Month: June 2021

The Chicago Park District’s 30% Funded Pension Plan – And More Tales Of Illinois’ Failed Governance

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2021/06/07/the-chicago-park-districts-30-funded-pension-planand-more-tales-of-illinois-failed-governance/?sh=7ce1216054fa

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The Illinois legislature ended its regular legislative session on May 31, in a flurry of legislation passed late into the night. One of those bills was a set of changes to the 30% funded pension plan of the Chicago Park District. Were these changes long-over due reforms, or just another in the long line of legislative failures? It’s time for another edition of “more that you ever wanted to know about an underfunded public pension plan,” because this plan illustrates a number of actuarial lessons.

80% is not OK. Governance – who gets to set the contributions? Funded status can collapse very quickly and be very difficult to rebuild. Need to use actuarial analysis not just legislator’s brainstorms

Author(s): Elizabeth Bauer

Publication Date: 7 June 2021

Publication Site: Forbes

The Federal Insurance Office: Looking Back, Looking Forward

Mary Pat Campbell

Link: https://www.rstreet.org/2021/05/19/the-federal-insurance-office-looking-back-looking-forward/

Full pdf: https://www.rstreet.org/wp-content/uploads/2021/05/Final-No-231-FIO.pdf

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1) The FIO was created in the wake of the financial crisis, as part of the Dodd-Frank Act. It has since been active on two fronts: as a source of information about the insurance industry for the U.S. Department of the Treasury and other branches of government, and as a representative of the insurance industry in international negotiations.

2) The FIO has had a challenging first decade. Since its launch, insurers have been concerned that the introduction of a new federal body, like all bureaucracies, is the camel’s nose in the tent, which would eventually lead to attempted expansion of its scope. Today, even though many have come to accept the FIO—provided it does not attempt to exceed its authority—there are still efforts to abolish it.

3) In the past, government restrictions of the free market with involvement in insurance have proven inefficient and anticompetitive. Should the FIO advance legislative attempts to address “affordability and accessibility” of insurance, it will likely contribute to the disruption of an efficient private market closely regulated at the state level.

Author(s): Jerry Theodorou

Publication Date: 19 May 2021

Publication Site: R Street Institute

Unprecedented federal borrowing floods state budgets

Mary Pat Campbell

Link: https://thehill.com/opinion/finance/556660-unprecedented-federal-borrowing-floods-state-budgets

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Once per calendar quarter, the state of Michigan conducts a Consensus Revenue Estimating Conference that provides updates on both the national and state economies and the state’s fiscal outlook. The May conference each year is especially significant because it sets the official revenue targets for the next fiscal year’s state budget. 

The May meeting packet contained a broad range of data points, but a few jumped out.

….

Another chart broke down the components of personal income. Over the previous four quarters, personal income was nearly $3,000 higher than pre-pandemic forecasts had expected. However, employee compensation actually declined by about half that amount. The entire increase is the result of the 53 percent increase in federal transfer payments that have floated U.S. households over the past year.

Author(s): DAVID GUENTHNER

Publication Date: 5 June 2021

Publication Site: The Hill

Illinois 2022 budget: The state’s financial cliff will be waiting after the federal largesse runs out – Wirepoints

Mary Pat Campbell
Illinois 2022 budget: The state’s financial cliff will be waiting after the federal largesse runs out – Wirepoints

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Wirepoints calculates that retirement costs will consume 26 percent of the 2022 budget. The state is set to contribute $9.4 billion in General Funds to pensions, pay $777 million in pension bond costs, and pay an estimated $1 billion in retiree health costs.

In total, that’s $11.2 billion of the $42.3 billion budget consumed by retirement expenditures.

On top of the payments from the General Fund, another $1.2 billion in pension payments will come from other budget funds, meaning the state’s total retirement costs will be an estimated $12.4 billion in 2022.

Author(s): Ted Dabrowski, John Klingner

Publication Date: 2 June 2021

Publication Site: Wirepoints

Cut Spending For The Rich Before Raising Their Taxes

Mary Pat Campbell

Link: https://www.manhattan-institute.org/cut-spending-rich-raising-their-taxes

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Members of Congress have increasingly demanded large tax hikes on upper-income families to finance large spending increases on top of soaring baseline deficits. But even the most aggressive tax hikes on the rich would make only a small dent in the long-term budget deficits, and they would significantly harm the economy. Before considering any new taxes, lawmakers should first reduce federal spending benefits for high-income families. This bipartisan strategy would achieve both the redistributive goals of the left and the spending restraint goals of the right.

Such upper-income spending cuts have several advantages over new taxes: 1) they will not harm economic growth, 2) they increase future policy flexibility, 3) they are better targeted, and 4) they promote political compromise.

Several programs target spending to wealthy Americans. This report focuses on three of the largest: Social Security, Medicare, and farm subsidies, where basic reforms could save upward of $1 trillion in the first decade, and substantially more in future decades.

Author(s): Brian Riedl

Publication Date: 20 May 2021

Publication Site: Manhattan Institute

More than 300 million COVID vaccine shots administered in U.S.

