Marian Walsh Withdraws

Posted on March 31, 2009 by billmanzi

Senator Marian Walsh today withdrew from consideration for the job at HEFA that had caused Governor Deval Patrick so much political heartburn. From the State House News Service:

Sen. Marian Walsh, standing next to Gov. Deval Patrick outside his office, announced Tuesday afternoon that she has withdrawn her name from consideration for a high-paying post at the Health and Education Facilities Authority. The HEFA board had voted to hire Walsh, a Patrick political supporter, to fill a long vacant assistant director’s post at a salary of $175,000. The move stirred public outrage and Walsh recently volunteered to take a $120,000 salary, a move that failed to quash sentiment against the hiring. Critics questioned her qualifications for the job, which was announced while Patrick was vacationing in Jamaica. The Boston Globe over the weekend published reports that Patrick administration officials had worked behind the scenes to engineer the Walsh appointment, moves that the governor’s opponents said were at odds with his campaign promises to clean up Beacon Hill. In withdrawing, Walsh said, “I feel that I have become the issue.” Walsh said she called Patrick chief of staff Doug Rubin Monday evening to announce her intentions.

It is a wise move for the Governor, and one that will help him extricate himself from this ongoing distraction. In this difficult economic climate the move was just not defensible, and the Globe releasing those internal emails provided the nails in this appointments coffin.

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Methuen High School Hoedown

Posted on March 31, 2009 by billmanzi

Presenting a TV To a lucky student winner.

Methuen High School had its “High School Hoedown” last week in the school cafe, and it really was a great time. It is an annual event put on by our outstanding Food Services Department and its Director, Wayne Vespa. It featured a live country western act, great country style lunch, and prizes for students lucky enough to win. Two TV sets, and two I-Pods were given to the student winners. We run a great food program at the Methuen Public Schools and that program also provides hot lunches for our summer programs, including the Methuen Arlington Neighborhood Summer Program. Congratulations to Wayne Vespa, our Director, for a succesful event and for running a great program.

Methuen High School Hoedown

Country Western at lunch at Methuen High School!

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Reform MBTA Health Care and Save a Billion

Posted on March 31, 2009 by billmanzi

Michael Widmer of the Massachusetts Taxpayers Foundation has just issued a report that proposes reforms to the existing MBTA health care system that could save one billion dollars over twenty years. In looking at the existing system it is not hard to figure out why such savings are achievable. Widmer details some of the existing systems richness in comparision to the state plan for all other employees, as well as private plans. From the Widmer report:

Although MBTA employees contribute 15 percent toward the monthly premiums – the same percentage paid by most state employees covered by the Group Insurance Commission (GIC) – the richness of the MBTA’s benefits package and the lack of even modest member cost sharing result in dramatically higher costs per employee. In 2008, the MBTA paid an average of $14,000 in health care costs for each of its 5,600 employees and $18,000 for 2,000 pre-65 retirees. This $15,000 average for all members under the age of 65 is an astounding two-thirds more than the GIC’s average cost of $9,000 and almost double the $8,000 per worker national average.

Widmer also highlights the benefit package for MBTA retirees.

More remarkable than the benefits provided current employees are those received by thousands of MBTA retirees. For the 4,000-plus former employees who retired from the Authority prior to July 2008, the MBTA pays 100 percent of their health insurance premiums. Workers who retired on or after July 7, 2008 and are under age 65 pay 10 percent of the premium; those under 65 who retire after December 31, 2008 contribute 15 percent. However, after turning 65, all MBTA retirees receive free health insurance paid for by the MBTA.
Most benefit plans allow employees to retire at an earlier age with reduced benefits, but T employees may retire after 23 years of service and immediately collect full benefits including free health care for as much as three or four decades, far longer than their service time. It is striking that the health care costs of the 2,000 pre-65 retirees are nearly half that of the 5,600 active employees and over 70 percent of the costs of all 4,700 retirees. While the costs to the pension system of the ‘23 and out’ benefit have received wide attention, the accompanying health care costs create a large additional drain on the T’s finances. Eliminating the ’23 and out’ pension benefit for current employees would produce significant health care savings beyond the $1 billion enumerated in the recommendations below.
For retirees age 65 and older who are eligible for Medicare, the Authority not only pays 100 percent of the cost for supplemental insurance for services not covered by Medicare, but also pays the retirees’ Medicare Part B premiums, which cover doctors’ services, outpatient care and other ancillary services. This benefit, which will cost the Authority $3.1 million in 2009, is virtually unheard of in the private sector and rare even among public employers. Even when compared to the state-subsidized health insurance program for low-income adults (Commonwealth Care), MBTA employees, retirees and their spouses/dependents enjoy unrivaled health coverage at rock-bottom prices.

