Tag: pensions

"Live now, pay later,"

Aside from the obvious reference to unearned hedonism and individual irresponsibility, it should be noted that governments derived from such careless individuals as the "live now" crowd can bring all of us even closer to being debt slaves.  Yet even without the notion of pleasure as an advance reward to leadership, the function of government runs unabated. One might find it differently in private enterprise however, according to Jack Spencer at Cap Con:

"In the private sector, businesses can't ignore economic reality by giving in to unrealistic union demands. They open their books and say, "look, we've had a lousy couple of years. We have to cut back or go under. We can't give you what you want." That reality check doesn't apply to government, which is always bargaining with other people's money. Those "other people" are us, the taxpayers. Over the decades, when faced with unpopular choices of cutting services or raising taxes, government officials have given unions most of what they asked for and left the tab to be picked up by future generations."

I've been there.  In fact, I have been in both places simultaneously.  At the business owned by my wife and I, folks haven't received raises in three years, yet as a county commissioner in 2012 I was present while union employees received automatic 1.5% increases. It made no sense to me that it should be so easy for a nearly unanimous Republican board to approve of such a thing, but over the years we have discovered that fiscal insanity is a scourge that has set upon both Capulet AND House Montague.

And it is generational too.  So much so, that entire infrastructures are collapsing from the weight that has long had its supports removed.  Pensions as a part of governmental financial negligence as referenced in the Cap Con piece above are responsible for cities literally falling apart, and legitimate public safety services being eliminated.

So what have we done to solve this?

Its not as if they weren't warned.

State appointed Emergency Financial managers couldn't touch any pension contracts whatsoever. As a state initiated law, it would  have run afoul of article 9, section 24; the state's own constitutional protection for pensions.  The EFM law was however, a tool to readjust current contracts not associated with those pensions.  Federal courts would have no say at that point.  But labor unions, and certain municipalities' elected bodies preferred to not allow such a thing.

Instead, a bankruptcy, fully clarified in the constitution as being under federal jurisdiction, takes the state's constitutional protections of those pensions off the table.

Two statements from high profile positions in Michigan State Government. Both from looking at the decision to allow the Detroit Bankruptcy to go forward. The first from the Nerd

"Today, the federal court allowed Detroit to stay on the path toward a brighter future.  A future where streetlights work and ambulances respond quickly. A future where crime and blight shrink, and where jobs and investments surge."

From the AG?

"However, I am deeply disappointed by Judge Rhodes' analysis that pensions may be impaired. I will continue to aggressively defend pensions and Article 9, Section 24 of the Michigan Constitution as this case proceeds to the confirmation stage of bankruptcy planning, at which time we can thoroughly review any plans for potential legal action involving pensions."

Outside of the progressive politics, corruption related to same, and a lack of respect for what USED to be the jewel of the Midwest, it was greed.  Greed, that is explained no better than by Bill Johnson:

"History, however, shows this looming crisis might have been averted if the employees unions and pensioners had shown more flexibility forty years ago in restructuring city pension benefits. Instead, the intractable opposition demanded the city stay on a dead end course to default.

As far back as 1974, then-Mayor Coleman Young proposed what was considered reasonable changes to Detroit's pension programs. Because labor and retirees are a potent political force, the City Council shot down the mayor's changes."

Not so much.

Read the rest at Johnson's blog.

The bizarro side of the world is wondering what you might be up to, but we have less tolerance for the games.  Don't play on their turf, because at some point you will realize all the friends you brought with you are gone. A realization of the truth will make short work of this:

"Consistency and the state constitution demand that Attorney General Bill Schuette fight to protect the pensions of Detroit retirees from being downsized in bankruptcy court. It's Schuette's job to defend state laws, and he can't pick and choose which ones he fights to protect.

Schuette filed Monday to intervene in the bankruptcy proceedings on behalf of pensioners.

The move puts him at odds with Gov. Rick Snyder, who supports Emergency Manager Kevyn Orr's position that retirees will have to sacrifice along with other creditors to resolve Detroit's $18 billion debt."

The Michigan Constitution has many things that need to be enforced, but Article 9 Section 24 cannot be used in this case. The average Joe can tell you that Article I, Section 8, Clause 4 of the US constitution says so.

"Both state legislation and state courts tended to use debtor-creditor laws to redistribute money from out-of-state and urban creditors to rural agricultural interests. Under the Articles of Confederation, the states alone governed debtor-creditor relations, and that led to diverse and contradictory state laws. It was unclear, for instance, whether a state law that purported to discharge a debtor of a debt prohibited the creditor from trying to collect the debt in another state. "

The constitution of the US is primary. Federal bankruptcy law which is derived from specific mandates it is absolute under this example.

The governor actually does something that makes sense, (and only 2-3 decades late) and the protectors of leftist failures jump into action. And, the kids are getting hurt feelings. Yesterday's Detroit Bankruptcy filing made little Rose cry.  She thought she had beat the bad man to the punch.  So she has retaliated:

"Aquilina said she would make sure President Obama got a copy of her order."

Kevyn Orr, The emergency financial manager, was given an unworkable task. In a city that has been reassured repeatedly that it is too big to fail, the lights are going out. All manner of economic development incentive paid for by Michigan taxpayers as yet proves to be insufficient to generate the activity necessary for basic government services, and a sustained infrastructure. Four decades of progressive politics and fear of calling out bad decision making as it happened; fearing the sting of racial politics, and lack of compassion.

Its far too late now.

Banks that have loaned Detroit operating cash should count those loans as losses.  Retirees that did their jobs, and counted on their employer to manage finances and their retirement moneys appropriately might wish to reevaluate their portfolios. Orr's current status report?

"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).

There are some other interesting items that have a familiar smell

Not that my opinion is any more valid than those of you who have posted on this already.  In fact I have carefully considered the arguments, and added in the known variables along with best guesses and personal experience.  I rely on your observations as much as my own, however this is one of those times I must respectfully disagree with some of you on the negative impact of the state's new tax policy.

Last night I was lucky enough to attend the Leelanau County Republican party Lincoln dinner with my wife and a great number of friends. Some of those friends are either retired and/or retiring soon, and have a reason to be concerned about higher taxes, the loss of exemptions, and changing tax policy that may directly affect them.  There was no shortage of Republicans present, and many of those were folks one would find in 912 groups, Tea Parties, and other constitution interested organizations.

I believe the Leelanau county chair suggested the numbers involved in the county party were even more than last year.  And last year we had great success in moving the bar back toward conservative government structure with landslide elections both statewide and nationally.

The reason I mention this, is to establish that this group, even while containing a number of "old guard" party types, it was hardly a pushover crowd.  While being a social affair, there is/was still an undeniable no-going-back attitude, and frankly there were enough who had a concern as do many in this forum, that this was not the way to start off.

For the most part, I too could be counted as one who was also troubled about extending tax levels, and elimination of particular exemptions.  My understanding of the MBT going away and the Corporate tax replacement was not yet complete.