Pension Hokus Pocus – Here We Go Again

From the Wall Street Journal:

When Congress passed a broad pension reform last year prodding companies to get their retirement programs in order, it seemed too good to be true. Now we know it was.

That’s the lesson of an amazing bit of corporate welfare the Senate tucked into the Iraq war supplemental last week. Last year’s bill included a hard-fought political compromise: Carriers that agreed to a “hard freeze” of their pension plans would be allowed to use a higher interest rate in calculating their plans — which would reduce their net liabilities. The idea was to discourage airlines from buying union peace by running up their pension tabs, which they might later dump on taxpayers. A few airlines, such as Northwest and Delta, took this medicine.

Their competitors, namely American and Continental, headed back to the Beltway and last week their lobbying blew apart last year’s compromise. Under the Senate’s backroom fix, the airlines can use a higher interest rate even if they promise higher pension benefits. The airlines claim this is about “leveling the playing field,” which makes little sense because American and Continental could have accepted the same rules all along. This is about giving those two a competitive advantage over other airlines that have already agreed to play by the reform rules.

I was one of them many who had their pensions not “hard frozen” but dumped. The new Senate rule will only drive pensions back into dangerous territory again. By allowing carriers to “assume” an 8% rate of return instead of the more realistic 6.5% the airlines can reduce their obligations.

I mean, why worry when the PBGC (taxpayers ultimately) are always around to bail out such bad policy!

No Money in Delaware?

This past Sunday Ron Williams of the News Journal opined that:

It’s ever so tedious to continually hear over and over again in this state that there’s no money. No money for this, no money for that. No money to continue to fund such-and-such program. No money to fund a richly deserved new program that would serve senior citizens or babies.

The fact is there is plenty of money in this state. The problem is we have a gaggle of gutless, worn-out wusses in the Legislature whose main goal in life is to run this state on the backs of non-residents through corporate taxes, interstate highway tolls, and inventory fees on national businesses.

Ron is correct. The sad part is the state is not running out of money but individuals are. However his remedy below is not the one we need.

But why not tap other areas of revenue that don’t single out a minority class? Auto registration fees haven’t been raised since 1964. Driver licenses. Auto sales tax.

Or how about the fairest and widest-based of all taxes that haven’t been raised in 20-plus years: state income. Just a quarter of a percent would raise nearly $55 million.

Before we raise one tax or ask Delaware’s ctizens for one more ‘revenue enhancement’ we should;

1. Have a comprehensive workforce review of all state agencies.

2. Consolidate 19 school districts in to 4, one per county and one statewide for Vo-Tech.

3. Go to a two year budget cyle and a Taxpayers Bill of Rights to limit spending increases.

The Case For Consolidating School Districts

Brandywine & Red Clay Staffing Inefficiencies

There has been a lot of noise lately over school referendums. The school districts have come out guns blazing to validate their needs ( which they should). We should ask why not consolidate the districts down from 19 to 4, one per county and one statewide for VoTech?

Do we need 19 Directors of Facilities, Personnel, Transportation etc?

Delaware Financial Woes

The News Jornal did a pretty good job of detailing the fiscal worries of Delaware but did not offer a solution (not their job) nor did any of the legislators. This problem is one of history, recent and not so recent.

During the time Tom Carper was Governor the budget grew 81%, yes 81%. Under Governor Minner there have been increases also but a bit less and she is not through. The rule of 72 is how you can guess when you can double your money in an investment. If you have an 8% rate of return your money will double in 9 years because 72/8 = 9. Our budgets have been growing at almosy 8% for too long.

The answer to our budget woes in the short term is a Comprehensive workforce analysis of all state agencies by an outside private firm and a Taxpayer Bill of Rights which would limit total government spending (general fund plus other trust funds and grant in aid) to inflation plus population growth.

We must also tackle Health Care as a state problem. We have a program Delacare 2008 which offers universal private care but limits growth to inflation.

The answer to the financial worries is sound economic development and a tax system which promotes savings, growth and investment. More about that later.

