Unprecedented federal borrowing floods state budgets

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

Pension crisis has local impact

Link: http://www.keweenawreport.com/featured/pension-crisis-has-local-impact/

Excerpt:

Keweenaw Report reached out to City of Houghton manager Eric Waara to see if there was a similar arrangement for DPW staff there. He said everyone’s plan was converted to MERS over a decade ago. Waara says Houghton’s fund is well over 80 percent covered, which is considered excellent. That means current assets can cover nearly all expected future liabilities related to retirement.

Publication Date: 6 May 2021

Publication Site: Keweenaw Report

The COVID-19 Disaster That Did Not Happen in Texas

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Most businesses in Texas had been allowed to operate at 75 percent of capacity since mid-October, when Abbott also allowed bars to reopen. It was implausible that removing the cap would have much of an impact on virus transmission, even in businesses that were frequently hitting the 75 percent limit.

While Abbott said Texans would no longer be legally required to cover their faces in public, he urged them to keep doing so, and many businesses continued to require masks. At the stores I visit in Dallas, there has been no noticeable change in policy or in customer compliance.

Conversely, face mask mandates and occupancy limits did not prevent COVID-19 surges in states such as Michigan, where the seven-day average of newly confirmed infections has risen more than fivefold since March 1; Maine, which has seen a nearly threefold increase; and Minnesota, where that number has more than doubled. Cases also rose during that period, although less dramatically, in other states with relatively strict COVID-19 rules, including DelawareMarylandMassachusettsNew JerseyPennsylvania, and Washington.

Florida, a state often criticized as lax, also has seen a significant increase in daily new cases: 34 percent since mid-March. But Florida, despite its relatively old population, still has a per capita COVID-19 death rate only a bit higher than California’s, even though the latter state’s restrictions have been much more sweeping and prolonged.

Author(s): Jacob Sullum

Publication Date: 21 April 2021

Publication Site: Reason

Detroit’s Black Wealth Tax

Link: https://www.city-journal.org/detroit-racial-wealth-gap-property-tax-policy

Excerpt:

But this is Detroit, which has the highest effective property tax rate of any major city in America, at 3.58 percent of market value. If the tax man assesses your house at its full renovation cost, this would add $537 to your monthly mortgage bill, bringing it to $1,295.

That hefty charge might not look too bad if the quality of local government services is top shelf. As Charles Tiebout observed in his classic 1956 article on local public finance, people “vote with their feet” and shop for their preferred combination of services and prices among various localities. Some happily buy at the public services equivalent of Neiman Marcus, others at Walmart.

From public safety to education to infrastructure, however, Detroit is no Neiman Marcus. To be charitable, let’s suppose the city’s services are on par with those of other Michigan cities, where the average property tax rate is 1.54 percent. Elsewhere, then, a comparable $180,000 investment comes with a monthly mortgage bill of just $989, or $306 a month less than in Detroit.

Author(s): Stephen J. K. Walters

Publication Date: 9 April 2021

Publication Site: City Journal

What We Hope Is The Final COVID Surge

Link: https://polimath.substack.com/p/what-we-hope-is-the-final-covid-surge

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My current plan is to stop following COVID numbers after this coming May. But a lot of that plan rested on this assumption that, as we get really high up there with vaccine numbers, the COVID data would become less and less interesting as it just kind of fizzles out.

Michigan is currently putting that assumption to the test.

*takes deep breath*

The numbers out of Michigan have all the markings of a classic COVID surge. I could maybe make the case that it’s not as steep as we would have expected and maybe it will plateau in the next week or two, but I’ve been expecting that the rate of vaccinations would temper this kind of a surge.

Author(s): PoliMath

Publication Date: 6 April 2021

Publication Site: Marginally Compelling at Substack

Detroit Mayor Is Wrong To Turn Down J&J COVID-19 Vaccines

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The Detroit Free Press reports that the mayor declined to accept a shipment of 6,200 doses of the Johnson & Johnson one-shot vaccine. Why? At a press conference on Tuesday, the mayor asserted, “Johnson & Johnson is a very good vaccine. Moderna and Pfizer are the best. And I am going to do everything I can to make sure the residents of the city of Detroit get the best.”

What does the mayor mean by “best”? Duggan stated, “The Moderna and Pfizer vaccines are 95% effective if you get two shots. Johnson & Johnson is one shot, which is nicer, but it’s about 67% effective.”

