Podcast: Steve Kerrigan, Candidate for Lt. Governor

Posted on May 29, 2013 by billmanzi

I was very fortunate to have on the Manzi in the Morning Radio Program (980 am WCAP every Wednesday at 10:00 am)Steve Kerrigan, who is a candidate for Lt. Governor. Steve was the first announced candidate for that office, and came on to talk about his candidacy, some of the critical issues facing Massachusetts, and his work as President of the Massachusetts Military Heroes Fund, as well as his work as the Chairman of the Steering Committee for the New Frontier Network at the JFK Presidential Library. Some great talk about President Kennedy and the Presidential Library, as well as his work for Senator Ted Kennedy. His website is can be found here. www.stevekerrigan.org. He is on twitter @stevekerrigan. My thanks to Steve Kerrigan for coming on the show, and I look forward to having him on again in the future.

http://yourlisten.com/swf/Player.swf?id=16988041

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Detropia- PBS Looks at Detroit

Posted on May 27, 2013 by billmanzi

A PBS film on Detroit, and what is happening to it, and how it is impacting some of its people, tonight at 10:00 p.m. on PBS. Worth a look.

http://dgjigvacl6ipj.cloudfront.net/media/swf/PBSPlayer.swf

Watch Coming to Independent Lens: Sundance Award Winner Detropia on PBS. See more from Independent Lens.

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Methuen Memorial Day Service

Posted on May 27, 2013 by billmanzi

Today’s Methuen Memorial Day Service. Apologies for the poor audio, as the wind was blowing hard and made it difficult. Thanks to the American Legion, the VFW, and all that participated in today’s ceremony.

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Enforce No Budget No Pay

Posted on May 26, 2013 by billmanzi

There have been so many budget battles in Washington over the past few years that the public has by and large tuned them out. From my perspective the Republicans, even when they may have had a solid point or two, have always managed to take those points to such an extreme that they have made a budgetary hash out of it. The very fact that their own budgetary numbers simply have not worked has never stopped them from making ridiculous claims in order to satisfy their donor base. The Democrats have not exactly covered themselves in budgetary glory, but the President has made reasonable attempts to bridge budgetary differences with Republicans, who were simply not able to compromise on anything of substance.

One area where the Republicans were able to actually score some public relations points against the Democrats and the President was the failure of Senate Democrats to pass a budget for four years. Although that was not a substantive issue it allowed Republicans to paint Senate Democrats as not serious on enacting budget reforms. In fact House Republicans, in dealing with the debt ceiling this year, passed a bill that included what they called “No Budget, No Pay“,attempting to embarrass Senate Democrats. Speaker Boehner summed it up:

“We are going to pursue strategies that will obligate the Senate to finally join the House in confronting the government’s spending problem,” Boehner said. “The principle is simple: no budget, no pay.”

The Speaker, after two big failures in budget negotiations with the President,also indicated a strong desire to return to what he called “regular order” in budgeting, saying that the traditional Congressional methodology for budget making should be adhered to. The Speaker second guessed himself in a speech given after the collapse of talks with the President. From The Hill:

Boehner now believes that effort was a mistake, and he has vowed to Republicans in the House that he will not negotiate one-on-one with Obama going forward. He is instead recommitting to a “regular order” process, whereby the House and Senate pass legislation independently that can then be reconciled with amendments or with conference committees.

(Emphasis added.)

The relentless Republican attacks on the Senate Democrats for their failure to produce a budget finally worked, with new Senate Budget Committee chair Sen. Patty Murray not only producing a budget, but passing it in the Senate. Now “regular order”, as noted above, would have both branches appoint conference committee members to work out the differences between their budgets. Standard operating procedure, and “regular order” for sure. But it seems that Republicans are now loathe to appoint conference committee members, with the Speaker as well as (some)Senate Republicans refusing to participate in “regular order.” It seems that Republicans now realize that “regular order” will allow some politically uncomfortable minority motions to hit the House floor (motions to instruct), and they just do not want to allow that to happen. So much for regular order. The Speaker is trying to explain how his new position actually meshes with his old position (he was for regular order before he was against it). The Speaker’s explanation? From TPM:

“I think you also know that under rules, if you appoint conferees and after 20 legislative days there’s no agreement, the minority has the right to offer motions to instruct, which become politically motivated bombs that show up on the House floor,” Boehner said. “I just want to be frank with you: we’re following what I would describe as regular order. These informal conversations are under way. That’s the way it should work.”

