Tag: American Rescue Plan Act of 2021

Mass Federalization: How Washington is Bailing Out Failed States, Decapitating Competitive Ones and Ending America As You Knew It – Wirepoints

Mary Pat Campbell

Link: https://wirepoints.org/mass-federalization-how-washington-is-bailing-out-failed-states-decapitating-competitive-ones-and-ending-america-as-you-knew-it-wirepoints/

Excerpt:

Don’t think that might ease your state and local tax burden. The downpour of cash on cities and states, most of which don’t need it, is all tied to a provision in ARP that bans tax cuts. It’s a mandate for statism – big government – whether states with small government philosophies like it or not.

“Thou shalt be statists and big spenders” – that’s what ARP might as well say as a direct federal mandate.

Most of ARP commentary about cities and states has wrongly focused only on the $350 billion that’s will go directly to them. That’s a small part and entirely misses the bigger picture.

Author(s): Mark Glennon

Publication Date: 22 March 2021

Publication Site: Wirepoints

Fact-checking a GOP talking point on state, local relief in the American Rescue Plan

Mary Pat Campbell

Link: https://www.politifact.com/article/2021/mar/19/fact-checking-gop-talking-point-state-local-relief/

Excerpt:

• The American Rescue Plan signed by President Joe Biden allocates state and local aid based on the extent of unemployment in a state in late 2020. Critics say this punishes states that opened their economies earlier, under the assumption that their unemployment levels were lower.

• It’s not so clear-cut. Preliminary academic research shows that government policies on reopening had only a modest impact on unemployment. States that depend on especially hard-hit industries like tourism and oil and gas show high unemployment regardless of the government policy.

• Experts say that no method for targeting aid to the states is perfect; each has pluses and minuses.

Author(s): Louis Jacobson

Publication Date: 19 March 2021

Publication Site: PolitiFact

State Aid in American Rescue Plan Act Is 116 Times States’ Revenue Losses

Mary Pat Campbell
State Aid in American Rescue Plan Act Is 116 Times States’ Revenue Losses

Excerpt:

Forty-three states and the District of Columbia have now published revenue data for all 12 months of 2020; in those states, revenues are up $3.2 billion in aggregate compared to the previous calendar year, thanks to robust gains in financial markets and federal assistance that has kept businesses afloat and provided benefits to individuals. Some of those are, indeed, taxable benefits, in the case of enhanced and expanded unemployment compensation benefits. For the remaining seven states, it is necessary to project revenues through the end of the calendar year based either on U.S. Census Bureau data through the three quarters, or, in Nevada and New Mexico, state data running through October and November respectively.

These adjustments yield an aggregate $1.7 billion decline in state revenues. Under the American Rescue Plan Act, states would receive $195.3 billion in aid, divided according to each state’s share of national unemployed workers. Under Senate amendments, a further adjustment is made to ensure that each state receives, at minimum, the amount it was allocated for purposes of the Coronavirus Relief Fund under the CARES Act. While some conservative lawmakers have criticized this allocation model (which benefits states with steeper job losses) on the grounds that different state policies and approaches may yield some of this variation and that the federal government should be neutral to these decisions, we have argued previously that using the change in unemployment is a more efficient targeting method than allocating aid per capita. Far less defensible, however, is the notion that aid to states should be 116 times the decline in state revenues—especially since the federal government has already provided over $200 billion in fungible aid to subnational governments.

Author(s): Jared Walczak

Publication Date: 3 March 2021

Publication Site: Tax Foundation

Democrats make low-tax states an offer they should refuse

Mary Pat Campbell

Link: https://thehill.com/opinion/campaign/543992-democrats-make-low-tax-states-an-offer-they-should-refuse#new_tab

Excerpt:

States are discovering and news outlets are reporting some surprising features of the new law. For starters, the President Biden-approved American Rescue Plan tweaks the funding formula to distribute funding based on average unemployment during the three final months of 2020 — rewarding Democratic-controlled states like New York, California and Illinois for their draconian COVID policies that resulted in the nation’s highest levels of unemployment. And it offers states billions more in Medicaid funding if they agree to boost their own Medicaid spending. 

Perhaps the most troubling is a legislative rider barring states that accept the aid from using the funds “to either directly or indirectly offset a reduction in the net tax revenue” derived “from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.” 

Author(s): MICHAEL G. FRANC

Publication Date: 19 March 2021

Publication Site: The Hill

The Tax Cut Ban and the Constitution

Mary Pat Campbell

Link: https://www.wsj.com/articles/the-tax-cut-ban-and-the-constitution-11616107345?mod=opinion_lead_pos1

Excerpt:

The $1.9 trillion bill marketed as Covid relief includes $350 billion in federal aid to states and localities. While states can use the money to increase spending, Congress decreed that they can’t use it to cut taxes. “A state or territory shall not use the funds,” the bill says, “to either directly or indirectly offset a reduction in the net tax revenue” from a new law or regulation.

Because the mandate applies to “indirect” revenue offsets, states are at risk of violating the law for any tax reduction “during the covered period,” which stretches through 2024. Ohio’s lawsuit by Attorney General Dave Yost argues that “this coercive offer of federal funds violates the Constitution.”

Author(s): Editorial board

Publication Date: 18 March 2021

Publication Site: Wall Street Journal

Keeping promises to pensioners

Mary Pat Campbell

Link: https://www.post-gazette.com/opinion/editorials/2021/03/20/Keeping-promises-to-pensioners/stories/202103050023

Excerpt:

In 2018, administrators of the Western Pennsylvania Teamsters and Employers Pension Fund announced it would cut benefits by 30% for 17,000 Pittsburgh-area retirees or their beneficiary survivors. The cut was needed to avoid insolvency and an accompanying collapse of the pension structure. Now, it is expected that those cuts will be restored.

