| By Ray Neset |
DFL micro-managers just don't seem to be able to control themselves. Not wanting to leave anything to chance, or worse yet the voters, more party lapdogs piled on board the Jeff Hayden bandwagon. As of Monday, Hayden is the only DFL candidate running in the HD61B "race". Until now, the pre-caucus endorsement of a candidate would rightfully be perceived as meddling, but the Minnesota DFL doesn't seem to care. It seems that for some, brazen machine-driven dirty politics, knows no boundaries.
According to sources in 61B, Hayden who's never held public office, added to a campaign literature drop that began arriving in Monday's mail (1/28/08), the additional endorsements of Minneapolis School Board Chair, Pam Costain, State Senator Linda Berglin District 61, Karen Clark 61A, Frank Hornstein. State Rep / Dist 60B and Hayden's aunt, Minneapolis Park & Recreation Board Vice President, Mary Merrill Anderson. Hayden had already announced at his January 17th Meet and Greet, endorsements by Minneapolis Council Members Glidden, Remington, Schiff, Lilligren, Goodman and Ostrow, CD5's Keith Ellison and Hennepin County Commissioners Peter McLaughlin and Gail Dorfman.
A former 61B resident characterizes the situation this way, " The dynamics of this campaign really illustrate the limitations resulting from a one-party town. Where a party endorsement is deemed to determine the winner of the election, a candidate only has incentive to obtain the support of a very small number of people who have power to determine that endorsement, instead of coming up with any sort of innovative program to impress voters."
How ironic that endorsements would come from the likes of Glidden and Remington, when in 2005, the Camp Wellstone classmates endorsed each other in the City Council race in which Glidden defeated Hayden. The endorsement of Merrill Anderson was no surprise, since Jeff's aunt doesn't have to worry about mixed loyalties in this election. Her former fellow Minneapolis Park & Recreation Board member, Marie Hauser, isn't running against her nephew this time, so she can forego any disputed claim that her image was used without her express permission in the race.
Hayden's parade of names was printed prior to the announcement by fellow DFL candidate Michael Katch, that he would be bowing out of the 61B race. According to Katch's January 28th announcement in the MPLSMirror, "the upper levels of our party are apparently not interested in working with me; how stupid would I be if I were to spend all that money and energy to get to the position and not be fully effective?"
So I asked Katch why would someone who has been as actively involved in grass-roots Minneapolis politics as he, be shut out by politicos without any kind of public dialogue, especially when Katch had suggested a public debate to which Hayden reportedly agreed? Why would they choose to shoot this messenger and opt to laude Hayden, who seemed to drop into the abyss after his failure to win the Ward 8 race in 2006 against first-timer Elizabeth Glidden?
We had the effect, but what was the cause? Katch suggested that I take a close look in the Mayor's 2008 budget and the May 2006 report by the Minnesota Center for Public Finance Research.
So I took his advise. As verbose Ward 10 Council Member Remington seems to love to remind taxpayers, elected officials are the keepers of the "public purse", and it would appear that the purse's lining has developed an enormous hole. But never fear, it appears that Minneapolis leaders might have a plan to fix everything. It's not an original one, but a plan taught in economics classes across the land. Spend, spend, spend, then divest yourself of all valuable assets like parkland, public libraries and their book collections, municipal parking ramps, etc. Eliminate as much oversight by independent boards as possible and drive the bus straight into bankruptcy and hope the federal government bails you out. Just look at the example of Orange County, CA, where every county program was cut, about 3,000 public employees were discharged and all services were reduced. When Orange County filed for Chapter 9 protection on December 6, 1994, it became the largest municipality in United States history to declare bankruptcy and it underlines the dangers inherent in a freewheeling bull economy and the imperatives of local and state governments to protect fiscal assets. Yes Mr. Remington, you do control the community purse. The question is whether or not you will be so cavalier about responsibility, when the money is gone?
Based on my pedestrian interpretation of the City and State's financial situation when viewed through the Mayor's budget and the May 2006 report by the Minnesota Center for Public Finance Research, a 16-page analysis of the public employees' pension funds, the outlook is frightening.
The public employees' pension funds were going strong back in the mid-80's, but the market downturn beginning in 2000 and the post 9/11 economic environment took its toll on fund health. I'll leave you to make your own assessments of their findings.
