Tag: bailout

COVID rescue package gives failing pension plans a $86 billion bailout, stirring hope and criticisms

Mary Pat Campbell

Link: https://www.bostonglobe.com/2021/03/13/nation/covid-rescue-package-gives-failing-pension-plans-86-billion-bailout-stirring-hope-criticisms/

Excerpt:

In the shadow of stimulus checks and extra unemployment aid, Democratic lawmakers extended another hand in the $1.9 trillion pandemic relief package: a long-sought bailout for failing private pension plans.

The union-backed provision, touted for years by Representative Richard E. Neal, was signed into law Thursday by President Biden as part of the larger COVID-19 stimulus bill. It promises to set aside an estimated $86 billion — and some say possibly far more — in grants for multi-employer retirement plans that were careening toward insolvency even before the pandemic hit.

Without it, the multi-employer pension plans for more than a million truckers, warehouse and retail workers, and others could collapse, unions and congressional Democrats warn. In New England alone, the measure could help preserve the promised retirements of at least 70,000 Teamster members, union officials said.

Author(s): Matt Stout

Publication Date: 13 March 2021

Publication Site: Boston Globe

Federal COVID-19 Bailout Prohibits States From Cutting Taxes

Mary Pat Campbell
Federal COVID-19 Bailout Prohibits States From Cutting Taxes

Excerpt:

Since the federal government is giving states money that they don’t need, there are two things state lawmakers can do: Use the federal money to grow government spending or pass that extra cash along to taxpayers by lowering their tax burdens.

However, the Senate inserted language in the American Rescue Plan expressly telling states that they “shall not use the funds provided…to either directly or indirectly offset a reduction in the net tax revenue,” or do anything 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.”

That same section of the bill also bans states from depositing the federal bailout into their public pension funds. That’s probably a good idea, but it’s pretty ironic considering that the American Rescue Plan also contains a completely indefensible bailout of some private-sector pension funds run by labor unions.

Author(s): Eric Boehm

Publication Date: 10 March 2021

Publication Site: Reason

Multiemployer Pension Relief Expected by March 14

Mary Pat Campbell

Link: https://www.morganlewis.com/blogs/mlbenebits/2021/03/multiemployer-pension-relief-expected-by-march-14

Excerpt:

EPPRA takes a far more direct approach to the problem than prior proposals. Under EPPRA, eligible plans can receive financial assistance from a new Treasury-backed PBGC fund. The available financial assistance will be sufficient for eligible plans to pay all benefits for 30 years. This includes any benefits previously suspended under the Multiemployer Pension Reform Act of 2014 (MPRA), which must be restored by plans that apply for assistance under EPPRA. EPPRA’s special financial assistance will not, however, cover adjustable benefits that have been cut under a rehabilitation plan.

The assistance is payable in a single lump sum without any repayment obligation. To qualify for assistance, a multiemployer pension plan must meet one of four conditions:

1. Be in critical and declining status

2. Have previously imposed a benefit suspension under MPRA

3. Be in critical status, have a modified funded percentage of less than 40% on a current liability basis, and have a ratio of active to inactive participants of less than 2 to 3

4. Be insolvent

The PBGC may prioritize plans that are insolvent, that require more than $1 billion of assistance, or that have suspended benefits under MPRA.

Author(s): Timothy P. Lynch, Daniel R. Salemi, Benjamin T. Kelly

Publication Date: 9 March 2021

Publication Site: Morgan Lewis

Bailed Out Multiemployer Plans

Mary Pat Campbell
Bailed Out Multiemployer Plans

Excerpt:

According to PBGC, 61 plans filed notices for 2020 that they were in Critical and Declining status.

There have been 32 plans that filed for benefit cuts under MPRA and it may pay off for every other multiemployer plan to rustle up a submission package prior to enactment.

Then we come to other plans who might be (or could make themselves) eligible. Of 1,220 plans who filed Schedule MBs for 2018 there were:

118 in Critical and Declining status

638 with more retired than active participants

1202 with unfunded liabilities

$685 billion in net unfunded liabilities

Author(s): John Bury

Publication Date: 9 March 2021

Publication Site: Burypensions

The Politics of Pensions

Mary Pat Campbell

Link: https://www.nationalreview.com/the-tuesday/the-politics-of-pensions/

Excerpt:

One of the difficulties faced by some of these pensions is that most of the large employers that were expected to pay into them no longer do so, many of them having ceased to exist. As Elliot Blair Smith put it in a 2016 MarketWatch write-up of the sorry history of the Central States pension fund: “Only three of the plan’s 50 largest employers from 1980 still pay into the plan. And for each active employee, it has 5.2 retired or inactive participants.”

