The Winter Council

The lame duck City Council is decamping to a broom closet in an abandoned bunker somewhere across the river for a few months.  This will not be a vacation. As it turns out there are still a few items on certain outgoing councilmembers' "bucket lists" that will still need attending to.  If you are a member of the public interested in providing your input on any of these items, getting yourself over  to the hidey hole where your representatives are conducting their ostensibly public proceedings is only your first obstacle.  Five of the seven councilpersons are leaving office in May so, even if you can get your pleadings through to them, it's doubtful they're going to pay much attention. So good luck.

Here are a few items that might make their way onto the agenda. The first of these probably will have to wait until after the turnover... but, also, it might not.

• A consultant recently completed a survey of city employee wages and benefits. Their recommendations are intended to look encouraging at first glance. See, they want to give everybody a raise.
  

  New Orleans city government should raise its employees' pay by 10 percent, provide for annual merit raises and allow new hires to be offered more than the minimum salary for their positions, according to a report by a consulting firm hired by the city.
  
  The report, completed last month, argues that increases in the cost of living in New Orleans and the availability of higher wages in the private sector have made city jobs less appealing and harder to fill.
  
  The last widespread boosts in salaries for city employees came in 2008, meaning most have seen at best minor raises over the past decade, according to the report.

  And there's plenty of justification for doing just that. The report cites the rising costs of housing in New Orleans as well as a 500 percent increase in health care costs for city workers over the past decade.  Of course, that's a strange thing for the consultants to bring up. A ten percent raise doesn't begin to address that problem. And they aren't arguing for more generous health benefits. In fact, they're recommending sick leave be slashed.
  

  That policy gives workers 13 days of sick leave a year during their first five years and provides those with more than six years of service 15 days of sick leave annually and those with 16 or more years of service 20 days of sick leave each year. The report recommends all those figures be capped at 12 days of sick leave per year, to meet the regional average.

  This sort of bait-and-switch strategy is used against low wage workers all the time. Offer something small but attractive up front, take something important away on the back end.  It's the same logic behind the recently passed Republican tax cut plan which all but guarantees devastating cuts to Medicaid and Social Security. We've also seen it here.
  
  
  
  
  
  In this case, what City Council is most likely to use the report for is as an argument for cutting retirement benefits.  That's what it says way down at the bottom of that Advocate article.
  

  The report also recommends changes that would make city workers' retirement system less generous, noting that other governments in the area require workers to contribute more to their own pensions. The changes recommended are similar to those the city put in place for new hires starting next year.

  Slashing pensions has been Stacy Head's highest priority in her final year on the council.  Her false claim that the retirement system is in fiscal peril echo decades-long Republican lies in agitation against Social Security. Last spring she even attempted to jump the gun on the wage survey and pass the cuts before even seeing its recommendation. Last month they finally passed a scaled back version of the cuts that only affect more recent hires.  But this is still a swipe at the retirement security of a slightly younger cohort of workers.  Head hopes "the next council" will take it further. But there's no guarantee she won't try sooner given that it's harder for people go yell at her now.
  
  
  
  
• Nadine Ramsey is trying to do a favor for a former staff member's father. 



Metairie gastroenterologist Tamer Acikalin wants a zoning change for a Frenchmen Street residential property he owns that he says could one day become an urgent care clinic. The pillared apartment house with a second-floor front porch is two blocks from Washington Square in the Marigny and just down the street from some of the city's best-known live music venues.

Under the proposed zoning change, a medical clinic is just one of 21 commercial uses that would be expanded from its current zoning designation, which only allows day care facilities and small, owner-occupied bed and breakfasts as a commercial use. One of the possible new uses is likely to rile neighbors: Short-term rentals would be allowed year-round, not subject to the 90-day cap that the New Orleans City Council adopted when new regulations took effect April 1, 2017.

We're actually seeing a rash of these "spot-zoning" requests aimed at proliferating short term rentals, lately. One thing they all have in common is a vague plan for some sort of small business on a property that is clearly meant to be used as an Airbnb hotel. Many of them have specific instances of political favoritism in common too. This is one of many but it is in the news because of how obvious it is.


Acikalin is father of Aylin Acikalin Maklansky, Councilwoman Ramsey's legislative director who recently returned to her job after an unsuccessful run for the council seat Guidry is leaving. Acikalin said his daughter has no financial interest in the property. Campaign finance records show Tamer Acikalin contributed $5,810 to Ramsey's election efforts between 2015 and 2017.

Recall that, during the campaign, both Ramsey and Maklansky were beneficiaries of pro-Airbnb lobbying groups so this is a pretty easy gotcha story.  Expect more of them to come, though.



• Most urgent on the Winter Council agenda is the surveillance ordinance. 



The plan, proposed in January as part of Mayor Mitch Landrieu's $40 million public safety initiative, includes the adoption of a city ordinance that would require bars and restaurants across the city to install cameras on the outside of their buildings pointing into public areas. The ordinance, if approved by the New Orleans City Council, would also require those establishments to store the surveillance footage on a cloud-based government server to which law enforcement would have access.