That explanation made as much sense as the one Republicans gave when they tried to explain why the Paul Ryan budget did not balance the federal budget for 40 years, when the stated purpose of his budgetary work was to fight the evil of debt and deficits. But I digress. In the Senate it has become hand to hand combat between Republicans, with some of the more traditional Republicans looking to utilize “regular order” and go to conference, while the newer members, more in line with Tea Party values, resist. Yes those that Senator McCain dubbed “whacko birds” have dug in pretty hard. Marco Rubio made it clear that “regular order” is not for him.

“I have tremendous respect for this institution,” Mr. Rubio said in an interview on Friday. “But I’m not all that interested in the way things have always been done around here.”

McCain’s favorite “whacko bird” Sen.Ted Cruz, took aim at Republicans.

“Here is the dirty little secret about some of those on the right side of the aisle,” Mr. Cruz said of his fellow Republicans. “There are some who would very much like to cast a symbolic vote against raising the debt ceiling and nonetheless allow our friends on the left side of the aisle to raise the debt ceiling. That, to some Republicans, is the ideal outcome.”

I would have to say that Senator Cruz is probably right about that issue. Some Republicans would prefer that the United States not default, but do not want to take any responsibility for making that vote. To Cruz those folks are just squishes. He is willing to give us the full monty of no compromise, followed by default. Senator McCain has taken the position that “regular order” should hold.

Mr. McCain called the demands of his Republican colleagues “absolutely out of line and unprecedented.” The Senate passed the budget before dawn on March 23 after a grueling all-night session, he noted, saying it was time to try to reach a final deal with the House in a negotiating conference.

“Will this deliberative body, whether it is the greatest in the world or the worst in the world, go ahead and decide on this issue, so we can at least tell the American people we are going to do what we haven’t done for four years and what every family in America sooner or later has to do — and that is to have a budget?” he asked. Although few of Mr. McCain’s colleagues took to the floor to join him, many have expressed similar views.

My only question is why “no budget, no pay” does not apply here? Since the Republicans brought it up I don’t see why the Democrats are not yelling for enforcement. More public relations I know, but the Republicans had a degree of success with their effort. Or maybe the Democrats are content to let the Republicans argue this issue out themselves. Whatever the outcome it certainly does not bode well for budget agreement, if we ever do get to conference.

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Manzi in the Morning- Michael Widmer Interview

Posted on May 22, 2013 by billmanzi

Michael Widmer came on the Manzi in the Morning Program to talk about Transportation Finance, the State budget, unfunded OPEB liabilities, and reform in transportation. Widmer is the President of the Massachusetts Taxpayers Foundation, and he is, in my view, the pre-eminent budget analyst in Massachusetts. Thank you Michael Widmer for taking the time to come on the program. The Massachusetts Taxpayers Foundation website is here.

object width=”522″ height=”300″>http://yourlisten.com/swf/Player.swf?id=16985474

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Governor Patrick Restores Some Cuts

Posted on May 21, 2013 by billmanzi

Governor Patrick, after cutting the current budget due to lower than expected tax revenues, is restoring $20.8 million of the $225 million cut as tax revenue begins to rebound. The latest figures show tax revenues $500 million or so above revised benchmarks, with about a month or so left in the fiscal cycle. Of particular note for localities is the Circuit Breaker amount of $11.5 million. Some good news there. The full list is below.

$5.25 million homeless students transportation;
· $1 million for regional school transportation;
· $11.5 million to reimburse for special education costs through the Circuit Breaker;
· $100,000 for micro small business loans;
· $50,000 for assistive technology at Massachusetts Rehabilitation Commission;
· $135,999 for Vocational Rehabilitation at the Massachusetts Rehabilitation Commission;
· $162,500 for Massachusetts Service Alliance (MSA);
· $200,000 for the Buy Local Program at the Department of Agriculture;
· $216,980 for Council on Aging (COA) Grants at Elder Affairs (ELD);
· $280,000 for the Department of Conservation and Recreation (DCR) to hire additional summer staffers;
· $717,554 for rest home rate increases at the Department of Transitional Assistance;
· $1 million for the Massachusetts Technology Collaborative program created in last year’s Jobs Bill;
· $53,000 for grants to Visitor Information Bureaus;
· $50,000 for Aid to Incarcerated Mothers; and
· $41,667 for the South Boston Community Health Center.

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Run Government as a Business????

Posted on May 19, 2013 by billmanzi

The Atlantic ran a pretty good story on government called, “Government Should Run Like a Business—but Not in the Way You Think.” Eric Schnurer has written a piece that provokes some thought, and got quite a bit of commentary from folks reading the piece online. I bring the comments up because they are a bit discouraging. But more on them later. Schnurer first lays out the case for even making the comparison of government and business, arguing that new delivery models, constant need for innovation, and competition make both government and business continually vulnerable.