Pension protection is critical, both for its morality and for its necessity. Pensions are a lifeline for older citizens. They should not lose their retirement money at the time they are depending on it — when they are no longer able or intending to work. The alternative reasonably could be poverty.

Were it not for the language in the new federal law, many people who spent decades toiling in union jobs would be in jeopardy of losing their benefits through no wrongdoing on their part. Forces conspired to put their retirement plans at risk. These are plans that were negotiated. These are plans that were promised. Nonetheless, many of the employers have gone out of business and have left their pension liabilities inadequately funded.

Author(s): Editorial board

Publication Date: 20 March 2021

Publication Site: Pittsburgh Post-Gazette

The Pension Bailouts Begin

Mary Pat Campbell

Link: https://www.wsj.com/articles/the-pension-bailouts-begin-11616107042

Excerpt:

It was perhaps inevitable that Congress would bail out multi-employer pensions for the Teamsters and other private unions after doing so for coal miners in 2019. But the Democrats’ spending bill does nothing to fix the structural problems that have made these union pensions funds so sick.

….

Unions like the plans because workers continue to accrue benefits if they switch employers. If one business goes bankrupt, others must pick up the cost for worker benefits. Workers also don’t lose benefits—at least not immediately—if union-driven costs contribute to putting employers out of business.

But the plans are riddled with perverse incentives that make them risky. Employers award generous benefits and make paltry contributions so they can pay higher wages. Pension funds invest in riskier assets to achieve higher returns to support generous benefits and low contributions, but their investments often underperform. As a result, 430 or so multi-employer plans are now at risk of failing.

Author(s): Editorial Board

Publication Date: 18 March 2021

Publication Site: Wall Street Journal

Who Needs MPRA?

Mary Pat Campbell
Who Needs MPRA?

Excerpt:

A scant week after the multiemployer pension bailout was enacted one large plan reversed course towards that pot of gold.

Their application withdrawal letter just popped up on the MPRA website.

Plan Name: American Federation of Musicians and Employers’ Pension Fund and Subsidiary

EIN/PN: 51-6120204/001

Total participants @ 3/31/20: 51,295 including:

Retirees: 17,116

Separated but entitled to benefits: 13,777

Still working: 20,402

Author(s): John Bury

Publication Date: 18 March 2021

Publication Site: Burypensions

Landmark Covid Relief Law Pumps More Than $100 Billion Into Public Health

Mary Pat Campbell
Landmark Covid Relief Law Pumps More Than $100 Billion Into Public Health

Excerpt:

The law steers $49 billion toward enhancing coronavirus testing, contact tracing and genomic sequencing, to help identify and track virus variants. Even if the number of infections declines, the money assures these efforts continue for the rest of this year and into 2022 if needed.

Another $50 billion goes to the Federal Emergency Management Agency to support vaccine distribution and logistical and social support in areas hardest hit by pandemic-related job loss and financial strain. This includes such activities as food distribution.

States and local government agencies are allotted $350 billion to make up for lost tax revenue amid the pandemic-caused recession. Some of that money is expected to be spent on pandemic response and public health programs, but it comes with a deadline. It must be spent by Dec. 31, 2024.

Author(s): Steven Findlay

Publication Date: 18 March 2021

Publication Site: Kaiser Health News

American Rescue Plan Act of 2021 (5) 9705

Mary Pat Campbell
American Rescue Plan Act of 2021 (5) 9705

Excerpt:

Going through the text of the stimulus bill, section 9705 turns to funding relief for Single Employer plans by returning to the 15 year amortization schedule for minimum funding purposes for 2022 (with optional election for 2019, 2020, and 2021) as if draconian PBGC premiums were not enough in themselves to discourage underfunding.

Author(s): John Bury

Publication Date: 16 March 2021

Publication Site: Burypensions

Will American Rescue Plan Act Multiemployer Pension Provisions Bring Relief to Employers?

Mary Pat Campbell

Link: https://www.natlawreview.com/article/will-american-rescue-plan-act-multiemployer-pension-provisions-bring-relief-to

Excerpt:

Further, under EPPRA, the interest rate used to calculate withdrawal liability for plans receiving assistance is limited. The interest rate used to calculate withdrawal liability would be capped, in part, by subsections of ERISA, plus 2%, which would currently be approximately 5%. Of course, the lower the interest rate used by a plan for this purpose, the higher the resulting employer withdrawal liability.

Importantly, less than 15% of the 1,400 multiemployer pension plans will receive financial assistance. Accordingly, the bulk of employer obligations to multiemployer plans, even those that are significantly underfunded, will be unaffected by EPPRA. With respect to employers who contribute to plans that receive EPPRA assistance, PBGC is expected to issue guidance that would limit (in whole or in part) the benefit of such assistance to employers.

The impact of EPPRA’s special financial assistance on contributing employers will largely depend on PBGC regulations and guidance. Employers who are currently confronted with an immediate decision regarding withdrawal from a multiemployer pension plan (for example, employers in the middle of labor negotiations) likely will need to exercise patience pending the issuance of PBGC guidance.

Author(s): Paul A. Friedman, Robert R. Perry, David M. Pixley

Publication Date: 15 March 2021

Publication Site: National Law Review