If corporations did nothing but grow and stack up profits, then this would be a pretty good system. But that isn’t how things actually work.

In spite of the sci-fi trope of immortal, galaxy-spanning corporations, the modern business firm is in fact a relatively vulnerable and short-lived thing. In the middle of the 20th century, a big corporation might be expected to stay in business for the better part of a century; today, the average big corporation will not live long enough to legally order a beer. McKinsey has estimated that three-fourths of the companies listed in the S&P 500 in 2017 will disappear within ten years. This is an inconvenient thing for people who expect to be taken care of for all of their adult lifetimes by a single employer, but it is the result of improved business practices rather than defective ones. As businesses become more focused on their core competencies and learn to adapt more quickly to changes in the market, they become ever more temporary partnerships among different kinds of capital: physical, financial, and human.

Author(s): Kevin Williamson

Publication Date: 9 March 2021

Publication Site: National Review

S.F’s budget will be saved from painful cuts thanks to federal stimulus. What about in the next one?

Mary Pat Campbell

Link: https://www.sfchronicle.com/politics/article/Federal-stimulus-nearly-wipes-away-San-16010321.php

Excerpt:

The federal stimulus package likely to be signed by President Biden this week will erase the majority of San Francisco’s projected $650 million budget deficit over the next two years, saving City Hall from having to make painful service cuts and layoffs — for now.

While the federal stimulus is a boon for the economy in the short term, it will not solve all of the city’s financial woes. San Francisco’s ultimate recovery heavily depends on how quickly parts of the local economy bounce back, from tourists visiting the city to employees returning to downtown offices.

Without a substantial comeback in hotel, sales and business taxes, City Controller Ben Rosenfield said that Mayor London Breed and the Board of Supervisors will likely grapple with a fragile budget over the next few years.

…..

The city learned in December it had a $125 million surplus for the current year due to higher-than-expected property tax revenue, increased federal reimbursements and lower expenses. But that was only for the current year.

Breed ordered every city department to propose cuts to trim budgets by 10% over the next two years. Those cuts could have had noticeable impacts, from fewer 911 operators to fewer trial attorneys in the public defender’s office.

Author(s): Trisha Thadani

Publication Date: 8 March 2021

Publication Site: San Francisco Chronicle

MoneyPalooza Monstrosity: It Passed! More on the Multiemployer Pension Bailout

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/moneypalooza-monstrosity-it-passed

Graphic:

Excerpt:

Here are the whole-number ratios if you can’t eyeball the relationships above.

The total MEP unfunded liability is 8 times that of the bailout bill amount

The total public pension unfunded liability is 22 times that of the bailout bill amount (this happens to be the same as the total American Rescue Plan Act of 2021)

The total Social Security shortfall is almost 200 times that of the MEP bailout bill

Author(s): Mary Pat Campbell

Publication Date: 8 March 2021

Publication Site: STUMP on Substack

Durbin, Duckworth Announce Illinois Wins In COVID-19 Relief Bill

Mary Pat Campbell

Link: https://www.durbin.senate.gov/newsroom/press-releases/durbin-duckworth-announce-illinois-wins-in-covid-19-relief-bill#new_tab

Excerpt:

U.S. Senate Majority Whip Dick Durbin (D-IL) and U.S. Senator Tammy Duckworth (D-IL) today released the following statements after the Senate passed President Biden’s American Rescue Plan, which will provide emergency relief to Illinois:

…..

To avoid dramatic budget cuts at every level of government:

Estimated $13.2 billion in state and local funding for Illinois including $1.8 billion for Chicago.

The bill provides an estimated $7.5 billion for the state and $5.5 billion for Illinois locals ($2.3 billion for counties; $2.4 billion for larger cities; $681 million for smaller municipalities).

…..

Multiemployer Pension Relief: 

By prolonging the solvency of the Pension Benefit Guaranty Corporation (PBGC), more than 100,000 Illinoisans will have their hard-earned pension benefits preserved 

Author(s): Dick Durbin, Tammy Duckworth

Publication Date: 6 March 2021

Publication Site: Dick Durbin’s Senate Office

STATE AND LOCAL CORONAVIRUS FISCAL RECOVERY FUNDS

Mary Pat Campbell

Link: https://www.naco.org/resources/featured/state-and-local-coronavirus-fiscal-recovery-funds

Excerpt:

In a major victory for America’s counties, the State and Local Coronavirus Fiscal Recovery Funds legislation, part of the American Rescue Plan Act was passed by the U.S. Senate on March 6. The bill, which now heads back to the U.S. House of Representatives for final consideration, includes $65.1 billion in direct, flexible aid to every county in America, as well as other crucial investments in local communities.  