"This ordinance would put the city's surveillance apparatus on steroids, subjecting New Orleanians to near-constant monitoring of their daily lives and stifling our vibrant public space - without meaningfully reducing crime," ACLU Louisiana interim executive director Jane Johnson said.

In addition to ACLU, the camera scheme has been criticized by the Orleans Independent Police Monitor citing “potential for mismanagement, poor information security, public record law compliance challenges and user abuse,”  and by the Music and Culture Coalition of New Orleans who released a review this week. MaCCNO's report concludes that the ordinance would constitute an unprecedented expansion of government surveillance powers that exists in no other U.S. city. The proposal has not been criticized by Councilmember (and incoming mayor) Cantrell, however. Her stated position is that the cameras are "a step in the right direction at the right time."

There is a vote scheduled for the coming Thursday over in the bunker.  If you have a hard time getting there, though, there is also a committee hearing set for this Wednesday at the very convenient for everyone time, I am sure, of 2 PM. They'll be on the 21st floor of an office tower at 1340 Poydras St.  Good luck figuring out how to get in there.  Maybe someone will think to install some cameras.

Bucket list

I think Stacy Head might be trolling municipal employees in addition to trying to steal their modest retirement savings.

NOMERS isn't in bad shape or in fiscal turmoil, this is just irresponsible policy. Councilwoman Head has even said that taking on pensions was "on her bucket list" before leaving the council.

In New Orleans, the average public employee pension is about $21,000 annually -- a modest amount that helps workers retire with dignity after putting in a career of service to our community. Councilwoman Head's proposal would make drastic cuts to our already modest pension, especially for employees with less than 10 years of service or future employees. An analysis by The Times-Picayune found that the average pension benefit for our public servants would be reduced almost $8,000 annually or $670 a month. That's a monthly rent payment, family grocery budget or mortgage.

You see, typically, a "bucket list" is something that a person who is comfortably retired has time and money to work on.... 

Stacy Head still hates poor people

After all this time, this is still what she's all about. 

New Orleans City Councilwoman Stacy Head is proposing changes that would make the city’s main pension plan less generous for new employees and those hired in the past 10 years — changes she said are necessary for the long-term viability of the system.

The changes would mean newer employees — who make up almost two-thirds of the workers enrolled in the New Orleans Municipal Employees’ Retirement System, or NOMERS — would accrue benefits at a slower rate and new hires would have to work longer before being vested in the system or becoming eligible for retirement.

The proposal also would either do away with cost-of-living adjustments for all retirees until the system is nearly fully funded or else require the city and employees to kick in extra money to fund those increases.

She's on her way out of office this year. This must be the goodbye kiss. 

Should bring the laptop out more often

It's ok to post a few quick lines on the tablet. But, for the most part, typing on this thing is a pain in the ass.  I've got a few minutes here in the coffee place, though, so here are a few collected links from this week.

The Fiscal Times: "The Retirement Revolution That Failed: Why the 401 (k) isn't working" David Dayen on the number our very smartest bankers and technocrats have done on everyone's retirement.

Nearly half of all working-age families have no money in retirement accounts at all. The median family has $5,000 saved. Even for people between the ages of 56 and 61, the median retirement account savings is a paltry $17,000. While the top 10 percent have at least $274,000 saved, the bottom 50 percent have next to nothing. “We are moving toward a retirement system that magnifies inequality instead of just reflecting it,” Morrissey said on a conference call Thursday.

This was not always the case. Pensions used to be far more egalitarian, held by people of modest incomes as much as the wealthy. Pensions were even held relatively equally by white and black populations. (Hispanics, Morrissey points out, always lagged behind.)

The 401(k) revolution changed this. Low-income Americans are more likely to have jobs that don’t offer 401(k) plans. And as financial risks are shifted to individual employees, the poor are increasingly unable to afford to put portions of their paychecks into their own retirement funds. Relatively complex 401(k) plans are also more difficult to understand when compared to having a pension benefit manager handle the details.

We've spent 30 years on this mistake. And in the process we've blown a hole in the security of an entire generation of future retirees. It would be nice if we could shut the failed experiment down. But it turns out that would make some hedge fund managers less wealthy and that would  be rude.

The Nation: "The Problem With Hillary Clinton Isn’t Just Her Corporate Cash. It’s Her Corporate Worldview." Naomi Klein explains why Hillary Clinton is exactly the wrong person to expect will be much use solving problems like the retirement crisis mentioned above or, to take Klein's example, climate change.

At the center of it all is the canonical belief that change comes not by confronting the wealthy and powerful but by partnering with them. Viewed from within the logic of what Thomas Frank recently termed “the land of money,” all of Hillary Clinton’s most controversial actions make sense. Why not take money from fossil-fuel lobbyists? Why not get paid hundreds of thousands for speeches to Goldman Sachs? It’s not a conflict of interest; it’s a mutually beneficial partnership—part of a never-ending merry-go-round of corporate-political give and take.

