Weekend Wrapup: Here are a few stories from the past week that are worth a quick review ….
LA mayor backs down
Google News is reporting LA mayor backs down, says shutdown a last resort
Mayor Antonio Villaraigosa backed down from his hardline stance over the budget crisis Wednesday, admitting he cannot shut down city services without the City Council’s approval and requesting $20 million from the power utility to keep the city solvent.
The City Council’s chief legislative analyst, Gerry Miller, told councilors Wednesday that the mayor cannot shut down city services without council approval. “The mayor does not have the unilateral authority to do that,” Miller said.
The city also would be violating labor contracts, which stipulate no furloughs, said Bob Schoonover, president of the Service Employees International Union Local 721, which represents about 10,000 city employees.
Controller Wendy Greuel announced an audit of the utility to verify its claim that it was financially unable to give the city $73 million. “I want to take the politics out of this process and provide an independent review of the DWP’s finances,” she said. Meanwhile, the council passed a series of motions to wrest control of the DWP away from the mayor.
For background details please see L.A. to Shut Down City Departments in Budget Crisis; IBEW Local 18 Head: “How Taxpayers Feel Is Not Relevant”
Sheriff’s friends benefit from foreclosures
The Akron Beacon Journal reports Sheriff’s friends benefit from foreclosures
Fifteen men, mostly retired police officers with little or no appraising experience, combined to earn more than $1.2 million working part time setting property values for the sheriff’s office last year.
The group includes former Akron police Capt. John T. Cunningham, Alexander’s campaign treasurer, whose appraisal work paid him $131,361 last year.
Since 2004, Cunningham has earned more than $570,000. Eight appraisers working part-time hours earned more than $109,000 in 2009, topping Alexander’s annual salary.
In kind, the appraisers were equally generous, contributing more than 16 percent of Alexander’s campaign funds since 2008, the sheriff’s finance reports show.
Alexander’s top-paid appraisers last year include:
- Tom Robinson, a former Green councilman and Alexander campaigner, who earned the most in 2009: $137,985.
- James Yocum, a retired Akron police captain, paid $128,245.
- David Waddell, son of the former head of the Summit County Republican Party, $127,619.
- James Buie, a retired Akron police lieutenant, $122,377.
- Al Wilkinson, a retired Akron officer and Fraternal Order of Police president, $120,541.
- Troutman, the former sheriff who died last year, $115,242.
- William Wilcox, retired Akron officer, $109,630.
More Sacramento County programs on chopping block
The Sacramento Bee is reporting More Sacramento County programs on chopping block
The county is mulling laying off nearly 630 workers and cutting 170 vacant positions to help close the projected $118 million general fund shortfall in fiscal year 2010-11, according to preliminary figures obtained by The Bee. The general fund is $2 billion.
The possible cuts include 208 layoffs from the Department of Health and Human Services, including nearly 40 public health nurses. If approved, that would mean a reduction in nurses of nearly 60 percent since January 2007, according to county figures.
Mental health programs face a big hit, possibly losing more than 30 frontline positions, including counselors and licensed mental health workers. Officials have proposed closing the county’s four mental health regional support teams, which provide outpatient services.
University of North Carolina Students Forced To Buy Health Care
UNCW Student Affairs says Health insurance to be required for UNCW students ~ Fall 2010
Beginning in Fall 2010, health insurance will be required for all UNCW students. This may be insurance the students bring with them (family, employer, etc), insurance they purchase through the school, or a combination of both plans.
Students who have their own insurance and do not want to purchase the insurance through the school will need to complete an on-line waiver each fall, providing details about their current insurance plan. Any student who does not waive out of the insurance plan will be charged the premium and automatically enrolled in the program.
Pearce & Pearce will be the insurance vendor and the annual premium will be $673. Plan highlights include $1,000,000 lifetime maximum coverage; a $300 deductible; coverage for immunizations, prescriptions and wellness services; and no deductibles or co-pays at the Student Health Center.
Blue Flue In Toledo
The Toledo Blade is pondering the meaning of “To protect and to serve”
About 60 police officers, most of them department veterans, took part in what the city called an outbreak of “blue flu” this week. They evidently were protesting city government’s imposition of emergency benefit givebacks on municipal employees whose unions have refused to negotiate voluntary concessions. The police union has been most militant in resisting even the smallest contract changes to help the city resolve its fiscal crisis.
