QUOTE OF THE DAY
Bloomberg: Buffett Says Pension Tapeworm Means Decade of Bad News
Public pension plans threaten the financial health of U.S. cities and states more than taxpayers realize, billionaire investor Warren Buffett said.
“Citizens and public officials typically under-appreciated the gigantic financial tapeworm that was born when promises were made,” Buffett wrote in his annual report to shareholders of Berkshire Hathaway Inc. (BRK/A) released on March 1. “During the next decade, you will read a lot of news –- bad news -– about public pension plans.”
Obligations to retirees have weighed on governments from Puerto Rico to the bankrupt city of Detroit. Illinois lawmakers passed a bill last year to bolster the worst-funded U.S. state pension system. New Jersey Governor Chris Christie said last week that Detroit shows what could happen if his state doesn’t limit obligations to workers.
Chicago Sun Times: Emanuel mulling 5,000-seat expansion to Soldier Field
The Chicago Park District is exploring the possibility of expanding Soldier Field by 5,000 seats to bolster Mayor Rahm Emanuel’s long-shot bid to host the Super Bowl and, more importantly, to increase seating capacity for other revenue-generating events.
“We are fighting below our weight class. That’s the way I would look at it. We capped ourselves” with a capacity of 61,500 for football and 63,500 for other events, Emanuel told the Chicago Sun-Times.
“I know everybody looks at the Super Bowl. But, look at this hockey event [between the Blackhawks and Pittsburgh Penguins], which we started last year with college hockey. You look at two years ago when we had the Mexican soccer team here. We have Liverpool coming. These things not only sell out. They sell out fast. And it’s clear that you could do more, given these super events and they would be self-financing and self-sustaining.”
Chicago Sun Times: Aldermen propose paid sick days for all workers in Chicago
Chicago employers large and small would be required to provide at least five paid sick days a year for their employees under an ordinance proposed Wednesday to provide a much-needed benefit for 460,000 workers without it.
The plan to let employees accumulate sick days at a rate of one hour for every 30 hours worked—up to nine a year for companies with 10 or more employees—was introduced by nearly a dozen progressive aldermen at the behest of Women Employed, unions and other advocates for low-wage workers and health care practitioners.
They argue that 42 percent of Chicago’s private sector employees do not get a single sick day and that the figure is nearly twice that for low-income workers in the food service and health care industries, which are dominated by women.
Governing: State Medicaid Programs Face Millions in New Fees
As states prepare their budgets for the next fiscal year, many are facing millions of dollars in new Medicaid fees under the Affordable Care Act.
Starting this year, the health insurance industry will pay an $8 billion annual fee, which will grow to $14.3 billion in 2018 and keep pace with premium growth thereafter. Private insurers pay their part of the fee based on the size of the market they control. But states that contract with private insurers to manage their Medicaid programs are shouldering those fees as well — at least according to some of the states that stand to pay the most. They say the actuaries that set premium rates for the private contractors typically consider fees a burden that states have to pay to ensure there’s enough money to cover the needs of patients.
There’s no official ruling from the federal government on whether states are required to cover the fees, and officials from the Centers for Medicare & Medicaid Services don’t plan to issue guidance. States are just beginning to consider how they’ll handle the fee and what they’ll do to offset any added costs, said Matt Salo, the executive director of the National Association of Medicaid Directors.
The Atlantic: This Is What the New SAT Will Be Like
No more SAT words or long essays: The new SAT is here, and it looks pretty different. Almost a year after first announcing the SAT would face a major redesign, College Board President David Coleman released new information this afternoon on how the exam is going to change.
The College Board says it is emphasizing “delivering opportunity” to all students and making the SAT more reflective of high school academics. “It is time to admit that the SAT and ACT have become disconnected from the work of our high schools,” Coleman said in a press conference. He also said he hoped the changes would remove the “sense of mystery and dismantle the advantages that people perceive in using costly test preparation.”
Here are some of the key changes, which will go into effect in 2016:
WSJ: How Housing Policy Hurts the Middle Class
The American dream traditionally meant that anyone could get ahead based on ability and hard work. But over the past few decades, the United States government created incentives through housing programs and the tax code that changed the dream for many Americans. Middle-class families began to think of homes as investments, not just shelter. When the housing market crashed, everyone suffered—homeowners, investors, wage-earners and taxpayers.
Aggressive housing programs have not always helped the poor and middle class. The median net worth of American adults is now one of the lowest among developed nations—less than $45,000, according to the Credit Suisse Global Wealth Databook. That compares with approximately $220,000 in Australia, $142,000 in France and $54,000 in Greece. Almost a third of American adults have a net worth of less than $10,000. Those statistics don’t convey the pain endured by millions of American families who lost their homes.
Bloomberg: Chicago Cut to 3 Levels Above Junk by Moody’s on Pensions
Chicago’s credit rating on $7.8 billion of general-obligation debt was cut one level to Baa1 by Moody’s Investors Service, which cited “massive” pension liabilities for the third-most populous U.S. city.
The reduction, on the 177th anniversary of Chicago’s incorporation, follows a three-step downgrade in July for the city of 2.7 million. The outlook remains negative, meaning the rating may be lowered further.
The decline to three levels above junk “reflects the city’s massive and growing unfunded pension liabilities, which threaten the city’s fiscal solvency,” Matthew Butler, a Moody’s analyst, said yesterday in a report. “The size of Chicago’s unfunded pension liabilities makes it an extreme outlier.”
CARTOON OF THE DAY