Books have been filled with the failures of Clinton-style philanthrocapitalism. When it comes to climate change, we have all the evidence we need to know that this model is a disaster on a planetary scale. This is the logic that gave the world fraud-infested carbon markets and dodgy carbon offsets instead of tough regulation of polluters—because, we were told, emission reductions needed to be “win-win” and “market-friendly.”

Buzzfeed: "Spies In The Skies"

Each weekday, dozens of U.S. government aircraft take to the skies and slowly circle over American cities. Piloted by agents of the FBI and the Department of Homeland Security (DHS), the planes are fitted with high-resolution video cameras, often working with “augmented reality” software that can superimpose onto the video images everything from street and business names to the owners of individual homes. At least a few planes have carried devices that can track the cell phones of people below. Most of the aircraft are small, flying a mile or so above ground, and many use exhaust mufflers to mute their engines — making them hard to detect by the people they’re spying on.

Yikes!

Forbes: "In World's Best-Run Economy, House Prices Keep Falling -- Because That's What House Prices Are Supposed To Do"  I'm not sure there's a lot here that suggests policy solutions in the U.S. unless we are willing to make fundamental changes to our ideas about housing as an investment asset, which we are definitely not willing to do. 

Also some of this seems not quite right.

A key to the story is that German municipal authorities consistently increase housing supply by releasing land for development on a regular basis. The ultimate driver is a  central government policy of providing financial support to municipalities based on an up-to-date and accurate count of the number of residents in each area.

The German system moreover is deliberately structured to encourage renting rather than owning. Tenants enjoy strong rights and, provided they pay their rent, are virtually immune from eviction and even from significant rent increases.

 Hmm.. so is the rent not too damn high in Berlin?  Let's check on that. 

As formerly low-income Berlin neighborhoods have attracted wealthier residents, there has been a widespread ripple of fear from many Berliners who worry that, despite rent-calming measures and some subsidized provision for people on low incomes, they will soon be priced out of their homes. This general fear has been tapped into by a small group of vandals, who have acted out their anger by attacking expensive cars parked in gentrifying areas.

When the craze began in 2007 and 2008, Berlin’s police were widely castigated for their perceived inaction. Then-Police Chief Dieter Glitsch became notorious for saying to car owners: “Don’t park your Porsche in [gentrifying] Kreuzberg.” 

QOTD

Judge Robin Giarrusso:

Andy Kopplin, Landrieu's chief administrative officer, attempted to plead poverty as an attorney for the city lobbed softballs his way regarding the many financial strains on the city's budget, such as federally mandated reforms of the jail and the Police Department.

Giarrusso cut them off. "I'm not interested in the city's problems," she said, shaking her head. "That doesn't matter. I've ordered you to pay this."

Well, ok, then. 

This pension will self destruct

Just like, say, a Snapchat message.

City Finance Director Norman Foster, who has been a voice for skepticism on the NOMERS board, questioned whether the pension fund, anyone else for that matter, could predict the future.

In the 1990s, a Mesirow fund of funds saw returns in the single digits when massively overvalued tech startups tanked. Whose to say the current fund wont tank in a similar way, Foster said.

Snapchat, as a privately held company, doesn't have to disclose much about its business, so not clear what, if any, revenue stream it has. It's a free service that doesn't even, as yet, sell much advertising. The company's gaudy valuation is based entirely on the assumption that the it will be able to monazite its user network, which is estimated to be in the hundreds of millions.
"How much was Snapchat valued at," Foster asked.

"Nineteen billion," DeBolt replied.

"And how much revenue did it make last year," Foster continued.

DeBolt demurred. "That's confidential, but you can guess that it's a pretty small number."

If that's not a bubble, Foster said, then nothing is.

Pension funds should never ever ever be invested in high risk tech stocks like this.  Unless the goal is to end up with decades long lawsuits on their hands, like this one.  Or unless you don't actually care whether or not the fund can support pensions over the long term which is probably the case.

Banksters eat pensions

The problems with the New Orleans firefighters pensions are different from this. But not too different.

The Lenape tribe got a better deal on the sale of Manhattan island than New York City’s pension funds have been getting from Wall Street, according to a new analysis by the city comptroller’s office.

The analysis concluded that, over the past 10 years, the five pension funds have paid more than $2 billion in fees to money managers and have received virtually nothing in return, Comptroller Scott M. Stringer said in an interview on Wednesday.

“We asked a simple question: Are we getting value for the fees we’re paying to Wall Street?” Mr. Stringer said. “The answer, based on this 10-year analysis, is no.”

Until now, Mr. Stringer said, the pension funds have reported the performance of many of their investments before taking the fees paid to money managers into account. After factoring in those fees, his staff found that they had dragged the overall returns $2.5 billion below expectations over the last 10 years.

