Month: January 2022

Three subtle ways inflation helps state and local government coffers

Mary Pat Campbell

Link: https://lizfarmer.substack.com/p/inflation-impact-local-governments

Excerpt:

If inflation pushes up interest rates and accelerates wage growth, that could take some of the pressure off of public pension plan performance. Since the Great Recession, pension plans have been steadily lowering their assumed annual rate of return to better match the low-interest rate environment. Pension plan actuaries factor that rate when in calculating a government’s annual pension bill. Lowering that rate results in a higher bill because governments have to make up the difference. 

More stable returns. Rising inflation can result in higher returns from a pension plan’s fixed-income assets. Unlike the volatile equities market, the nice steady investment return from fixed-income securities is much nicer to rely on from a planning perspective. In fact, bonds used to be pensions’ bread and butter until interest rates began falling in the 1990s.

The National Association of State Retirement Administrators’ research director Keith Brainard told me this week that if inflation is sustained, governments could decide to stop lowering their investment return assumptions and some could even start raising them again. 

That could result in lower pension bills for governments with healthy plans. Or in the case of struggling plans like Chicago or Kentucky, it could at least slow the pace of their rising pension bills.

Higher worker contributions. What’s more, noted Brainard, accelerated wage growth also means those workers paying into pension plans will be contributing slightly more. “What wages will do when inflation is 2% is a lot different than when it’s 6%,” he said.

Author(s): Liz Farmer

Publication Date: 15 Dec 2021

Publication Site: Long Story Short at substack

HOW HAVE STATES USED THEIR DIRECT COVID RELIEF FUNDS?

Mary Pat Campbell

Link: https://www.pgpf.org/blog/2022/01/how-have-states-used-their-direct-covid-relief-funds

Graphic:

Excerpt:

The federal government provided $512 billion in direct financial assistance to help state and local governments cover their expenditures and revenue losses associated with the coronavirus (COVID-19) pandemic. So far, about $400 billion of that total has been disbursed. Here are some notable trends showing how lower levels of government have spent some of their relief funds using a database compiled by the National Conference of State Legislatures (NCSL).

Publication Date: 14 Jan 2022

Publication Site: Peter G. Peterson Foundation

New York Is Trying To Punish Its Way to 100% Vaccine Compliance

Mary Pat Campbell

Link: https://reason.com/2021/12/15/new-york-is-trying-to-punish-its-way-to-100-vaccine-compliance/?utm_medium=email

Excerpt:

Beginning Monday, at the order of Democratic Governor Kathy Hochul, every business in the state was required by law to have every employee and customer show proof of full COVID-19 vaccination, or make everyone inside their doors over the age of 2 wear a mask.

Violators face fines of up to $1,000. Enforcement is being left to county governments, of which an estimated one-quarter—almost all run by Republicans—have indicated they will not participate in.

….

The two-shot vaccination rate for New Yorkers ages 12 and older currently stands at 81 percent. Six months ago, when Hochul’s predecessor Andrew Cuomo lifted almost all statewide COVID restrictions, he did so because the Empire State had crossed the 70 percent threshold set by the Centers for Disease Control and Prevention (CDC)—not for full vaccination of everyone over age 12, mind you, but for single shots among adults.

….

Contra Hochul, it is far from clear that even 100 percent vaccination would have prevented a third consecutive winter surge across the northeast, which currently has the highest rates of vaccination and coronavirus cases in the United States.

Author(s): Matt Welch

Publication Date: 15 Dec 2021

Publication Site: Reason

Second SFA Decision

Mary Pat Campbell

Link:https://burypensions.wordpress.com/2021/12/23/breaking-news-second-sfa-decision/

Excerpt:

The PBGC Special Financial Assistance program for troubled multiemployer plans has ruled on the third plan to apply for bailout money.

According to a PBGC press release:

The Pension Benefit Guaranty Corporation (PBGC) announced today that it has approved the plan application for the Idaho Signatory Employers-Laborers Pension Plan (Idaho Signatory) in Portland, Ore. The plan covers 682 participants in the construction industry and will receive $13.9 million in special financial assistance, including interest to the expected date of payment to the plan.

Author(s): John Bury

Publication Date: 23 Dec 2021

Publication Site: Burypensions

Wrong Way CalPERS: Dumping $6 Billion of Private Equity After Struggling to Put Money to Work and Then Increasing Target

Mary Pat Campbell

Link: https://www.nakedcapitalism.com/2022/01/wrong-way-calpers-dumping-6-billion-of-private-equity-after-struggling-to-put-money-to-work-and-then-increasing-target.html

Excerpt:

When CalPERS does something as obviously nonsensical as planning to dump $6 billion of its private equity holdings, nearly 13% of its $47.7 billon portfolio, when it just committed to increasing its private equity book from 8% to 13%, it’s a hard call: Incompetent? Corrupt? Addled by the latest fads (a subset of incompetent)?

