage rollback in each of the next two budget years to avoid layoffs, a proposal being evaluated by the unions that represent city workers.
My recommendation to Las Vegas is to declare bankruptcy and let the unions see what they can get in court.
Simi California: Simi, police union agree to contract
The Simi Valley City Council on Wednesday approved a new agreement with the Simi Valley Police Officers’ Association for an 18-month employee contract that includes a 3 percent salary decrease for sworn police officers and sergeants.
The unanimous approval came after the council went into a closed session meeting late Wednesday afternoon with attorneys and representatives from both the city and police association.
Significant provisions of the MOU approved Wednesday include:
For fiscal year 2009-2010, the base
…
New York Takes a Bite Out of Pensions?
by Zero Hedge - December 2nd, 2009 9:39 pm
Courtesy of Leo Kolivakis
Submitted by Leo Kolivakis, publisher of Pension Pulse.
Quelle surprise! Bloomberg reports that N.Y. Raises Pension Requirements to Save $48 Billion:
New York state’s pension program will raise the retirement age and financial contributions for new workers to save the state and local governments about $48 billion over 30 years.The change, affecting workers hired Jan. 1 or after, was approved by legislators today and is supported by Governor David Paterson. The two biggest public employee unions backed the change after Paterson agreed to drop proposals to eliminate a 3 percent pay increase this year and cut 8,700 state jobs.
“Savings will be achieved not only in state spending, but at the local level, which will help to reduce property taxes,” Paterson, 55, said in a statement. The state constitution bars reductions in pension benefits for existing workers.
New York’s pension fund, the third-largest in the U.S., covers 1 million current and retired workers, and had $126 billion in assets on Sept. 30, according to Comptroller Thomas DiNapoli, the sole trustee.
For new workers, the bill raises the age for retirement without penalty to 62 from 55, imposes a 38 percent penalty on non-uniformed workers who retire before 62 and increases the minimum years of service to draw a pension to 10 from 5, according to Paterson’s office.
Overtime payments included in calculating pension benefits will be capped at $15,000 a year for civilian workers, and 15 percent of wages for police and firefighters.
Savings Estimates
The Division of Budget estimated in December 2009 that a similar package of pension changes would save $30 million in its first year. In June, Paterson, a Democrat, said savings would be at least $48 billion over 30 years. Assembly Speaker Sheldon Silver, a Democrat from Manhattan, said today the changes would save state and local governments $48.5 billion.
For teachers outside New York City, whose pension fund covers 420,000 current and retired workers, the bill raises the minimum retirement age to 57 from 55 without penalty, and increases their pension contribution to 3.5 percent from 3 percent.
The bill changes New York City teacher pensions to save the city $19.1 million this year, rising to $64.1 million in 2019, according to a news release from the governor’s office.
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Putin for Pensions?
by Zero Hedge - November 27th, 2009 9:52 pm
Courtesy of Leo Kolivakis
Submitted by Leo Kolivakis, publisher of Pension Pulse.
Greg Bryanski of Thomson Reuters reports that Russia’s Putin sees economy boost from higher pensions:
Russian pensioners who will have 46 percent more money in 2010 than this year will provide a much needed boost for the flagging economy as they spend, Prime Minister Vladimir Putin said on Wednesday.‘Our decision to increase pensions may contradict (the goal of maintaining macro stability). But at the same time it is a stimulus. It is consumption,’ Putin told a pensions conference in Moscow.
Putin said the pensioners, who spend 80 percent of their meagre income on consumption, shun expensive imported goods and tend to buy domestically produced ones.
Russia, hit harder by the economic crisis than most other major emerging economy, is very slow to recover due to the very weak domestic demand and Putin has vowed to continue stimulus policies, helping the demand recover.
Russia is raising pensions by 35 percent in 2009 and plans to raise them further in 2010, envisaging to spend a staggering 10 percent of GDP on pensions and other social benefits.
As a result of the increase, the average pension will rise to 8,000 roubles ($277.4), breaching the minimum subsistence level and achieving a replacement ratio of 39.7 percent on the average post-crisis salary.
The pensions increase will also bring an eight percentage points hike in social security taxes to 34 percent of income from 2011, a move generally opposed by businessmen.
So what gives? Did the Christmas spirit strike Vladi early this year? Or could it be that polls are showing support for Putin and Medvedev is falling:
Prime Minister Vladimir Putin’s approval rating has fallen to an eight-month low, a poll said on Wednesday, as faith in Russia’s leaders is tested by an economic crisis that has put more than one million people out of work.
Despite a sharp deterioration in the economy, Putin and ally President Dmitry Medvedev have enjoyed high ratings since they took up their posts last year. But polls have shown their public approval fall steadily in recent months.
Public trust in the work of Putin fell from a peak of 72 percent in mid-October to 65 percent on November 22, the lowest point since March, according to weekly poll figures posted on the
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More Overselling of Pensions?
by Zero Hedge - October 27th, 2009 11:15 pm
Courtesy of Leo Kolivakis
Submitted by Leo Kolivakis, publisher of Pension Pulse.
The Honourable Jim Flaherty, Canada’s Minister of Finance, released a reform plan for the federal private pension legislative and regulatory framework on Tuesday:
"Our Government has listened carefully to Canadians," said Minister Flaherty. "We understand the value of secure and sustainable pension plans. We are proposing a balanced package of measures for the benefit of pension plan sponsors, plan members and retirees."
Today’s announcement comes out of extensive consultations with Canadians, beginning with the January release of a discussion paper, Strengthening the Legislative and Regulatory Framework for Private Pension Plans Subject to the Pension Benefits Standards Act, 1985, and including online consultations.