“When you do the math on what we pay Wall Street to actively manage our funds, it’s shocking to realize that fees have not only wiped out any benefit to the funds, but have in fact cost taxpayers billions of dollars in lost returns,” Mr. Stringer said.

Why the trustees of the funds — Mr. Stringer included — would not have performed those calculations in the past is not clear.

Bull market for consultants

Obviously, somebody's found a way to make money on this mess.

Councilwoman Stacy Head, the driver behind the pressure for changes, has been pushing for the board to bring in an outside consultant to help analyze the fund and walk the board through potential solutions.

The board had been hesitant in previous meetings, but it acquiesced Wednesday, voting to invite Head's preferred consultant, The Kapoor Company, to make a presentation on the pension fund and possible reforms.

It's not clear who would pay for the group's work should the board formally hire the company.

Kapoor is the same consultant that has been providing research to a working group created by Mayor Mitch Landrieu to find a sustainable plan for the firefighters' pension system, which is badly underfunded due to bad investments and the mayor's refusal to fully fund the system.

A banner year

The backdrop of potential cuts and political pressure couldn't have made it easier for the board to learn about the fund's drab returns in 2014, a banner year for Wall Street.

If you have a 401(k) or an equity mutual fund, you probably did well. The S&P 500, an index of blue-chip stocks, closed at a record high 52 days in 2014, finishing the year with a gain of 13.69 percent when dividends are taken into account.

The pension fund, however, increased in value by only 4.7 percent.

Stacy's consultant is going to recommend that we basically trash the retirement fund in order to "save it." It won't be necessary but that's really not the point.

Penalizing low wage workers

The most right wing city government in our lifetime has already obliterated the traditional civil service wall between politics and service delivery.  Now they are moving on employee pensions.  Like any right wing outfit, they'll tell you they're operating out of a sense of fiscal responsibility, but really they are about punishing people for not being wealthy enough. 

The actuary said Social Security integration could be appropriate, but it wouldn't save the city much money and it would penalize low-wage workers.

The city, like any private employer, pays for half of a worker's Social Security costs, so it's not unreasonable for the city to deduct those contributions from an employee's pension package, the actuary said, but doing so would represent a "radical change" in the plan's structure. It might not be legal to apply it to current employees, he said.

The actuary also noted that Social Security's benefits are proportionately more generous at the low end of the wage scale, so the workers who benefit most from the current system are those at the bottom rung of the employment ladder. If pension benefits were reduced as a function of Social Security payments, as Head's scenario would do, low-paid workers would take the biggest hit.

The move also would provide relatively little budget relief, according to his analysis. The most aggressive of Head's scenarios would apply Social Security integration to all employees with less than 15 years service. That would improve the fund balance by .3 percent and save the city $1.5 million in 2014, and more over time as the share of employees covered by the new plan increased.

Not sure if Stacy Head actually cares about saving the city money as much as she cares about penalizing low wage workers so you can see why she likes this option.

At least it's not a "coldcock"

The city is trying to screw a lot of people out their pensions right now.  The firefighters are a special case in that they've been going rounds over this for decades now.  Anyway... here's where things are this afternoon.

Firefighter union chief just challenged Landrieu administration CAO Andy Kopplin to a fight. "Let's lace up the gloves and step outside."
— Robert McClendon (@RobertMcClendon) December 11, 2014

Bobby Jindal: Health care expert

Remember back when Bobby Jindal was a young up-and-comer in the Mike Foster administration?  Former Governor Duck Hunter* appointed Jindal to be Secretary of Health and Hospitals at the precocious age of 24.  The young whiz kid didn't make too many waves during his tenure there.  But he did a pretty good job of figuring out where all the money was.  This would be useful later when, as Governor, he helped people steal much of it.

We've already talked about this a few times this week.  First there's the slow-motion obviousness of the Bruce Greenstein directed grift of Medicaid privatization.  Later in the week we saw that Jindal's hospital privatization scheme was causing rape victims in New Orleans to be billed for their examinations.

Finally, there's yet another health care related Jindal grift in the news.  The State Office of Group Benefits, which manages health care and retirement benefits for state employees, is going bankrupt.

Group Benefits will soon go broke if changes to its health insurance offerings aren’t made, Commissioner of Administration Kristy Nichols warned legislators Thursday.

“If we do not make the changes now the Office of Group Benefits will not have the money to pay for the health care of its members,” Nichols said.

But some legislators and insurance plan members said other options are available that won’t be as financially devastating to the 230,000 state employees, teachers, retirees and their dependents who are members of Group Benefits, especially retirees on fixed incomes, and time should be given to pursue those options.

“It’s an economic catastrophe for thousands of citizens of Louisiana who do not deserve this,” said Peggy Schwarz, of Braithwaite.

Some blamed the Jindal administration for creating the crisis because of poor management and “reckless decisions.”

"Some blamed the Jindal administration." 

Well, yeah. "Some" have been blaming Jindal for this since the outset.  It's a lot like the Greenstein situation in that regard. It's another one of these Jindal privatization schemes that divide the spoils amongst cronies at the expense of both taxpayers and people who depend on the services provided.