And rest assured, the harder you look, the more it becomes apparent that this scheme is as hare-brained as it appears at the 30,000 foot level. But unlike another recent hare-brained private equity scheme, its “private equity new business model,” beneficiaries won’t have the good luck of having it collapse under its own contradictions. CalPERS has loudly announced that Jeffries & Co. will be handling these dispositions, so they will get done….at least in part. But the fact that CalPERS’ staff has gone ahead and merely informed the board, as opposed to getting its approval, is yet another proof of how the board has abdicated its oversight and control by granting unconscionably permissive “delegated authority” to staff.

The one bit of possible upside would not just be unintended, but the result of CalPERS acting in contradiction to its expressed objectives: that its allocation to private equity would undershoot its targets by an even bigger margin than otherwise.

Author(s): Yves Smith

Publication Date: 14 Jan 2022

Publication Site: naked capitalism

What Illinois didn’t tell you about its celebrated early payment of federal loan – Wirepoints

Mary Pat Campbell

Link: https://wirepoints.org/what-illinois-didnt-tell-you-about-its-celebrated-early-payment-of-federal-loan-wirepoints/

Excerpt:

In fact, the state originally did intend to pay off the Federal Reserve loan with other federal bailout money from ARPA, the American Rescue Plan Act, according to The Bond Buyer. But the “Treasury threw a wrench in repayment prospects” when the initial federal guidance barred the use of ARPA aid for debt repayment. “The state lobbied for a change in a letter to Treasury Secretary Janet Yellen. But as state tax collections turned rosier, state leaders opted instead to cover repayment with tax collections,” says The Bond Buyer.

The bottom line is that all of us, as federal taxpayers, will bear the cost of the federal bailout, for Illinois and other states, whether through higher taxes to repay the Treasury or inflation created by Federal Reserve money creation. And Illinois will be worse off because only Illinois borrowed extra and incurred interest costs.

So, no, Governor Pritzker, paying back this loan ahead of schedule doesn’t mean Illinois achieved a “level of fiscal prudence not seen in our state for decades.”

Author(s): Mark Glennon

Publication Date: 7 Jan 2022

Publication Site: Wirepoints

CalPERS Considering Selling Up to $6 Billion in Private Equity Stakes

Mary Pat Campbell

Link: https://www.ai-cio.com/news/calpers-considering-selling-up-to-6-billion-in-private-equity-stakes/

Excerpt:

The California Public Employees’ Retirement System (CalPERS) has engaged financial services company Jefferies about the potential of selling up to $6 billion of its private equity stakes, according Buyouts magazine. This comes just after CalPERS announced it would be increasing the percentage of its portfolio allotted to private equity to 13% from 8% in November.  

CalPERS board member Margaret Brown told Secondaries Investor in November that the fund is considering investing in secondaries and divesting from some of its legacy private equity investments.

“We have some really old private equity that’s just sitting there and doing nothing,” she said.

Author(s): Anna Gordon

Publication Date: 13 Jan 2022

Publication Site: ai-CIO

Nationwide Surge In Deaths Among People Aged 18-49: A State by State Overview

Mary Pat Campbell

Link: https://www.theepochtimes.com/mkt_morningbrief/northeast-fares-best-amid-2021-prime-age-mortality-spike_4208797.html

Graphic:

Excerpt:

Deaths among people aged 18 to 49 increased more than 40 percent in the 12 months ending October 2021 compared to the same period in 2018–2019, before the COVID-19 pandemic, according to an analysis of death certificate data from the Centers for Disease Control and Prevention (CDC) by The Epoch Times.

The agency doesn’t yet have full 2021 numbers, as death certificate data trickles in with a lag of one to eight weeks or more.

…..

It’s not clear why the mortality spike seemed to exhibit a geographical trend. Overall, a part of the surge could be likely blamed on drug overdoses, which increased to more than 101,000 in the 12 months ending June 2021 from about 72,000 in 2019, the CDC estimated. About two-thirds of those deaths involved synthetic opioids including fentanyl that are often smuggled to the United States from China through Mexico.

For those ages 50 to 84, mortality went up more than 27 percent, representing more than 470,000 excess deaths. Almost four out of five of the deaths had COVID marked on the death certificate as the cause or a contributing factor.

Author(s): Petr Savb

Publication Date: 13 Jan 2022

Publication Site: The Epoch Times

This Local Pennsylvania Police Pension Fund Is About to Run Out of Benefits. How Did That Happen?

Mary Pat Campbell

Link:https://www.ai-cio.com/news/this-local-pennsylvania-police-pension-fund-is-about-to-run-out-of-benefits-how-did-that-happen/

Excerpt:

But of all the struggling pension funds in Pennsylvania, the pension system in the city of Chester was shown to be the most underfunded municipal public pension plan in the entire state in 2019. And now, that situation has gone from bad to worse.

Reports say the pension will run out of money in less than four months, according to Philadelphia’s PBS station, WHYY. One of the primary reasons for this situation appears to date back to 2009, when the pension board adjusted the pension calculation procedure. These adjustments seem to have made it easier for some police officers to spike their pensions.