So the employees of the MBTA are getting a better deal than those enrolled in Commonwealth Care, which is amazing. Widmer makes some common sense proposals to reform this inequitable system and simply bring these benefits in line with what other state employees receive, which is good health care at a reasonable price (by today’s market standards). And with the MBTA looking at a budget gap of $160 million dollars in this fiscal cycle it is incomprehensible that this system is still around. The T is facing some tough choices, but earning political support for additional revenues without immediate reform of this system will be difficult, if not impossible. The full MTF Report is posted below.

MTF Report MBTA Health Care

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The Good, The Bad, and the Ugly

Posted on March 30, 2009 by billmanzi

The Obama Administration’s plans for G.M. and Chrysler seem to be taking shape publicly for the first time, with selected leaks out of the Administration laying out a map of where this debacle might end up. Today’s Wall Street Journal lays out the blueprint, indicating that the Administration is planning on a bankruptcy filing by G.M. that would wipe out the recalcitrant stakeholders and start anew by breaking the company in two. The “good” or new G.M. would take the attractive assets, and the “bad” or “old” G.M. would be left with all else, including some retiree legacy costs. From the Wall Street Journal:

GM looks increasingly like it will be forced into filing for bankruptcy protection, sometime in mid-to-late May, and that the surviving “new GM” will retain select brands and some international operations, said several people familiar with the situation.

Stakes in this new GM could be given to creditors. It is also possible the new company could be sold whole or parts to investors or its shares sold in an initial public offering. The UAW’s retiree health-care fund would likely get either some shares or proceeds from the sale of the stock.

A key ingredient in acting on this plan is getting the UAW to agree to an entirely new contract, including major reductions in health-care benefits, said several people involved in the matter. “That’s the No.1 wild card here,” one of these people said Monday.

Under the plan, the “good” GM would not be expected to hold the tens of billions of dollars in retiree and health care obligations that hurt the auto maker in recent decades. Instead, those obligations would be transferred to an “old GM,” made up of less-desirable brands such as Hummer and Saturn, and underperforming plants and other assets.

At Chrysler the drill would be the same, with bondholders and labor both wiped out by the prospective filing. It is a doubtful prospect that Chrysler could ever emerge from such a filing.

While I am certainly no lawyer or expert in bankruptcy law it strikes me that the bondholders would fight a G.M. split to the death, and might be able to delay such a deal from moving forward quickly. But I believe that the Obama team is tired of the nonsense from both debt holders and labor, and intends to get what they need from both through negotiations, with the credible threat of bankruptcy to give both groups “incentive” to accept the inevitable. If they cannot they are now making clear that both groups will be run over by bankruptcy. But what is still not clear to me is how legacy costs will be apportioned through bankruptcy, and what will happen if the VEBA collapses. Much more to come.

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Obama Auto Announcement

Posted on March 30, 2009 by billmanzi
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Auto Task Force Delivers a Harsh Verdict

Posted on March 30, 2009 by billmanzi

The Obama Administration delivered a harsh verdict on the futures of G.M and Chrysler, calling for strong medicine before additional federal funding is provided. The Administration dismissed the current version of both companies plans for viability, saying that neither would produce profit making companies. The Obama Administration also boldly mentions the potential for supporting bankruptcy for the companies. That is a tough shot across the bows of the companies. As has been clear for some time the numbers just don’t add up. And it has been a truly fatal flaw across the United States that when the numbers do not add up we simply ignore the numbers, and hope for the best. That was the essence of the G.M. and Chrysler plans for viability.

Chrysler has been called a company that cannot continue to exist as a stand alone entity. The Government documents make clear that Chrysler has a very limited time to reach a deal with Fiat, and failure to do so will result in a Chrysler bankruptcy filing. The U.S. Government will provide no additional funding outside the scope of such an agreement.

General Motors is seen as more likely to survive, but the Government analysis of General Motor’s own plan showed how outlandish the G.M. numbers are. The Government raises the possibility of bankruptcy for G.M., and makes the promise of standing by G.M. warranty wise should negotiations with important stakeholders fail.

The best path to achieve this may well be an expedited,court-supervised process to extinguish unsustainable liabilities, should an out-of-court restructuring not be possible. The Administration is prepared to stand by GM throughout this process to ensure that GM emerges with a fresh start and a promising future. Consumers thinking about buying a GM car and workers and communities that depend on this iconic American company should have confidence that GM can and will come out of this crisis as a stronger, leaner and more competitive car company.

The basis of the prospect of bankruptcy flows from the existing G.M. plan and its underlying assumptions, which the Government cuts to shreds.

While GM has made progress in its turnaround to date,GM’s current plan will not result in a healthy company that is meaningfully cash flow positive in a normalized business environment and thus able to support its operations and obligations without continued government support. (A summary of the Administration’s findings is provided separately).

The Government, in addition to moving CEO Wagoner, announced its intent to replace up to half of the G.M. Board. Long overdue.

