Tag: bailout

Days Ahead Of First Federal Stimulus Payments, Local Governments Still Don’t Know How—And In Some Cases If—They’ll Spend The Money

Mary Pat Campbell

Link: https://www.forbes.com/sites/lizfarmer/2021/05/06/days-ahead-of-first-federal-stimulus-for-governments-lawmakers-still-dont-know-how—and-in-some-cases-if–theyll-spend-it/?sh=2abe348711d8

Excerpt:

The first round of aid for state and local governments is set to go out next week, but with no guidance yet on the spending rules, leaders are becoming increasingly frustrated.

The American Rescue Plan Act (ARPA) included $350 billion in direct aid to states and localities and the law requires the U.S. Department of Treasury to distribute the first tranche by May 10. Since it passed on March 11, the department has been developing guidance on the spending rules with input from government organizations. The ARPA law says governments can use the money for public health crisis expenses and for budget deficits, but more specifics are needed because governments are required to track and report on their spending.

Now, with just days to go until the first round of aid is to be delivered, the rules still aren’t out and frustrations are mounting. This is particularly true for those governments who are receiving direct federal aid for the first time since the pandemic began.

Author(s): Liz Farmer

Publication Date: 6 May 2021

Publication Site: Forbes

How much is your community getting under the American Rescue Plan? A searchable database for the nation is here – Wirepoints

Mary Pat Campbell
How much is your community getting under the American Rescue Plan? A searchable database for the nation is here – Wirepoints

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Embedded below are a set of searchable databases that provide the estimated allocation of the $360 billion in direct government aid to states, counties and cities under the $1.9 trillion American Rescue Plan. The remaining stimulus includes funding for schools and other programs, for which detailed data is not yet available.

The $360 billion is split as follows: State governments are set to receive $230 billion in direct and capital project grants, county governments will receive $65 billion, and municipal governments will receive the other $65 billion.

Author(s): Ted Dabrowski, Mark Glennon, John Klingner

Publication Date: 17 April 2021

Publication Site: Wirepoints

Multiemployer Pensions: Will the Recent Bailout Destroy Pensions (in the Long Run)?

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/multiemployer-pensions-will-the-recent

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I think it unlikely that Congress, at least this Congress, will pass any MEP reforms. The bill allowing for MEP benefit cuts passed under Obama, during his second term – with a Republican House and a Democratic Senate.

There may eventually be MEP reforms, but with a big cash injection into Central States Teamsters, the reckoning day has been pushed off.

The real crisis was Central States Teamsters going under. It would have taken down the PBGC. The puny plans like Warehouse Employees Union Local No. 730 Pension Trust (total liability amount: $474,757,777) are drops in the bucket compared with Central States (total liability amount: $56,790,308,499).

Author(s): Mary Pat Campbell

Publication Date: 5 April 2021

Publication Site: STUMP at substack

Pension and Executive Compensation Provisions in the American Rescue Plan Act

Mary Pat Campbell

Link: https://www.seyfarth.com/news-insights/pension-and-executive-compensation-provisions-in-the-american-rescue-plan-act.html

Excerpt:

Seyfarth Synopsis: On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”), the $1.9 trillion COVID-19 relief bill.  ARPA includes various forms of multiemployer and single employer pension plan relief, as well as certain executive compensation changes under Section 162(m) of the Internal Revenue Code (“Code”), which are discussed further below. Please see our companion Client Alert on the other employee benefit items of interest in ARPA here.

Author(s): Seong Kim, Christina M. Cerasale, Kaley M. Ventura, Alan B. Cabral

Publication Date: 11 March 2021

Publication Site: Seyfarth

COMMENTARY: COVID stimulus won’t cure the pension pandemic

Mary Pat Campbell

Link: https://fredericksburg.com/opinion/commentary-covid-stimulus-won-t-cure-the-pension-pandemic/article_d33a07f1-ee2d-59f4-9e24-c7380f2020a8.html

Excerpt:

While state and local governments cannot put their stimulus directly towards pensions, depending on how the federal government enforces this restriction, they will still have the leeway to free up money that can then go towards pensions (or be spent on budgetary items that have been cut in recent years due to growing pension obligations).

….

Public pensions will continue to use overly optimistic assumptions about how their investments will perform, accounting tricks that mask the true size of their pension liabilities, and underreport how much money is needed to fund them.

They will also continue to expose themselves to risky investments in order to attempt to shore up funding gaps. In fact, as the fiscal health of pensions plummeted following the 2008 financial crisis, pension plans only doubled down on the practice.

Author(s): Daniel J. Smith, Eileen Norcross

Publication Date: 27 March 2021

Publication Site: The Free Lance-Star

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

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.

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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

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

American Rescue Plan Act of 2021 (4) 9704

Mary Pat Campbell
American Rescue Plan Act of 2021 (4) 9704

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Going through the text of the stimulus bill, section 9704 is the meat of the bailout but those 10 pages might be a little hard going so I have added my emphasis.

What struck me on initial reading is that there does not seem to be any cap on those one-time lump sum assistance payments and applicants may be able to value future benefits too. That is, a union with the foresight to sponsor a pension that is almost broke could entice employers to enter their union with the offer of providing their employees with a good pension at a cost that taxpayers will subsidize. Sounds too stupid to be real except if the law were entirely drafted by lawyers for the unions.

Author(s): John Bury

Publication Date: 15 March 2021

Publication Site: Burypensions