Students Show Scant Gains In History, Civics Knowledge

By ROBERT TOMSHO WSJ
May 17, 2007; Page A18

More students have a basic understanding of U.S. history and civics, but the number who are proficient in the subjects has changed little in recent years, according to a key national test.

The NAEP is the chief federally sponsored test measuring academic achievement. The latest results were for history and civics tests given in 2006 to a nationwide sampling of fourth-, eighth- and 12th-graders.
On a scale of zero to 500 points, history scores for students in all three grades increased by three points over results in 2001, the previous time the same test was given. Lower-performing students posted the biggest gains. The average score for fourth-graders was 211, while the average scores for eighth- and 12th-graders were 263 and 290, respectively.

In civics, the only significant improvement was among fourth-graders, whose average score was 154 on a scale of zero to 300 points, up from 150 in 1998, the last time the civics test was given.
Some critics said the NAEP results were most remarkable for what students didn’t know. Only 14% of seniors taking the history test could explain a reason for U.S. involvement in the Korean War. In civics, 28% of eighth-graders could explain the historical purpose of the Declaration of Independence and about 14% of fourth-graders knew a defendant has a right to a lawyer.

Check out 50 Ways to Make Delaware a Better Place-Education

Health Care Is the #1 Issue

In Washington, the business lobby has stepped up its push for action on health care. That’s largely a reaction to rapidly rising costs. Health-care spending last year ate up 16% of the nation’s economic activity, according to the latest government figures. That’s up from 14.5% just five years ago, and is projected to be 20% ten years hence. Business ends up bearing much of the burden.

“Health-care costs are the No. 1 cost pressure our members face,” says the Business Roundtable’s John Castellani. He calls it a critical competitiveness issue: “You’re getting to a tipping point where you can no longer compete against companies in countries” with government-provided health care, or with no health-care coverage at all.

Take a look at Delacare2008-the answer for Delaware. It is found at http://ProtackforGovernor.com.
Every one is in, no one is out, every one pays their fair share and everyone is responsible.

The Case for a Taxpayers Bill of Rights

In retirement planning there is the rule of 72. If your rate of return is 8% a year it will take 9 years to double your money because 72/8 =9. The miracle of compound interest works wonders.

You might also not know that the miracle of interest works in the negative also. If a budget grows 8% a year then the state budget will double in 8 years also. This is what happened when Gov Carper was in charge and Gov Minner will be close.

In Delaware it is often difficult to gauge spending levels because of the different trust funds and also because Gov. Minner raided the Transportation Trust Fund to obscure real spending.

Here is a proposal. Total spending can not increase more than inflation plus population growth and we should budget on a two year cycle with a 5% reserve in each department with all surpluses given back to the taxpayers.

A Diverse and Secure Energy Future: Time for Nuclear, Ethanol, Wind and Solar

Gas pump gulps more of family pay
Average household spent $2,277 in ‘06
By Barbara Hagenbaugh