Here are some excerpts from Public Pensions in Minnesota: Re-Definable Benefits and Under-Reported Performance Published by the Minnesota Center for Public Finance Research.
According to the report's Executive Summary:
In September 2005, the Council of State Governments estimated that the liabilities owed by state government-operated retirement plans nationwide exceeded assets by some $292.4 billion...This report focuses on six major pension plans: the three major independent teacher plans (St. Paul, Duluth, and Minneapolis Teachers Retirement Fund Associations) and the three major statewide public employee plans (MSRS or Minnesota State Retirement System General Plan; PERA or Public Employees Retirement Association General Plan; and TRA or Teachers Retirement Association). Minnesota’s public pension system includes many more plans than these six. There are a total of eighteen statewide public pension plans and four other plans that cover the employees of individual cities. There are also several hundred locally administered volunteer firefighter pension plans (mainly operated by townships) and some locally administered plans whose members are police and professional firefighters. However, the plans studied in this report are the three largest statewide public pension plans, accounting for about 80% of the retirement funds under the control of the State Board of Investment, and the three largest city-operated pension plans in Minnesota. The six plans combined cover more than 600,000 active and retired public employees. Even though a review of the status and performance of the other state and local pension plans is beyond the scope of this report, taxpayer risk issues discussed in this study apply to these plans as well.
According to the report's Findings on the Current Health and Status of Public Pensions in Minnesota:
As of June 2005 the six plans comprising this study had reported unfunded pension liabilities totaling $6.1 billion. Although the funded ratios (defined as total assets divided by total accrued pension liabilities) have mostly improved over the past thirty years, the $6.1 billion in unfunded liabilities is greater in absolute terms (inflation adjusted dollars) than in 1975.
The Minnesota Post Retirement Investment Fund (Post Fund), the fund exclusively for the assets and liabilities of existing retirees from statewide pension plans, also has unfunded liabilities totaling $3.7 billion for PERA, MSRS, and TRA retirees. These liabilities are not reported as part of fund actuarial reports. If these liabilities are included, total unfunded pension liabilities in these six funds totaled $9.8 billion as of June 2005.
The health of the plans is mixed. None is fully funded. Two of the plans, MSRS and TRA, are above 95% funded. PERA and St. Paul Teachers have less than 80% of the assets needed to pay the benefits owed to active and retired plan members. Minneapolis Teachers Retirement Fund had less than half of the assets needed to pay benefits owed to its plan members.
Five of the six plans also had contribution deficiencies, which means that too few contributions are being made to close their existing funding gaps. The size of contribution deficiencies for MSRS and PERA are the greatest in 30 years. Since 2002, PERA has added over $500 million in unfunded pension liabilities as a result of contribution shortfalls alone. The magnitude of contribution deficiencies for all three major independent teachers plans are all greater than the state plans and also are approaching or exceeding 30-year highs. Only TRA had a contribution surplus, which means that progress was being made on reducing their unfunded liabilities.
Contribution increases are already in law to begin to remedy these shortfalls. However, these increases are not without real cost. If all the approved increases to fix the PERA funding gap occur, local government spending will increase by $380 million through 2010, in the form of city and county governments’ pension contributions (the employers’ share only). The employees’ share of these increased contributions also create wage increase pressures for local governments to compensate employees for lower net pay. Real life divergence from the assumptions actuaries have used to calculate future pension liabilities has had a major influence on reported pension fund health. Changing mortality rates, rates and timing of employee retirement, and related demographic issues added nearly $4.5 billion in unfunded liabilities to the six funds since 2002.
Under the section Findings Regarding Legislative Decision-Making in Paying for Future Pension Costs:
To determine whether or not a pension fund will have enough assets to meet the liabilities owed to current and future retirees, the state makes an assumption about what annual average rate of return it will earn on its investments in perpetuity. The 8.5% assumed rate of return that the Minnesota legislature has adopted is among the highest assumed rates of return used by any state managed pension fund in the nation. Of 127 state managed funds surveyed by the National Association of State Retirement Administrators in 2004, 85% assume more conservative rates of return. Only 2 funds reported using a higher assumed rate of return.
Reported pension fund health is very sensitive to changes in assumed rates of return. If Minnesota used an 8% assumed rate of return—the norm for most state managed plans—PERA’s reported funded ratio would decline to 70.03%, which translates into an additional $1.02 billion of unfunded pension liabilities.