In March and April, Ted Menzies, Parliamentary Secretary to the Minister of Finance, chaired a series of national public and private consultation meetings across Canada to hear the views of Canadians on strengthening the framework.
The package includes measures to:
- Enhance protections for plan members.
- Reduce funding volatility for defined benefit plans.
- Make it easier for participants to negotiate changes to their pension arrangements.
- Improve the framework for defined contribution plans and for negotiated contribution plans.
- Modernize the rules for investments made by pension funds.
"These reforms will provide enhanced benefit security for workers and retirees while allowing pension plan sponsors to better manage their funding obligations as part of their overall business operations," said Minister Flaherty.
In particular, the Government plans to restrict an employer’s ability to take a contribution holiday unless a 5-per-cent funding cushion remains, change the solvency funding methodology to make it less volatile and less pro-cyclical by basing the funding requirements on a three-year average, and require employers to fully fund pension benefits on plan termination.
In addition, the Government intends to increase the pension surplus threshold under the Income Tax Act, which applies to both federally and provincially regulated defined benefit plans, to 25 per cent from 10 per cent.
The proposed changes are aimed at federally regulated private pension plans, which represent about 7 per cent of pension plans in Canada.
While some of the proposed changes can be introduced by changes to regulation, others will be implemented by legislation, which is expected to be introduced in Parliament.
Protecting seniors is a priority for the Government. In addition to these pension framework modernizations, the Government has taken action by:
- Introducing
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CalPERS Admits California “Pension Costs Unsustainable” – So What To Do About It?
by ilene - August 18th, 2009 2:16 pm
CalPERS Admits California "Pension Costs Unsustainable" – So What To Do About It?
Courtesy of Mish
In an unusual display of honesty CalPERS Actuary Says "Pension Costs Unsustainable"
The CalPERS chief actuary says pension costs are "unsustainable," and the giant public employee pension system plans to meet with stakeholders to discuss the issue.
"I don’t want to sugarcoat anything," Ron Seeling, the CalPERS chief actuary said as he neared the end of his comments. "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. We’ve got to find some other solutions."
Dwight Stenbakken of the League of California Cities told the seminar that pension benefits are "just unsustainable" in their current form and difficult to defend politically.
"I think it’s incumbent upon labor and management to get together and solve this problem before it gets on the ballot," he said.
"I actually think it is sustainable," said Terry Brennand of the Service Employees International Union. He said the basic problem is investment losses, not high benefit levels.
"What is sustainable?" said Lou Paulson of the California Professional Firefighters. He said proposals to extend the retirement age for firefighters from 50 to 55 would result in more injuries with advancing age, driving up workers’ compensation costs.
Sustainability In Eyes Of Beholder
The California Firefighters Association and the Service Employees International Union think the plan is sustainable. I think it is too, if they are willing to put 25% of their pretax pay in every year at retire at 60 after 25 years of service.
Otherwise, they are speaking as extremely biased beneficiaries of massive public handouts, not as impartial unbiased observers.
8% annual returns are not sustainable, at least not with long-term yields at 3.5%. Indeed chasing performance is one of the reasons CalPERS suffered the losses it did. CalPERS is attempting to get 8% returns in a 4% return world.
Perhaps the crisis is just too noticeable to deny any longer, but it’s refreshing to see a bit of reality from CalPERS even as the unions are in a massive state of denial.
Politically Unfeasible Solutions
The article notes that four years ago…
California Politicians Making Progress but “Biggest and Hardest Decisions Remain”
by ilene - July 13th, 2009 2:59 pm
California Politicians Making Progress but "Biggest and Hardest Decisions Remain"
Courtesy of Mish
California Governor Arnold Schwarzenegger and legislative leaders negotiated through the weekend, making progress while reporting no breakthrough in solving the state’s $26 billion budget deficit that’s left the most-populous U.S. state issuing IOUs to its creditors.
The meetings, held July 11 and yesterday in Schwarzenegger’s Sacramento office, failed to produce a consensus on how to slash government spending to compensate for a drop in revenue brought on by the faltering economy. Democratic legislative leaders said they were optimistic after talks broke down last week.
“We have several more days to go,” Democratic Assembly leader Karen Bass told reporters during a break in the meetings yesterday. “What I think is most important is that talks have not broken down.”
California this month began issuing IOUs to pay some of its bills, a step taken only one other time since the Great Depression, because of political stalemate over a gap in the $100 billion annual budget.
Schwarzenegger, a Republican, has repeatedly said he won’t endorse another round of tax increases. Instead, he’s proposed deep cuts to spending on schools, health insurance programs and welfare, and sought to link the passage of the budget to measures he says would crack down on fraudulent claims for state aid. Democrats have bristled at the scale of the cuts, saying they would deal a blow to residents already reeling from the economic recession.
Assembly Republican leader Sam Blakeslee, who represents San Luis Obispo, said the negotiations have yet to deliver agreement on the magnitude of cuts needed.
Nor have they dealt with Schwarzenegger’s proposal to suspend a voter-approved law that guarantees minimum funding levels for public schools, he said. That suggestion has drawn fire from the California Teachers Association, which represents more than 340,000 school employees.
“It’s premature to declare victory,” Blakeslee told reporters. “The biggest and hardest decisions are before us.”
Unless and until California addresses the problems of bloated unneeded programs, union pay scales, and particularly the issues of pensions and benefits, the legislature will have solved nothing. Now is the chance to address those issues but the safe bet is that legislators will once again snatch defeat from the jaws of victory by postponing hard decisions on the real issues.
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