Let's see how far back we can go to explain this one.   Sometime in the spring of 2011, Tom Aswell started writing about this. Here is a post he wrote about the request for proposals for privatizing OGB.  It was picked up by TPM. 

But critics of the governor's plan contend that any financial benefit will be a one-time thing. In the long run, they charge, privatizing will result in higher costs for employees, the state and, therefore, the taxpayer. Some have even suggested that the plan is a way for the state to get its hands on part of the agency's sizeable surplus, which Louisiana law prohibits from being used for "cash flow purposes" or any other purpose "inconsistent" with the administration of the department that generated it.

A few days after Jindal unveiled his budget, blogger and local reporter Tom Aswell, who was at the time still an employee of the state's Office of Risk Management (which was itself privatized last year), reported that investment bank Goldman Sachs had helped write the OGB's Request for Proposals. He says the only bid that came back for the advisory role -- and the $6 million fee -- was from Goldman. Among the questions TPM has posed to DoA, with no response so far, is what, if any, involvement Goldman Sachs had in the request for proposal. TPM has also reached out to Goldman for comment. Aswell also wrote that an employee at the DoA, who did not want to be identified, had informed him that, as part a sale of the OGB, the state would receive $150 million to $200 million of the surplus, with the rest going to the purchaser.

So you've got a stable department that provides a vital service for state employees and runs a budget surplus. Sounds great... but what if we break it open and suck out all the money! This is a running theme of Bobby Jindal's tenure in office.

Also a running theme, Bobby Jindal knows and cares a lot about health care so it's ok.

Jindal, meanwhile, noted that he is also a state worker whose coverage is provided through the benefits office.

Noting that one of his two sons was born with a heart condition, Jindal said, "I'm not going to do anything that jeopardizes health-care coverage for my family or other state employees."

"Some" raise objections.  But then "some" get fired for that.  

"Should the state of Louisiana be an insurance company or do you provide it to a private company to run?" Commissioner Of Administration Paul Rainwater told the committee. Rainwater said privatizing would "unleash some of the value" of the agency, potentially net the state $150 million in up front cash, and "create something that's much more efficient."

(Former CEO Tommy) Teague was fired from OGB on April 15, just as questions about the potential sale of the agency were getting louder. And when he testified Tuesday, he appeared much less convinced than Rainwater about the financial benefits of the proposed plan. By many accounts a popular and competent administrator, Teague referred to OGB as "we" several times during his testimony.

"Fully-insured [insurance] plans are simply more expensive than self-insured plans," he said.

Teague also said the agency's large surplus fund -- which was accumulated during his tenure -- would be part of any sale, but expressed bewilderment at the math of such a deal.

"You give up 520 [million dollars], and you're going to get back 150 [million dollars]?" Teague said. "I don't understand how that works."

How it works is you "unleash some of the value" so that the state and the contracting management company and the consultants can take it all, of course.  Teague didn't get that. So they fired him and brought in someone who.. sort of did.  

Early in the hearing, State Sen. Edwin R. Murray (D) wanted to know if Kipper had seen the report, but had a hard time getting Kipper to even acknowledge that a report exists.

"Senator Murray, I have not seen that report," Kipper said at one point. "I have not seen that report."

"So it does exist?" Murray asked.

"I have no knowledge that it exists--" Kipper responded.

A little later on, when the existence of the report had been firmed up, Murray wanted to know, more specifically, if Kipper himself had asked to see the report. Kipper said that he had not, because he does not want his "judgment jaded" by the report while he evaluates bids currently coming in from financial advisers that want to help the state with OGB's privatization.

"The report might tell you there's no need to privatize it," Murray said.

"That might be the case," Kipper admitted. 

The report that Teague's replacement, Scott Kipper, did not want his "judgment jaded"by did, in fact, suggest that privatization might not be the way to go.

The Legislative Auditor’s Office issued a report Monday that predicts the Jindal administration’s plans to privatize a health insurance plan could increase costs for state employees.

The 17-page report characterizes the possible increased premiums as an issue that should be deliberated before decisions are made on the future of the Office of Group Benefits.

“The sale/lease may result in higher insurance premiums to state employees under a private insurer because of an increase in marketing costs, premium taxes, necessary profit margin, and reinsurance costs,” the report states.

In his response, Commissioner of Administration Paul Rainwater, the governor’s top budget adviser, dismissed the possibility of higher premiums purely as a result of privatization as speculative.

In any event, Kipper's bungling was bad enough that he resigned shortly after his appearance at this hearing.  The process of selecting a contractor moved on. Soon, state employees would wonder if a 5 percent raise in their premium was part of a scheme to make the plan more attractive to bidders.

In 2012 the Legislature approved the outsourcing plan.  The contract went to Blue Cross/Blue Shield.  As, we've seen them do throughout this story, "some" criticized this entire plan as stupid and short sighted grifting.  "Some" were fired.