At some point, all entities need a demand for their services, to deliver those services at a level of quality that maintains that demand, to respond to innovation and competition by improving them for the times, and to do it with the resources they can command by performing those functions. Any entity that ignores these realities will eventually “go out of business” — whether or not it’s a business.

Schnurer points to many of the failed municipalities as proof of the “going out of business” comparison. I am not sure I am buying into the point entirely, but it is true that failure to adapt, innovate, or become more efficient is a prescription for failure in either case. But government, even in bankruptcy, cannot go out of business.

So what are the business principles that Schnurer thinks are important?

To make government work in the 21st century requires the same basic “business plan” as in any other failing, but potentially still viable, enterprise:

First, resize it to current realities — stop the bleeding, cut the fat, and get the existing operation on stable footing. Then, start thinking about the future — or, more accurately, the present that’s already arrived while the enterprise remained stuck in the past;

Redesign the business, its products, services, and organization, to meet current and future demand — you wouldn’t keep selling buggy whips if people wanted cars. And then,

Redefine and reposition the enterprise to compete effectively against new competitors and in whole new markets.

Right off the bat he steps into the breach, going right to the “resize” issue. I don’t believe Schnurer intends the piece to be a rehashing of the conservative/liberal split on the appropriate size of government, but rather an appeal to “efficiency”. If in fact we are going to spend taxpayer dollars on defense our management should prevent the purchase of $2,000 hammers. He gets to the reality of that later in the piece:

Consider for a moment what is “waste” (and its cousins, “fraud” and “abuse”). Many people apply this term to virtually any government program with which they disagree. For instance, a liberal may view military spending as “waste” while a conservative might think the same of giving money to a homeless person. We’ll use the term “waste” in a different and more precise sense: money that isn’t being spent for its intended purpose. However one feels about defense spending, defense dollars shouldn’t be spent on gold toilet seats, as the National Performance Review under Vice President Al Gore found they were, and whatever one thinks of welfare, welfare dollars shouldn’t be spent on ineligible services, as various federal reviews have found to be the case with as much as 40 percent of Medicaid spending.

He uses the word waste. I prefer efficiency. Call it what you will, it is entirely separate from the policy choices that so divide us as a nation. Before he goes slightly off the tracks, in my opinion, Schnurer gets to the exactly correct point.

That’s because, in turning around a troubled enterprise, the first thing to do is to stop the hemorrhaging. That doesn’t mean you start hacking away at the enterprise indiscriminately, or just blow it up. You want to attack the problem strategically, starting with purely wasteful spending that can be eliminated without hurting operations — in fact, eliminating waste will actually help operations.

That point should be something that we all agree with. Why should anyone prefer to spend governmental money inefficiently? Nominally nobody does. But in reality there is usually a built in, politically strong, opposition to governmental efficiency. Schnurer, after building the case for efficiency, then veers over to the fact that people want more government than they are willing to pay for, and also that a complete elimination of waste would not solve our fiscal problems. Absolutely correct on the latter, probably correct on the former. But is it not discouraging to ask people for higher taxes, even when really needed, when there are glaring examples of governmental waste and profligacy? Schnurer does not get to that, but it is a good piece, with a promise of more to come. I look forward to those.

In the final analysis government is not a business, and strictly speaking cannot be run like one. But sound business principles can be applied to government in order to increase efficiency, and do more with less. As mentioned earlier there are powerful forces arrayed against efficiency in government, and those forces are willing to fight hard against change. And when that fight does come the rules are not generally Marquess of Queensberry. Government at all levels, especially local, have much that can be done today to improve efficiency. From my vantage point I have seen resistance to reform from both left and right, with nobody having a monopoly on virtue. It just depends on whose ox is being gored. Entrenched anti-reform politics is aided by the political divisions within the electorate, with slogans and invective taking the place of governing and reason. When you read the comments at the end of the Schnurer piece you will get that notion firsthand. An efficiency in government article becomes subsumed in a right/left argument. Surprising? No. Disappointing: Absolutely.