Now the president of the police union says some members are so intent on forcing a reversal of the city’s declaration of “exigent circumstances” that they are considering a strike he concedes would be illegal.
If the police strike, the city should fire every one of them, offering their jobs back at 60% pay and/or outsourcing the whole operation to the sheriff’s association. On second thought, Toledo ought to outsource the whole shebang anyway.
Fed Watching Out For Speculative Bubbles
Yahoo!Finance is reporting Fed keeps eyes out for speculative bubbles.
Federal Reserve officials at their March meeting stressed the need to make sure record-low interest rates don’t feed new speculative bubbles in stocks or other assets.
At the same time, some officials said the Fed’s pledge to keep rates low for an “extended period” doesn’t mean a fixed period of time. Rather, it depends on the strength of the economy, according to minutes of the closed-door meeting released Tuesday. Many analysts have taken the pledge to mean rates would stay at record lows for roughly six months to help underpin the recovery.
It should be crystal clear the market is back in bubble land right now. Regardless, it is impossible to claim you will do something about bubbles while also pledging to keep rates low for an “extended period”.
Medical Student Debt Statistics
The American Medical Association has some interesting statistics on Medical Student Debt.
Student debt statistics
- 79 percent of graduates have debt of at least $100,000.
- 58 precent of graduates have debt of at least $150,000.
- 87 percent of graduating medical students carry outstanding loans.
According to the Association of American Medical Colleges (AAMC), the average educational debt of indebted graduates of the class of 2009 is $156,456.
It will take a decade or longer to pay that debt off. And that is IF the students find a good job.
California Municipal Bonds Rated Worse Than Kazakhstan
The Financial Times is reporting California ire over Borat bonds
Taking a page out of Greece’s playbook, the peeved treasurer of America’s largest state fired off letters this week to the chiefs of Goldman Sachs and other banks questioning their marketing of credit default swaps on California’s debt. The instruments, he complained, “wrongly brand our bonds as a greater risk than those issued by such nations as Kazakhstan.”
On paper, California’s debt of $85bn supported by 37m citizens and the world’s eighth largest economy looks more manageable than Kazakhstan’s nearly $100bn heaped on its poorer population of 16m. Go beyond headline figures though and Kazakhstan, with the world’s 11th largest oil reserves, an economy that grew more than 8 per cent annually from 2002 through 2007 and unemployment of just 6.7 per cent looks positively vibrant next to the Golden State’s joblessness of 12.4 per cent.
Meanwhile, Kazakhstan’s modest budget deficit and $25bn rainy day fund make it a paragon of fiscal virtue compared to a state forced to pay bills with IOUs last year and possibly again this summer. Unlike US states, Kazakhstan has its own currency and central bank. If it were to raise taxes or cut public services, wealthy Kazakhs could hardly defect to Kyrgyzstan the way Californians, already facing some of the highest levies and worst schools in the nation, might decamp to, say, Utah.
But such head-to-head comparisons do not even begin to spell out the relative woes of American states compared to many developing nations. In addition to their headline borrowings, equal to almost a quarter of national output, states and cities have made trillions more dollars in promises to current and future retirees. …
Fitch Recalibrates 38,000 Munis Up
The Bond Buyer is reporting Fitch Recalibrates 38,000-Plus Ratings
Fitch Ratings lifted its rating on more than 38,000 municipal bond issues yesterday under a systematic overhaul of the way it assigns grades to the credit quality of state and local governments.
About 3,750 Cusips not previously rated AAA by Fitch now enjoy the top rating. More than 7,500 Cusips not previously rated AA-plus are now.
“Over time, once they’re on the same playing field, I think it will give munis a boost,” said Kathleen McNamara, municipal strategist at UBS Wealth Management.
Municipal credit was “underrated” under the old system, she said. Many investors comparing municipals with corporate or sovereign bonds on the same scale will realize municipals are safer than people thought previously, she said.
Let’s just make everything AAA again.
Property Tax Rebellion Brewing
ABC News is reporting Property Tax Rebellion Brewing After Real Estate Collapse
Americans grumble that local tax assessors haven’t caught up with the real estate downturn, leaving homeowners with unfairly high property taxes. Many disgruntled homeowners are challenging authorities, either by appealing their tax bills or mobilizing groups to push for tax-law overhaul.