Opponents of the measure have questioned whether those savings will actually materialize and argued that switching to a private company to administer health benefits will lead to increased problems for employees filing claims.

Lawmakers have been able to delay the privatization effort for months. Initially the Jindal administration sought to sign the contract without the input of legislators, but that was blocked by an opinion from the Attorney General's Office saying state budget committees would have to sign off on the move.

The measure then appeared on track to be rejected by the Appropriations Committee during a joint meeting last week. Administration officials pulled the item from the agenda before representatives could take that vote.

Reps. Cameron Henry, R-Metairie, and Joe Harrison, R-Napoleonville, lost their spots on the Appropriations Committee shortly after that meeting. While both men said they believed their opposition to the privatization at the Office of Group Benefits played a role in their ouster, they also suggested they were being punished for their past clashes with the Jindal administration over budget policy and their support for a special legislative session.

Fast forward a few years and it turns out that "some" may have been right about this stuff.  By July 2014, the agency is already struggling to maintain stable financing.   

The administration’s management firm — Alvarez & Marsal — recommended changes to Group Benefits that are projected to save $1.1 billion over five years.

Johnson defended the premium reduction, saying there was no need to keep a $500 million reserve. Group Benefits officials have said a responsible target is between $120 million and $220 million. She said it was inappropriate “taking employees money and banking it.”

But state Sen. Ronnie Johns, R-Lake Charles, who is in the insurance industry, disputed Johnson’s statement.

“You honestly think that was too large for 230,000 employees?” Johns asked. “I personally believe there’s been some decision made at the Office of Group Benefits that’s not in the best interest of the overall stability of the program.”

Johns said he was a member of a legislative committee that had to deal with Group Benefits finances when it was in shambles previously. “We worked hard to get it back into a positive position,” he said.

State Rep. Rob Shadoin, R-Ruston, said the administration has a definite “PR problem.”

He said Group Benefits members point to increased premiums and benefit reductions that are on the way and blame it squarely on the program’s privatization.

“They say it was running great until we privatized this thing. Whether it’s true or not, it’s the perception of some,” Shadoin said.

Johnson and McIlwain agreed that the privatization was not the culprit in the diminishing reserves but rather an intentional act by the administration when it reduced premiums.

Some understood from the outset that this scheme mostly amounted to an attack on an efficient and important department of state government for the benefit of  favorites and corporate raiders. "Some" wrote letters to the editor about it.

The Attorney General’s Office said before privatization could go into effect, the legislators had to approve it. The Appropriations Committee, by a 16-10 vote (after two members were removed from the committee and two new ones who would vote for it were put in), approved privatization; the Senate Finance Committee voted 10-3, and the Jindal administration had won. State Group Benefits was privatized.

After privatization of the Office of Group Benefits, health benefits are being cut, premiums are being raised and the $500 million trust fund has been raided. They gave a 1.5 percent pay increase to retirees that starts in July, and the same month a 5 percent rate increase on insurance premiums, at a loss of 3.5 percent for the year.

This Jindal administration should be held accountable as to where the $500 million trust fund went. Workers worked so hard to build this up, and it’s nearly gone after two years with higher rates and less benefits to the 250,000 families insured. This is a shame, and someone needs to be held accountable.

No one will be held accountable.   Well, state workers and retirees will, in a way.  They're going to be asked to give up some benefits and pay higher premiums now in order to resolve this entirely manufactured crisis.

And, as we've already seen, this is just one of several crises our technocratic health care expert Governor has managed to leave us with.  Maybe next time we'll elect "Some" instead.


*Buddy D used to call him that. It wasn't a compliment.

Maybe there's a reason for that

When costing out a 20 percent raise for police officers, city Civil Service staff conveniently neglected to factor in pension contributions.

Inspector General Quatrevaux said the staff report is flawed because it looks only at starting salaries, ignoring the cost of pension funding.

Retirement contributions, which are set by the state and paid by the city, currently stand at 31 percent of an officer’s salary. That’s money the city must come up with in addition to officers’ pay.

“How can you make an intelligent assessment if you’re ignoring 31 percent of the cost?” Quatrevaux said. “If they fail to look into retirement contributions, they’re very likely going to get the wrong answer.”

“I will certainly oppose any pay raise based on this analysis,” Quatrevaux added. “It’s such surface treatment of an important subject, it’s beyond belief.”

In 2014, the city budgeted $21.8 million for the state’s police pension fund. That means the recommended raise would cost the city another $3.3 million annually by the third year.

It's "beyond belief."  So what's the reason for it?

Let it burn

Mitch's official policy regarding the troubled firefighters' pension.

According to the latest independent audit, the fund took a roughly $40.2 million loss on its investments in 2013, in large part because it was forced to acknowledge the deteriorating value of real estate and other investments on its balance sheet.

On top of that, Mayor Mitch Landrieu’s administration has refused to hand over enough money from the city’s general fund during the past few years to entirely make up for declining assets, forcing the fund’s managers to cannibalize investments in order to pay current beneficiaries.