I have attached the G.M. and Chrysler viability sheets released by the Government, as well as the overall release. Tough medicine from the Obama Administration. The President will speak at 11:00 a.m. this morning.

auto-restructuring-fact-sheet20090330gm_viability_assessmentchrysler_viability_assessment

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Wagoner Forced Out at G.M.

Posted on March 29, 2009 by billmanzi

With President Obama scheduled to talk tommorow about bailouts for both G.M. and Chrysler it was announced tonight that Rick Wagoner was stepping down as CEO of G.M., effective immediately. The news was leaked by White House sources, as was the fact that Wagoner had been forced out by the White House.

The President spoke today on Face the Nation, and he said that the automakers had not yet made enough progress in restructuring to qualify for additional federal aid. The White House has been calibrating that message for over a week, building the expectation that tough measures would be required of all stakeholders in order for the President to approve additional help. From MSNBC:

Obama said Sunday that GM and Chrysler and all those with a stake in their survival need to take more hard steps to help the struggling automakers restructure for the future. In an interview with CBS’ “Face the Nation” broadcast Sunday, Obama said the companies must do more to receive additional financial aid from the government.

“They’re not there yet,” he said.

A person familiar with Obama’s plans said last week they would go deeper than what the Bush administration demanded when it approved the initial loans last year.

The bondholders are putting up quite a struggle on the issue of trading debt for equity, and labor, for all of the criticism it has received, is about to take a gigantic hit on retiree health care costs. Those costs have been transferred to a Voluntary Employee Benefit Association Trust, which was scheduled to take in some pretty hefty cash payments from the big three to fund the benefits. The UAW has just agreed to contract terms with Ford that would allow the company to substitute Ford stock for half of the cash Ford owes to the VEBA. G.M. will likely get the same deal on that issue. G.M. reportedly owes the VEBA $30 billion. The reluctance to sanction bankruptcy, even prepackaged, has to have some relationship to the fate of the retirees whose health benefits might be completely washed away by such a filing. What the governments responsibilities would be under such a scenario is not clear to me. But there would be a political firestorm.

So Rick Wagoner is fired by the President. Tommorow will be a key day for the auto industry in the United States.

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The Globe Delivers a One Two Punch to Governor Patrick

Posted on March 28, 2009 by billmanzi

Today’s Boston Globe furthered the political misery surrounding the Patrick Administration, with two stories culled from internal emails putting the Administration in a very bad light.

Contradicting a series of steadfast denials, internal e-mails show that Governor Deval Patrick’s top aides controlled the appointment of state Senator Marian Walsh to a high-paying job at a state authority, from setting her salary to crafting her job description. They also provided the agency’s talking points for the news media in an attempt to quell a public uproar. “I’m going to send you a proposed job description from [Patrick chief of staff Doug Rubin] soon,” Patrick senior adviser Jay Gonzalez told the two top officials at the Massachusetts Health and Education Facilities Authority in a March 11 e-mail.

The Patrick Administration has steadfastly denied any involvement in the Walsh hiring, pointing to HEFA as the responsible entity. While not many placed any credibility in those denials today’s Globe story outs them as totally false, with the entire operation being run out of the Governor’s office. The salary offer of $175,000 to Senator Walsh was also orchestrated by Patrick Chief of Staff Doug Rubin, who had the HEFA Board make the salary offer in spite of a survey done showing that a market rate salary for this position would be $128,500.

The salary level of $175,000 originated with the administration, the e-mails indicate. They also show that Rubin drafted Walsh’s job description. Patrick’s press office wrote the script for public statements by the agency.

On the weekend before the Patrick-controlled HEFA board unanimously approved Walsh’s appointment as assistant director, Larson asked Gonzalez to justify why the Democratic lawmaker should be paid more than $128,500. That was the amount that a Burlington-based consulting firm, The Survey Group, reported as the average market base pay for the position.

Larson asked Gonzalez to contact Rubin for backup information that would support a $175,000 salary.

“Generally, it’s lower than the $175,000 figure,” Larson wrote to Gonzalez, referring to the consultant’s survey of pay at other government agencies. “It would be helpful if Doug or others could send along some comparables so that we have substantive justifications.”

Even though the HEFA Board chair continues to deny the orchestration by the Governor’s staff it is quite clear that that is exactly what happened. And while it is no big suprise to many it is just another terrible story at a time when the Governor could use a good story or two. The Governor was not served well by staff on this matter, and the appointment of Marion Walsh to this position has to be considered “in trouble”. It is time for the Governor to cut his losses.

Read the Globe story here.

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Donna Byrne in Methuen

Posted on March 28, 2009 by billmanzi

The great Donna Byrne performing at last summers Great Court Concert Series with the Marshall Wood Quartet. She put on a great show!

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Obama Responds to Disaster in Dakotas

Posted on March 28, 2009 by billmanzi

President Obama has been bringing federal disaster relief to North Dakota, South Dakota, and Minnesota, and spends this week’s address talking about that situation. A nice job done professionally. Who says that being President is all about ideology?

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