The National Taxpayers Union, a Washington-based advocacy group, estimates that 30-60 percent of homeowners are over-assessed each year.
The problem stems largely from a simple technicality: Home values in most states are reassessed every few years, according to data from Therese McGuire, real estate professor at Northwestern University’s Kellogg School of Management.
In Nevada, for example, one of the states hit hardest by the housing crunch, the average time between assessments is five years, while in Connecticut the average cycle is 10 years.
U.S. homeowners paid a median $1,897 in property taxes in 2008, according to the Tax Foundation, a Washington-based advocacy group, with New Jersey residents paying the highest bill at $6,320 annually, 1.74 percent of home values. New Jersey doesn’t have the highest property rates, however. Texas wins that distinction, with localities on average charging homeowners property taxes worth 1.76 percent of their home value.
The assessor in Illinois’ Cook County, the nation’s second-largest county, lowered assessments last year for all the homes under his jurisdiction, estimating home values by measuring foreclosure rates and sales data. Cook County includes Chicago and its sprawling suburbs.
In other localities, however, governments can’t afford to lose tax revenue. In many areas where reassessments have already taken place, governments have simply raised property tax rates to make up for the loss.
Icelanders Flee Country
Yahoo!Finance is reporting Destitute and desperate, Icelanders opt for exile
Anna Margret Bjoernsdottir never thought she would be forced to leave her once wealthy homeland, but after 18 months of economic upheaval she has decided to join the biggest emigration wave from Iceland in more than a century.
“I just don’t see any future here. There isn’t going to be any future in this country for the next 20 years, everything is going backwards,” lamented the 46-year-old single mother, who plans to move to Norway in June.
The former real estate agent who lost her job when Iceland’s housing market disintegrated two years ago said she feared she could soon be forced out of her large house in Mosfellsbaer, some 15 kilometres (nine miles) from Reykjavik.
In 2009, more than 10,600 people left the country of fewer than 320,000 inhabitants, according to official statistics, with 4,835 more people moving away than immigrating.
In a March 6 referendum, more than 93 percent of Icelandic voters rejected a deal to repay Britain and the Netherlands at a high interest rate. Reykjavik has since said it will try to secure a more favourable agreement.
Bjoernsdottir was among those who voted down the deal — and says the debacle strengthened her determination to leave Iceland. “I don’t want my daughter to have to pay for this,” she said. “I just have such a bad feeling about what’s happening here.”
U.S. Apartment Rents Fall 1.5 Percent, Vacancies at Record
Bloomberg is reporting U.S. Apartment Rents Decline as Vacancies at Highest Level Since 1980
U.S. apartment rents dropped in the first quarter and the vacancy rate remained at a record as unemployment near a 26-year high limited tenant demand.
Actual rents paid by tenants, known as effective rents, declined 1.5 percent from a year earlier, Reis Inc. said in a report today. Asking rents fell 1.6 percent, according to the New York-based property research firm. Vacancies were unchanged at 8 percent, the highest level since 1980, when Reis began tracking the number, said Victor Calanog, director of research.
Effective rents fell the most, year over year, in Las Vegas; San Jose, California; Phoenix; Seattle; and San Francisco, according to Reis.
Rents paid by tenants climbed the most in Colorado Springs, Colorado; Washington, D.C.; San Antonio; and Dayton, Ohio.
33 states out of money to fund unemployment benefits
Yahoo!Finance is reporting 33 states out of money to fund unemployment benefits
A total of 33 states and the Virgin Islands have depleted their funds and borrowed more than $38.7 billion to provide a safety net, according to a report released Thursday by the National Employment Law Project. Four others are at the brink of insolvency.
Debt-challenged California has borrowed the most, totaling more than $8.4 billion, followed by Michigan and New York, which have loans worth more than $3 billion. Nine other states have borrowed at least $1 billion from the federal government.
“The nation’s financing system for jobless benefits is under unprecedented stress,” said Andrew Stettner, deputy director of the New York-based advocacy group for the unemployed. “While the recession has certainly made things worse, this funding crisis has been developing for years.”
At the onset of the recession, only 19 states met the recommended funding level, which is one year of reserves equal to the highest amount of unemployment insurance paid out during prior recessions.
Mike “Mish” Shedlock
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