The Senate version amends the House-adopted bill in several important ways:

The U.S. Department of Treasury would still oversee and administer these payments to state and local governments, and every county would be eligible to receive a direct allocation from Treasury. States, municipalities, and counties would now receive funds in two tranches – both tranches would provide 50 percent of the entity’s total allocation. In cases where a state has a very high level of unemployed individuals, these states may receive both tranches at the same time.
 

In order to receive a payment either under the first or second tranche, local governments must provide the U.S. Treasury with a certification signed by an authorized officer. The U.S. Treasury is required to pay first tranche to counties not later than 60-days after enactment, and second payment no earlier than 12 months after the first payment.

The table below contains projected allocations for counties from the U.S. Treasury, if the proposal is signed into law. The values are informed by the House Oversight Committee and the Congressional Research Service (CRS). The estimates are not official values from the U.S. Treasury and are subject to change.

Date Accessed: 7 March 2021

Publication Site: National Association of Counties

Peter Meijer Proposes $2,400 Stimulus Checks under ‘DOGE’ Plan

Mary Pat Campbell

Link: https://www.newsweek.com/peter-meijer-stimulus-package-doge-biden-michigan-1573963

Excerpt:

Republican congressman Peter Meijer has said that the American Rescue Plan is full of waste and has touted his own proposal to cut the price tag of the stimulus package in half while increasing payments to individuals.

The Michigan freshman representative has been pushing his own alternative to the $1.9.trillion relief package with his alternative Direct Dollars Over Government Excess, called the $DOGE Plan.

He told Fox Business that his proposal, whose title is a nod to the meme turned cryptocurrency, would put more money in the pockets of Americans and give less to individual states.

Author(s): Brendan Cole

Publication Date: 5 March 2021

Publication Site: Newsweek

GOP says ‘no’ to state and local aid as Senate heads toward vote on COVID bill

Mary Pat Campbell
GOP says ‘no’ to state and local aid as Senate heads toward vote on COVID bill

Excerpt:

Supporters of the bill — including numerous Republican mayors — say the answer is a clear “yes.” They argue that a number of states, particularly those that rely on service industries and tourism, have seen steep revenue declines, and local governments are facing deeper financial strains as they struggle to expand services with fewer employees.

“Many of our cities have furloughed workers, shrunk their workforce through attrition, cancelled police and fire recruitment efforts, and frozen capital budgets that build community infrastructure — all while absorbing additional expenses to respond to COVID, delivering essential services and reaching out to our communities that have been disproportionately affected,” a bipartisan group of Ohio mayors wrote to federal lawmakers last month.

But congressional Republicans, who also opposed including more state and local aid in the coronavirus stimulus bill approved in December, largely have been unpersuaded. They point to data showing some states outpacing their revenue projections, and argue that sending more financial help to states would unfairly reward those that locked down their economies instead of lifting restrictions on businesses.

Author(s): Laura Olson

Publication Date: 4 March 2021

Publication Site: NC Policy Watch

With Congress poised to give states and local governments $350 billion, pandemic budget hit for many was smaller than predicted

Mary Pat Campbell

Link: https://www.cnn.com/2021/03/05/politics/state-budgets-covid-relief-package/index.html

Excerpt:

“If the point of the stimulus bill is to just prevent state and local governments from having to cut back on spending or having to implement tax increases, then the $350 billion is way too much,” said Dan White, director of public-sector research at Moody’s Analytics. “Is that money better spent directly in terms of federal fiscal stimulus, as opposed to it flowing through states? If you use that money for PPP or for enhanced unemployment insurance, does it have a bigger bang for the buck in terms of economic stimulus?”

Moody’s Analytics now pegs the state and local budget shortfall at $61 billion when taking existing federal help into account. The left-leaning Center on Budget and Policy Priorities recently estimated that the budget gap is around $225 billion, but it noted that that doesn’t include states’ and localities’ costs to continue fighting the virus or helping their struggling residents and businesses.

Author(s):  Tami Luhby

Publication Date: 5 March 2021

Publication Site: CNN