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Manzi in the Morning- Linda Soucy Interview

Posted on May 17, 2013 by billmanzi

I was very pleased to have Linda Soucy of the Methuen Arlington Neighborhood on the show this past week to talk about the progress made in our neighborhood through the efforts of MAN, and also to talk about the big Golf Tournament coming up on June 10th. Looking to play in the Tournament? Give us a call at 978-691-5645.

http://yourlisten.com/swf/Player.swf?id=16983710

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Shedding OPEB Through ObamaCare

Posted on May 15, 2013 by billmanzi

There is plenty to write about within the broad subject of municipal finance, pension obligations, and “Other Post Employment Benefits”(OPEB), which are primarily health care costs for retirees. While pension costs have at least (nominally in many cases)been addressed by creating “full funding” schedules that attempt to solve the problem of huge unfunded pension liabilities, OPEB remains an actuarial nightmare, with billions in unfunded liability now on the books due to the health care commitments made to municipal and state retirees. In all of the highly distressed cities we have written about in the last week the unfunded OPEB liabilities have become a huge issue. They now take center stage in Chicago, where Mayor Rahm Emanuel is looking to shed those costs entirely by moving retirees into ObamaCare. From the Chicago Tribune:

Mayor Rahm Emanuel plans to start reducing health insurance coverage next year for more than 30,000 retired city workers and begin shifting them to President Barack Obama’s new federal system.

The move is aimed at saving the city money and comes as the Emanuel administration has been trying to wrangle significant pension cost concessions from employee unions.

The details are found in a letter the city plans to send to retirees this week.

Still getting health insurance: Police officers and firefighters who retired between the ages of 55 and 64 and are not yet eligible for Medicare but whose coverage is guaranteed under union contracts, as well as workers who retired before August 1989 and are protected by a legal settlement.

Cut out as of Jan. 1 will be the rest. That’s when the city will begin a three-year phase out of the coverage, according to the letter signed by Comptroller Amer Ahmad. During that period, premiums, deductibles and benefits could change, the letter states.

Once the phase-out is complete, those retired workers would have to pay for their own health insurance or get subsidizes under the Affordable Care Act, known as Obamacare. The city-subsidized coverage is particularly important to retired workers who aren’t yet eligible for Medicare, as opposed to those 65 or older who use the subsidies for Medicare supplemental insurance.

Chicago is faced with some numbers that are staggering for retiree health care. They have made some pretty poor labor deals, in particular with public safety unions, that have made the situation worse. The bill for Chicago this year was $109 million for retiree health care, with a projection that the number would balloon to over $540 million within ten years. The Tribune story also pointed to the City’s four pension funds having an unfunded liability of $20 billion, but that is a story for another day, as the Mayor is waging another battle with labor over that issue. Labor pushed back on the Mayor, who certainly is not on the Christmas Card list of Chicago’s unions these days.

Chicago Fraternal Order of Police First Vice President Bill Dougherty said the city’s projections for future cost of health care are too high.

Dougherty called the mayor’s plan “a poor decision” and suggested that it should in no way be linked to negotiatoins over pension changes. “The mayor has shown that he likes to play games on different levels, and we’re not interested in doing that,” Dougherty said.

Will movement of municipal employees and retirees to ObamaCare become a tool for mayors to shed costs, and large future liabilities? Mayor Emanuel has made the first move. Will others follow? A link to the Chicago study of retiree health care is below, and that report is the basis of the move by the Mayor.

Chicago Retiree Health Care Commission Findings and Recommendations.

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Panic in Detroit Part Two

Posted on May 15, 2013 by billmanzi

The Emergency Manager in Detroit, Kevyn Orr, just released his first report as E.M., painting a bleak picture of Detroit’s current financial status.This report was mandatory, with Orr going through some of the details found in his very short tenure on the job so far. What the E.M. reported was pretty dire, with the City of Detroit “insolvent” no matter how you care to measure that term. What exactly did he report? He gave a numbers rundown, which showed how Detroit has simply papered over its problems for the past five or so years. But the E.M. doesn’t just delve into numbers, because running a City is not just about reading a spreadsheet. It is about providing critical services to residents. Kevyn Orr recognized that in his report, and did not just talk about cutting, but also spoke of the need to invest in things that have been broken for years. But that “investment” will not be made into existing systems, but will come with hard management changes, including privatizations, that will change the face of how Detroit is managed. For those that have launched objections to a “state takeover” I say that you should have put your house in order before calamity struck. How bad is it? Let’s lift the hood with the E.M.

Detroit has been running deficits for years. But rather than face those deficits the City has chosen to borrow money through bond offerings to paper over debt. I am not familiar with Michigan state law when it comes to municipal bonding but I would have to say that for Michigan to allow these borrowings is flat out bad policy. That does not even begin to speak of the insanity of the bond lenders, whose bad judgement will now be rewarded by a haircut, likely a major one. From the E.M. report, we see the extent of the financial problems, and the papering over of debt.