That left the fund with about $84.8 million in net assets available to pay retirement benefits at the end of 2013, a 41 percent decline from a year earlier. In 2011, that figure stood at $158.5 million.

Moreover, a good portion of what remains is in the form of real estate and other investments that could not be sold off quickly, should the extra cash be needed.

We all understand the city's budgetary problems.  They're not unlike what other cities are facing in many respects.  But it's important to point out that a political leadership that actually believes workers shouldn't lose their retirement to the vicissitudes of the financial crisis would try to find ways to help muddle through.

Mitch is asking for a property tax increase this fall in order to fix some of this. But he's only doing that because several court rulings have mandated that he do something.  As a matter of philosophy he seems to favor scrapping the pension altogether.. thus leaving working people to pick up the tab for bankers' crimes. 

Also.... I sure hope the firefighters don't have any money in securitized re-packaged auto loans.

Auto loans to people with tarnished credit have risen more than 130 percent in the five years since the immediate aftermath of the financial crisis, with roughly one in four new auto loans last year going to borrowers considered subprime — people with credit scores at or below 640.

The explosive growth is being driven by some of the same dynamics that were at work in subprime mortgages. A wave of money is pouring into subprime autos, as the high rates and steady profits of the loans attract investors. Just as Wall Street stoked the boom in mortgages, some of the nation’s biggest banks and private equity firms are feeding the growth in subprime auto loans by investing in lenders and making money available for loans.

And, like subprime mortgages before the financial crisis, many subprime auto loans are bundled into complex bonds and sold as securities by banks to insurance companies, mutual funds and public pension funds — a process that creates ever-greater demand for loans.

Update: This morning the judge rejected Stacy Head's stab at trying to muddle through.

Head, taking the witness stand in Civil District Court, offered to bring a motion at the council that would take $2 million this year from the New Orleans Police Department budget, plus raise about $1.4 million by furloughing current firefighters one day per month through the end of the year, although there was confusion about exactly how many days would be required.

While that would cover only a fraction of the $17.5 million, Head argued that it would be more than enough to keep the pension fund from continuing to shrink, as it has over the past few years.

Civil District Court Judge Robin Giarrusso rejected the offer from the bench, ordering the city to come up with the full judgement before a Sept. 3 hearing and threatening to hold certain officials -- she did not say which -- in contempt of court. Presumably that could mean fines or even jail for city officials.

Priorities

Can't keep giving away those big corporate tax breaks unless we cut more pensions.

Good Jobs First found that Louisiana spent $348.5 million annually on pension costs, but allowed $1.8 billion worth of corporate subsidies, tax breaks and loopholes. The group made similar comparisons in nine other states, in which governors and legislators have moved to change the retirement benefits for state government workers.

“My colleagues and I have been concerned about the crusade against public employee pension benefits that seems to be taking place in so many states. Governors and legislators often give the impression that retirement costs are out of control and that drastic measures are necessary,” said Philip Mattera, Research Director of Good Jobs First. “If anything is out of control fiscally in many states, it’s the extravagant subsidy and tax break demands that many companies are making as a condition of investing and creating jobs.”

Gotta keep the banks happy

I made a passing reference to this earlier in the week but, here's a Rolling Stone feature by Matt Taibbi on the shell game Wall Street has played with public pension funds in municipalities all over the country. 

This is the third act in an improbable triple-fucking of ordinary people that Wall Street is seeking to pull off as a shocker epilogue to the crisis era. Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy. The resultant loss of tax revenue plunged states everywhere into spiraling fiscal crises, and local governments suffered huge losses in their retirement portfolios – remember, these public pension funds were some of the most frequently targeted suckers upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in the pre-crash years.

Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions. This war isn't just about money. Crucially, in ways invisible to most Americans, it's also about blame. In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America's states and cities.

Toward the end of the month, the New Orleans City Council will begin holding its annual budget hearings. The Mayor presents his budget October 15. Council will then hold a series of hearings with individual departments during the last week of October and first week of November.  The schedule was posted on Friday.

Given what we heard at the Mayor's series of community budget meetings we can anticipate he will stress the burdens placed on the budget by the prison and police consent decrees, as well as the firefighters' pension fund.

At the District B meeting, Mitch told us that the NOFD pension was "the greatest threat to the budget." That was before anyone told us about the expected jump in workers' comp costs.

The city of New Orleans’ 2014 budget will include an $8 million increase for workers’ compensation to reflect a spike in claims since 2012, Budget Director Cary Grant told the City Council’s budget committee on Thursday. But he and Courtney Bagneris, the city’s interim risk manager, did not explain a reason for the sudden increase, saying an audit is still in process.

Prior to 2012, workers’ compensation claims were typically under $17 million per year and didn’t significantly exceed what was budgeted, Grant said. In 2012, however, claims spiked to $22 million, well above the $15.6 million budgeted.

