Archive for June 29th, 2012

PERA – Wait Till Your GASB Gets Home

So we knew that when the new Government Accounting Standards Board requirements for public pension reporting came out, reported funding levels across the country would drop like a rock, but we didn’t really know how much.

Turns out that the good folks at the Center for Retirement Research at Boston College did some of that work for us a couple of years ago, studying 127 public pensions across the country.

Remember, the new standards have two parts: pensions must report their holdings at current market value, and not average those values over 3-5 years as they had before.  And the unfunded liabilities, the portion that they do not believe are funded by current holdings, would have to be discounted at the long-term borrowing rate for the municipality involved, producing a blended rate likely lower than then expected return, and thereby decreasing the apparent funded level.

As of 2009, the numbers for Colorado didn’t look good at all.  The school portion of PERA would fall from 65% funded to 52%, and the state portion from 63% to 48%.  With current funded levels slightly lower, the actuals are also likely lower now.

It’s important to remember that these are accounting changes, and that the plans didn’t suddenly become less solvent overnight.  But as a better reflection of reality, they are still pretty sobering.

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A New Form of Revenue

Just as physicists long ago realized that light is neither a particle nor a wave, the Democrats have now, evidently, discovered a form of revenue that is neither a penalty nor a tax:

President Obama:

David Axelrod.

Deputy Campaign Manager Stephanie Cutter:

Austan Goolsbee:

HHS Secretary Sebelius:

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A Loss Wrapped in a Tie Shrouded in a Defeat

References to yesterday’s 98th anniversary of the assassination of Archduke Franz Ferdinand may be overwrought, But contrary to those who see this as a win disguised as a loss inside of a tie wrapped in a stalemate, it was a loss.

Yes, the Court may have drawn some lines with regards to the elasticity of the Commerce Clause, but replacing the ever-elastic Commerce Clause with the taxing power isn’t necessarily a win.  Especially as conservatives have always held that property rights are a key underpinning of political rights.  There is nothing here that necessarily keeps Congress from doing what it pleases, as long as the penalties are collected by the IRS.  What happens then, if they add on an additional provision that, much like student debt, you can work off your sins against the state, but you can work it off more quickly in certain favored ways?

I’ve also heard it asserted that in the political climate, it will make it more difficult to pass large changes, since they’ll have to use the taxing power.  This seems overly-optimistic to me in at least three ways.  First, the ruling in no way begins to roll back nearly a century of mistaken Commerce Clause jurisprudence, and if anything has shown, it’s that the current boundaries of the Commerce Clause are plenty broad enough to contain all sorts of trouble.

Second, I doubt that further massive changes are on the agenda, anyway.  The gargantuan administrative state that this law is going to require, the tens of thousands of pages of regulations and rules and boxes to check off, will provide more than enough machinery for Change as they stand.

But mostly, it’s not as though the individual mandate was ever sold as a tax in the first place.  Taxes may be toxic, but the Court ruled – probably correctly – that something doesn’t have to be expressly declared a tax in order to be valid under the taxing authority.  Even the silver lining here is double-edged: what can be repealed under reconciliation can be passed under reconciliation.  And repeated use of the phrase, “taxing power” has the ability to drain the word “tax” of its deserved fearsomeness.

In terms of this election, it’s certainly a net plus.  It will make Obama’s life miserable on the campaign trail, as he finds himself explaining that “it all depends on what the meaning of ‘tax'” is.  Those who have been calling for him to play against type an imitate Clinton probably didn’t have that part in mind.

It also means that it’s true, as Romney will now say, that “in order to get rid of Obamacare, you have to get rid of Obama.”  The Court essentially eliminated the severability clause between Obama’s presidency and this law.

But this election really is the game.  Not only would Obama’s re-election, or the retention of a Democrat Senate, ensure the eventual transformation of freeborn citizens into subjects, even a victory doesn’t guarantee victory.  The electoral wipeout of 2010, and its foreshocks (Scott Brown) and aftershocks (Keith Judd), have left the Democrats undeterred.  To believe that they won’t use every Senatorial procedural option available to them is probably to hope for too much.  Even the hoped-for lame duck period between November and January will be fraught with opportunities for administrative mischief.

If elections are to continue to have meaning, if indeed, they haven’t already been emptied of their power to reflect change in any but one direction, this one needs to count.

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