Under the 2009 change, police officer pensions in Chester were calculated using the salary of the final year of service, which may have encouraged some officers to work overtime as much as possible in their final year in order to inflate their pensions, according to the state’s appointed receiver. In October 2021, this rule was changed so that calculations will now be based upon the last three years of service. 

This one-year policy, combined with the practice of spiking among approximately 80 police officers, appears to be the cause of the pension system’s lack of funding. Officials are hoping to recoup some of the overpayments to retirees, and they are expecting future payments to be reduced significantly.  

Author(s): Anna Gordon

Publication Date: 10 Jan 2022

Publication Site: ai-CIO

Infection fatality rate of COVID-19 in community-dwelling populations with emphasis on the elderly: An overview

Mary Pat Campbell

Link: https://www.medrxiv.org/content/10.1101/2021.07.08.21260210v2

doi: https://doi.org/10.1101/2021.07.08.21260210

Graphic:

Excerpt:

Objective: This mixed design synthesis aimed to estimate the infection fatality rate (IFR) of
Coronavirus Disease 2019 (COVID-19) in community-dwelling elderly populations and other age
groups from seroprevalence studies. Protocol: https://osf.io/47cgb.


Methods and analyses: Eligible were seroprevalence studies done in 2020 and identified by any of
four existing systematic reviews; with ≥1000 participants aged ≥70 years that presented
seroprevalence in elderly people; that aimed to generate samples reflecting the general population;
and whose location had available data on cumulative COVID-19 deaths in elderly (primary cutoff
≥70 years; ≥65 or ≥60 also eligible). We extracted the most fully adjusted (if unavailable,
unadjusted) seroprevalence estimates. We also extracted age- and residence-stratified cumulative
COVID-19 deaths (until 1 week after the seroprevalence sampling midpoint) from official reports,
and population statistics, to calculate IFRs corrected for unmeasured antibody types. Sample sizeweighted IFRs were estimated for countries with multiple estimates. Secondary analyses examined
data on younger age strata from the same studies.


Results: Twenty-five seroprevalence surveys representing 14 countries were included. Across all
countries, the median IFR in community-dwelling elderly and elderly overall was 2.9% (range 0.2%-
6.9%) and 4.9% (range 0.2%-16.8%) without accounting for seroreversion (2.4% and 4.0%,
respectively, accounting for 5% monthly seroreversion). Multiple sensitivity analyses yielded similar
results. IFR was higher with larger proportions of people >85 years. Younger age strata had low IFR
values (median 0.0013%, 0.0088%, 0.021%, 0.042%, 0.14%, and 0.65%, at 0-19, 20-29, 30-39, 40-
49, 50-59, and 60-69 years even without accounting for seroreversion).

Author(s):Cathrine Axfors, John P A Ioannidis

Publication Date: 23 Dec 2021, accessed 17 Jan 2022

Publication Site: medrXiV

COVID-19 Hospitalizations Are Soaring for Working-Age People, Too

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2022/01/12/working-age-covid-19-hospitalizations-soar-34-over-september-levels/

Graphic:

Excerpt:

The hospitalization rate for U.S. residents of all ages is about 60% higher than it was during the last hospitalization surge, which lasted from Aug. 10 through Sept. 10.

U.S. COVID-19 patients ages 20 through 59 are doing better than older patients, but they are facing their own, smaller hospitalization surge.

The pandemic put 51,947 people in the 20-59 age group in U.S. hospitals in the week ending Jan. 7.

Author(s): Allison Bell

Publication Date: 12 Jan 2022

Publication Site: Think Advisor

Americans Moved to Low-Tax States in 2021

Mary Pat Campbell

Link: https://taxfoundation.org/state-population-change-2021/

Graphic:

Excerpt:

Nationally, the U.S. population only grew by 0.1 percent between July 2020 and July 2021, the lowest rate since the nation’s founding. Pandemic-induced excess deaths, virtually nonexistent international in-migration, and an already-declining birth rate yielded an almost flat population trend nationwide. This, however, belies state-level and regional differences. Whereas the District of Columbia’s population shrunk by 2.8 percent between April 2020 (roughly the start of the pandemic) to July 2021, New York lost 1.8 percent of its population, and Illinois, Hawaii, and California rounded out the top five jurisdictions for population loss, Idaho was gaining 3.4 percent, while Utah, Montana, Arizona, South Carolina, Delaware, Texas, Nevada, Florida, and North Carolina all saw population gains of 1 percent or more.

The picture painted by this population shift is a clear one of people leaving high-tax, high-cost states for lower-tax, lower-cost alternatives. The individual income tax is only one component of overall tax burdens, but it is often highly salient, and is illustrative here. If we include the District of Columbia, then in the top one-third of states for population growth since the start of the pandemic (April 2020 to July 2021 data), the average combined top marginal state and local income tax rate is 3.5 percent, while in the bottom third of states, it is about 7.3 percent.

Author(s): Jared Walczak

Publication Date: 4 Jan 2022

Publication Site: Tax Foundation