So now there's that too.  It's bad enough that the mayor already talks about the city's obligations to its employees and to the public safety in terms of "sacred cows" that need "slaying." But, now.. just as the budgeting process is about to ramp up... the bankers have issued their opinions as well.  

Fitch Ratings has downgraded the rating outlook for New Orleans’ bonded debt because of concerns about the city’s ability to cover an underfunded firefighter pension program and court-mandated increases in spending for public safety.

Mayor Mitch Landrieu’s administration has been warning for months the city cannot afford to implement simultaneous federal court consent decrees mandating major changes at the New Orleans Police Department and Orleans Parish Prison without making deep cuts in other departments’ spending, probably involving furloughs or layoffs.

So if care about the policy choices your elected representatives make, you can attend the budget meetings, write your councilperson, you know.. vote.. or whatever. But the chances are the bankers will have to be made happy before you are.

Entrepreneurial Spirit

The New York Times Sunday Business section features this story about South Carolina's public pension program which, is a particularly egregious example of the fact that states have learned exactly nothing from the 2007-present financial crisis. In fact, it would appear that, in a shrinking market for suckers, high stakes investment scams are focusing more on publicly funded pension funds.

THE South Carolina Retirement Systems fund manages money for 530,000 public employees, retirees and their beneficiaries. It owes these people $38.8 billion. 

Not long ago, this fund was about as boring as it gets. Before 1999, it was largely invested in a mix of United States Treasuries and corporate bonds. The fund moved into equities just before the technology bubble burst in 2001. By 2005, some state leaders were pushing to give the fund more leeway, arguing that South Carolina’s money should work harder. State laws were changed in early 2007 to let the fund put money in a broad mix of private investments. 

But to make that work, pension officials needed a money manager wise to the world of private investments. That’s where Bob Borden came in. 

A fighter pilot’s son who grew up on military bases all over the world, Mr. Borden would acquire experience in managing investments before heading up the Louisiana State Employees’ Retirement System, commonly known as Lasers, from 1995 until early 2006. There, he would move 11 percent of the fund’s assets into alternative investments. In the three years through fiscal 2006, the fund’s annualized return was an enviable 13.3 percent. 

Borden then jumped ship to South Carolina where he was given more room to invest large chunks of the state pension fund in volatile but potentially high return vehicles.  Results were good for a while and then not so good.

“I remember going wild,” recalled former Gov. Mark Sanford. South Carolina piled into the stocks, as well as hedge funds, private equity and other alternative investments, at the top of the market. It raised its projected rate of return in July 2008 — just before the worst of the financial crisis hit. “South Carolina,” Mr. Sanford said, “is the dumb investment state.” 

As the overall market plunged in the fall of that year, South Carolina’s pension fund was no exception. It would drop 28.7 percent for the year as a whole.

Borden went on to earn a half million dollar salary managing the fund. The fund continues to perform erratically but it pays out hundreds of millions of dollars in hedge fund management fees on its high risk investments which is really the point of all this in the first place. At the end, Borden defends himself simply by telling us the problem is he isn't a "bureaucrat"

“Everybody wants their cake and to eat it too,” Mr. Borden said. “They want high returns at low risk and low cost.” 

Asked if he thought that he had made any mistakes in South Carolina, Mr. Borden paused, and then replied, “I have an entrepreneurial spirit, and I was in a bureaucratic job.”

State retirement funds aren't venture capital.  They represent real money deducted from modest paychecks belonging to people who trust they'll have a modest benefit in their later more vulnerable years.  A trust like that isn't supposed to managed in a way that shoots for the moon in order to maximize earnings.  Its primary goal is to keep its members' money safe.  Somehow we've lost sight of that and instead given license to "entrepreneurs" like Borden to follow their muse using other people's money.

But nevermind that. The important thing to remember is there's always another free market solution lurking around the corner.  Bobby Jindal has proposed privatizing the Louisiana equivalent of Borden's office altogether which would not only free up the "entrepreneurial spirit" of the person entrusted with the members' money but any pretense to the contrary.

In Clancy Dubos' piece I linked to in the post below, he dubiously listed state employees as "winners" in the recent legislative session, I suppose, because things could have gone worse for them than they actually did regarding their retirement benefits. Given all of the above, I guess that's true. 

Breaking promises

Jindal to state employees: "I am altering the deal. Pray I don't alter it any further."

Under the governor's plan, all employees under the age of 55 would have their retirement age bumped up to 67 to match Social Security's retirement age and that age would move along with the federal system. Louisiana is one of six states in which most state employees do not participate in Social Security.

"To change provisions such as those targeted would violate the constitutional restriction against impairing existing benefits," Rougeou said. "Employees who are not yet vested have contractual rights to their benefits."

Interesting

City Council RFP

"The City Council of New Orleans desires to engage an experienced professional or private firm to formulate or evaluate proposed changes to the various city employess' pension systems..."

You see, since New Orleans city employees are mostly not unionized, we wouldn't expect much of a problem...