Mary Pat Campbell

Link: https://www.axios.com/us-300-million-covid-vaccine-shots-administered-a05f7677-cdd7-41ec-99c9-95d28a2ecabc.html?mc_cid=dd765ae547&mc_eid=983bcf5922

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More than 300 million COVID-19 vaccines doses have now been administered in the U.S., the Centers for Disease Control and Prevention confirmed Sunday.

Why it matters: The latest CDC figures show that 41.9% of the U.S. population has been fully vaccinated against the coronavirus and 51.5% has received at least one dose.

The vaccination milestone comes as the U.S. has seen new infections fall to the lowest level since March 2020, when the pandemic began.

Author(s): Rebecca Falconer

Publication Date: 7 June 2021

Publication Site: Axios

Unlocking: India states start reopening amid dip in Covid cases

Mary Pat Campbell

Link: https://www.bbc.com/news/world-asia-india-57380665

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Major Indian states that have been virus hotpots are easing restrictions as Covid case numbers continue to fall.

National capital Delhi and financial hub, Mumbai, are among the cities that are opening partially.

This comes in the wake of a crushing second wave that saw hospital beds, medicines and even oxygen run short as cases spiked and deaths rose.

But experts continue to advice precaution amid a lagging vaccine drive and the threat posed by new variants.

Publication Date: 7 June 2021

Publication Site: BBC

Which US vaccine plans actually helped hard-hit communities?

Mary Pat Campbell

Link: https://www.technologyreview.com/2021/06/07/1025824/us-vaccine-equity-success-story/

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One success story took place in Philadelphia, thanks to an effective collaboration between two health systems and Black community leaders. Recognizing that the largely online signup process was hard for older people or those without internet access, Penn Medicine and Mercy Catholic Medical Center created a text-message-based signup system as well as a 24/7 interactive voice recording option that could be used from a land line, with doctors answering patients’ questions before appointments. Working with community leaders, the program held its first clinic at a church and vaccinated 550 people.

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In Alabama, for example, National Guard mobile vaccination units were set up with the ultra-cold freezers needed to transport and store mRNA-based covid-19 vaccines. “Why not, when this particular push is over, leave those freezer units with the federally qualified health centers that are already in those communities?” McClure says. “You’re starting to build the infrastructure for being able to deliver vaccination on a consistent basis.”

Author(s): Mia Sato

Publication Date: 7 June 2021

Publication Site: MIT Technology Review

Means testing is a dog of a tax and it will destroy the welfare state

Mary Pat Campbell
Means testing is a dog of a tax and it will destroy the welfare state

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Means tests must always turn regressive at some point in the income or wealth distribution. Because the means test withdrawal cannot exceed the benefit amount, the implicit tax can only rise with income or wealth so far. From there, it turns into a fixed sum tax, like the notorious Thatcher poll tax albeit phased-in at the lower end.

Consider the Australian Government’s Age Pension assets test, which functions as an implicit wealth tax targeted at the middle class. The single Age Pension benefit is approximately $953 a fortnight. The maximum implicit tax amount can then only be $953 per fortnight – whether you’re worth $600,000 or $600 million. The implicit tax amount payable by wealth (excluding the family home) for a single person is shown below.

Author(s): David Sligar

Publication Date: 5 June 2021

Publication Site: Western Sydney Wonk

S&P: Kentucky’s pension funding ratios weak despite improvements

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202106031046SM______BNDBUYER_00000179-ce04-d125-a17f-ce353e9b0000_110.1

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Kentucky has taken action to shore up its pension system, but it?s going to take time to reverse the adverse effects of past funding shortfalls, according to S&P Global Ratings.

Kentucky has one of the poorest funded pension systems among all U.S. states, with an aggregate funded ratio of 44% as of fiscal 2019, S&P said. The state?s general obligations are rated A by S&P with a stable outlook.

The state?s Public Pensions Authority is responsible for the Kentucky Employees Retirement System (KERS) and State Police Retirement System (SPRS) while counties and cities are responsible for the County Employees Retirement System (CERS). The Teachers Retirement System is a seperate system with its own board.

The funded ratios for the systems are 14.01% for the KERS non-hazardous and 55.18% for the KERS hazardous, 58.27% for the TRS, 28.02% for the SPRS and 47.81% for CERS non-hazardous and 44.11% for the CERS hazardous.

Author(s): Chip Barnett

Publication Date: 3 June 2021

Publication Site: Fidelity Fixed Income

MTA scare highlights public finance cyber woes

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202106070952SM______BNDBUYER_00000179-d86e-df56-a3fd-f8fe8d120001_110.1

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Subway safety in New York took on a new meaning when the Metropolitan Transportation Authority acknowleged a cyber intrusion, which set off loud alarm bells about the rising threat of system hacks.

The MTA is one of the largest municipal issuers and reports linked China’s government to the episode.

Despite MTA officials? assurances of quick troubleshooting and no evidence of compromise to its operational systems, employee or customer information, this marked the latest chilling cybersecurity event for public finance.

Author(s): Paul Burton

Publication Date: 7 June 2021

Publication Site: Fidelity Fixed Income