USA TODAY
WASHINGTON — U.S. families paid $1,000 more on average for gasoline last year than in 2001, as higher prices at the pump ate up a hefty portion of the increase in their paychecks, two consumer groups said Wednesday.
With retail gasoline prices at records, the increase in the tab for gasoline may be significant again this year.
The average U.S. household paid $2,277 for gasoline in 2006, up 78% from 2001, according to estimates from the Consumer Federation of America and Consumers Union, the publisher of Consumer Reports. The numbers are similar to other estimates, including those from Moody’s Economy.com.
“It’s a big bite out of the household budget,” says Mark Cooper, director of research at the Consumer Federation of America.
From 2001 to 2005, the most recent data, median household income rose more than $4,000, nearly 10%, to $46,326, according to the Census Bureau.
While higher gasoline prices have been a nuisance to all, they have placed a bigger burden on low-income households. Cooper estimates the percentage of pretax income low-income consumers spent on gasoline was 9.5% in 2006 vs. 7% in 2002. For all consumers, the percentage was 3.6% in 2006 vs. 2.5% in 2002.
For the very poor, “people buy less medicine, they buy less food” when forced to pay more at the pump, says Mark Wolfe, executive director of the National Energy Assistance Directors’ Association. He notes the increase in gasoline prices comes on top of higher costs for heating and air conditioning, which have stressed some household budgets.
“Businesses that serve lower- to middle-income people, they have reason to be concerned,” Wolfe says.
Wal-Mart executives this week said higher gasoline prices were hurting sales at the nation’s largest retailer.
“Gas prices are causing Americans significant financial hardship,” Rep. Bart Stupak, D-Mich., said at a hearing Wednesday of the House Judiciary Committee on gasoline prices.
The nationwide average price of a gallon of regular gasoline was $3.103 Wednesday, up more than a penny from Tuesday and nearly 25 cents higher than a month ago, according to motorist club AAA. The price set a record, not adjusted for inflation, for the fourth consecutive day. The inflation-adjusted all-time high was set in March 1981 at $3.223 in today’s dollars, according to the Energy Department.
Consumer groups, along with Connecticut Attorney General Richard Blumenthal, argued at the hearing that consolidation in the oil industry has led to reduced competition and has allowed oil companies to limit how much oil they refine into gasoline. That is restricting supplies and leading to higher gasoline prices, they said.
“Mega-companies arising from this merger mania have aggressively used their ever-growing market clout to subject consumers to increasing prices and unnerving market volatility,” Blumenthal said. “Big Oil has created a market on the brink.”
A representative from the oil industry said the higher gasoline prices were a result of elevated crude-oil costs set on world markets, strong demand, a decline in imports, environmental mandates for specialty gasoline blends and necessary refinery maintenance.
“The recent price increases reflect the forces of supply and demand,” American Petroleum Institute chief economist John Felmy said.

What Do We Do With The Old Chrysler Plant?

DaimlerChrysler AG will sell 80.1 percent of its money-losing Chrysler Group to private equity firm Cerberus Capital Management LP for $7.4 billion.

DaimlerChrysler AG’s Chrysler Group plans to build two new plants in Michigan and upgrade three others.

It said that Chrysler would keep its heavy obligations for pensions and health care costs, a key issue complicating DaimlerChrysler’s effort to sell the division.

Isn’t it time we made plans for a new industrial/technology park at the Chrylsler site? It is clear the plant will be closed and probably sooner than the previously announced.

A very meager $50 million seed fund from the $5 billion plus Delaware Pension Fund would go a long way to jump starting the transition.

Merits of inspector general bill debated

Office would complement auditor, sponsor says
By J.L. MILLER, The News Journal
Posted Thursday, May 3, 2007
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05/03/2007
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DOVER — A bill that would create an Office of the State Inspector General to ferret out waste, fraud and corruption among state employees or in state agencies has state Auditor R. Thomas Wagner Jr. saying, “We do all of that stuff.”

Under House Bill 155, sponsored by Reps. William Oberle Jr., R-Beechers Lot, and Robert J. Valihura Jr., R-Laurel Ridge, the inspector general would investigate the operation of state agencies for fraud or waste and report it to the governor.

Any instances of possible criminal activity also would be reported to the Attorney General’s Office for possible prosecution, and reports of the investigations would be posted on the state’s Web site — all of which sounds duplicative to Wagner.

Under H.B. 155, which was introduced Wednesday, the inspector general would be an independent office, though office space and staff would be provided by the Secretary of State. No cost estimate for the legislation was available Wednesday.

Wagner is an elected officeholder, and thus does not report to the governor. But his office’s duties include probing waste and fraud in state government, in addition to auditing agencies that receive state funds.

But co-sponsor Valihura said H.B. 155 would not duplicate what Wagner’s office does, but complement it.
“The reason I’m co-sponsoring it is I think it’s time for us to create a role for someone whose complete efforts are devoted to looking for fraud, waste and what I would call white-collar crime in government,” Valihura said.

“[The auditor's] major role is not to be a fraud uncoverer,” Valihura said. “An inspector general would be devoted to that in its entirety. I think the two can function side-by-side on things.”

If the state can miss the crisis at Christina School District and no one has been held accountable why not have an Inspector General??? Valihura is right.