Excluding proceeds from debt issuances, the City’s expenditures have exceeded revenues from fiscal year 2008 to fiscal year 2012 by an average of $100 million annually. These financial shortfalls have been addressed with long‐term debt issuances (e.g., $75 million in fiscal year 2008, $250 million in fiscal year 2010 and $137 million in fiscal year 2013) and by deferring payments of certain City obligations,such as contributions to the City’s two pension funds.The accumulated unrestricted deficit was $326.6 million at the end of fiscal year 2012. Fiscal year 2013 (year ending June 30, 2013) is currently projected to add approximately $60 million to the accumulated unrestricted deficit balance(excluding the impact of the $137 million debt issuance).

Pretty bad numbers just in that paragraph, but there is more to come. One of the ways to determine insolvency is through cash flows, and whether you have enough cash on hand to maintain yourself as a going concern. Detroit, today, does not. From the report:

The City had negative cash flows of $115.5 million in fiscal year 2012 (year ended June 30, 2012)and borrowed a total of $80 million from Bank of America in March 2012 (of which $50 million was drawn by the General Fund) to avoid running out of cash. The City is projecting negative cash flows of approximately $90 million in fiscal year 2013 and would run out of cash by year‐end if not for (i) the deferral of payments for City obligations, including pension contributions,and (ii) the receipt of proceeds from the escrow account established as part of the $137 million August 2012 bond refinancing transaction, disbursements from which are controlled by the State.
As of April 26, 2013, the City had actual cash on hand of $64 million but had current obligations of $226 million to other funds and entities in the form of loans, property tax distributions, and deferred pension contributions and other payments. Therefore, the City’s net cash position was actually negative $162 million as of April 26, 2013. The City has been deferring, and will need to continue to defer, payments on its current obligations in order to avoid running out of cash…….The City of Detroit continues to incur expenditures in excess of revenues despite cost
reductions and proceeds from long‐term debt issuances. In other words, Detroit spends more than it takes in – it is clearly insolvent on a cash flow basis.

So the City is not able to stay afloat, except by not paying its bills. The E.M. uses the term insolvent. Take note of the pension deferrals, as those will at some point become a major issue. (FY 2013 pension deferral will be $108 million, after paying $31 million into the fund). Unfunded pension liability? Over a half billion dollars, measured with existing actuarial and financial assumptions, but likely to be much higher when those assumptions are updated. But that is chicken feed compared to the unfunded OPEB obligations, which stand at $5.7 billion, mostly for retiree health care. Why worry about that now? From the report:

During fiscal year 2013, in order to make current annual required contributions and repay prior year deferred pension contributions, the General Fund would have had to make aggregate pension contributions of approximately $139 million, which together with healthcare benefit payments (approximately $200 million), total approximately $339 million (33% of fiscal year 2013 revenues, excluding the impact of debt issuance). Annual payments on account of these legacy liabilities are expected to increase in the future if no action is taken to mitigate them.

33% of total revenues for those two items alone. How about other debt?

The City has obligations totaling at least $15 billion, including General Fund debt ($1.1 billion),
enterprise fund debt ($6.0 billion), Pension Obligation Certificates (“POCs”) and related derivative instruments ($1.8 billion), …..

That is one big hole. Orr talks about the lack of capital investment stifling productivity, about a City operation to produce and sell electricity that loses money and is in need of major capital investment, and all of the operational reviews needed of city departments. In order to produce results Orr will be forced to seek major restructuring, and all stakeholders will be impacted negatively. Orr is holding the potential for a Chapter 9 filing in his pocket, but you have to think he may have to pull that card eventually. An editorial in the Detroit News put it in pretty straightforward terms.

What Orr needs residents, employees and creditors to wake up to is the reality that this crisis can’t simply be managed away. Orr used the word “insolvent” in his report for a reason: Detroit can’t keep operating unless drastic changes are put in place.

“We can’t cut enough” to balance the budget, Orr said. “We have to negotiate with stakeholders.”

For Detroiters, that means accepting that certain services will be delivered in a different way, likely by private contractors, and many of the jewels they’ve been so possessive of will either be sold or transferred into regional authorities.

Employee unions must recognize that additional concessions are necessary. Detroit can’t afford to keep promises made in the past.

If pensions can’t be touched under state law, then the savings will have to come from retiree health care benefits. Current workers will likely see far less generous benefits when they retire. Those unions that haven’t participated in past rounds of pay cuts must get on board.

If the E.M. is forced into Chapter 9 the same type of battle will open between bondholders and city pensioners as we are seeing in Stockton and San Bernadino Califormnia. But Detroit is much larger, and the battle will be on a grander scale. Emergency Manager Orr has a very difficult task, both financially and operationally. Will he avoid Chapter 9? The odds are stacked against him. More to come.

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