Actually, in the United States arm of the Johnson & Johnson (J&J) clinical trial, the vaccine’s ability to prevent moderate to severe infection was 72 percent and it is 85 percent effective at preventing severe disease.In addition, the J&J vaccine has been shown to be effective against the new, more contagious COVID-19 variants that are now spreading across the country. And it is likely that many citizens would prefer the convenience of getting a one-and-done J&J shot as opposed to waiting nearly a month to get a second Moderna or Pfizer/BioNTech shot.

Author(s): Ronald Bailey

Publication Date: 5 March 2021

Publication Site: Reason

Guilty of bribery and extortion, ex-public employees still collect public pensions

Link: https://www.wxyz.com/news/local-news/investigations/after-admitting-to-bribery-and-extortion-ex-public-employees-still-collect-public-pensions

Excerpt:

In 2017, a law was passed that attempted to make forfeiture of a crooked public employee’s pension mandatory, or at least easier to pursue. But a 7 Action News investigation reveals it has seldom been used, and Michigan’s Attorney General was not even familiar with it.

Former Detroit Police officers James Robertson, Jamil Martin and Anthony Careathers were charged by prosecutors when it was revealed that each was extorting collision shop owners on the job.

Author(s): Ross Jones

Publication Date: 4 March 2021

Publication Site: WXYZ

Group files records requests for Michigan school, state employee pension information

Link: https://www.lansingstatejournal.com/story/news/2021/03/02/two-transparency-groups-seek-salary-pension-information-michigan-workers/6834356002/

Excerpt:

Sain and other Michigan public school retirees who are part of the state pension system were notified this week their names and pension information were released through the Freedom of Information Act request, Department of Technology, Management and Budget spokesperson Caleb Buhs said in an email. 

Steven Schupbach, who works for the Illinois nonprofit American Transparency, which tracks government spending, asked for retired public school workers’ first and last names, middle initials, residential zip codes, last employer zip code and monthly payment amount. 

Author(s): Carol Thompson

Publication Date: 1 March 2021

Publication Site: Lansing State Journal

Lawmakers Want to Be More Careful With Pension Funds

Link: https://www.mackinac.org/lawmakers-want-to-be-more-careful-with-pension-funds

Excerpt:

One of the most important assumptions built into pensions is the guess at how much investments will grow over time. If investments provide high returns, then lawmakers don’t need to set aside as much money today to pay for pensions to be paid out in the future. If investments do not return as much as assumed, a gap develops between what has been promised and what has been saved. The bills cap the rate at which administrators can assume their investments will grow, allowing them to be no more risky than current policy allows. They also let administrators use less risky assumptions if they think it is prudent.

This is a smart approach. Much of the current pension debt exists because administrators overestimated investment returns. Taxpayers now owe more to the pensioners than they do to the lenders and bondholders who willingly lent the state money. Putting a cap on the assumptions administrators make can prevent future pension debt.

Author(s): James M. Hohman

Publication Date: 1 March 2021

Publication Site: Mackinac Center for Public Policy

To Plug a Pension Gap, This City Rented Its Streets. To Itself.

Link: https://www.nytimes.com/2021/02/16/business/dealbook/pension-borrowing-retirement.html

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That hasn’t deterred governments. Nationwide, cities and states issued $6.1 billion in pension obligation bonds in 2020, more than in any year since 2008, according to data compiled by Municipal Market Analytics, a research firm. States with significant new pension borrowings last year included Arizona, Florida, Illinois, Michigan and Texas. In California, cities borrowed more than $3.7 billion to squirrel away at various public pension funds, breaking the old state record of $3.5 billion, set in 1994.

It’s a major comeback for this type of debt, said Matt Fabian, a partner at Municipal Market Analytics who has been writing about the deals for years. “They’re borrowing money and basically putting it into the market and gambling,” he said.

Mr. Fabian said his firm’s tally almost certainly missed the borrowing by municipalities that took West Covina’s approach, because those bonds used different names. Flagstaff rented its City Hall, libraries and fire stations last year to back a pension deal marketed as “certificates of participation.” In January, Tucson did the same, leasing two police helicopters, a zoo conservation center, five golf courses and the bleachers at its rodeo grounds, among other things. And a Chicago suburb, Berwyn, used “conveyed tax securitization bonds” to help fund police pensions.

Author(s): Mary Williams Walsh

Publication Date: 16 February 2021

Publication Site: New York Times