From 1985 to 2001, pension funds made steady progress toward reducing unfunded liabilities by consistently out-performing the 8.5% assumed rate of return. However, the market downturn beginning in 2000 and the post 9/11 economic environment took its toll on fund health. In only four years, the three state funds added back over 50% of the unfunded liabilities they had managed to reduce through investments over the previous sixteen years (1985-2001). Over the same time period, all of the reductions in unfunded liabilities from investment gains made by the Minneapolis and St. Paul Teachers Funds were reversed.
The effects of failing to achieve assumed rates of return—and the resulting taxpayer exposure—can in part be seen in the contribution rates of struggling pension funds. In the Minneapolis and St. Paul Teachers funds, employees contribute 5.5 percent of their salary to the pension fund, more than the three state funds. However, taxpayers in those school districts contribute over 8% of salary through school district employers. This employer contribution rate is more than twice the percentage state taxpayers contribute to the statewide MSRS fund.
According to the report's Findings Regarding Legislative Decision-Making on Pension Benefits
The policy of turning investment gains into permanent benefit increases has had significant negative impact on the health of public pension funds:
The state Post-Retirement Fund’s position changed from a $4.3 billion surplus in 1999 to a $4.1 billion deficit in 2005. Even if the investments in this fund return 9% annually going forward, it will take until the year 2033 for this fund to be restored to full funding. The permanent benefit increases also hindered the ability of the Basic Funds to achieve fully funded status because transferred assets were used to pay post retirement increases.
It has created major fairness and equity problems among public employee retirees. Those who were fortunate to have benefited fully from the 1990s markets have retirement benefits today often in excess of their working salary. The story is completely different for public employees retiring recently under much different market and fund conditions. Those in the three state plans have little hope of seeing anything other than inflationary adjustments – especially since the Post Fund for retirees will have unfunded liabilities for years to come. The “winners” under this system have been persons who retired between roughly 1981 and 2001, and the “losers” have been those persons retiring since 2001.
It has exposed taxpayers to significant risk. If the state’s pension fund managers are unable to realize returns of at least 8.5%, retirees do not have any risk of reductions in benefits. Because public employee retirees no longer make contributions to the funds, governments—and by extension taxpayers—will be liable for any long-term deficiency that threatens benefits.
The report also found Findings Regarding Accountability in Public Pension Asset Management
Applying value added performance auditing methods yields insights into the current situation faced by the Minneapolis Teachers Retirement Fund. Between 1982 and 2005 approximately $1.78 billion of investment returns were available through efficient investment in its own policy. However, $667 million of this total was not realized due to poor investment decision-making. In other words, 68% of the current $972.5 million deficit plaguing the Minneapolis Teachers Retirement Fund (according to the 2005 actuarial report) could have been avoided with better investment management of the fund’s assets.
Past efforts to adopt value added performance auditing in Minnesota were first championed then resisted by the Office of State Auditor. Future attempts to institute this methodology may require moving the performance auditing function into a state agency less subject to the political pressures of elected officials.
The type of investments made by public pension funds can also introduce accountability problems. Growing interest in “alternative investments” – such as private equity funds – is being fueled by returns superior to those offered by investments traded publicly on organized exchanges. However, investment performance in these vehicles comes at the expense of transparency and accountability. Alternative investment managers don't price their assets as often— and only they know if that pricing is accurate. Often the valuations are merely estimates.
So to bring it to the street, one simply has to connect the dots that lead right to the City of Minneapolis' purse. In the The Southwest Journal's City looks to Legislature for pension funds help by Brady Gervais writes:
The City Council is increasing its efforts at the state Capitol this year to change the managing structure of the city's closed police and firefighters' pension funds. Chief among the city's concerns is that it's financially obligated to cover costs and make up for investment shortfalls of its closed pension funds, but it plays a limited role in investment decisions. The funds' boards, which include two city appointees, manage the investments and administer the benefits. Officials are also worried about growing costs to the pension funds. The city estimates it will owe $255.8 million — roughly the equivalent of what it spent on five services in 2007 — over the next 20 years. During the next two years, the city's contribution to the closed funds is expected to increase by $14.2 million, not including debt service. "We have to write these blank checks, and yet we don't have any way of controlling what those checks are," said Patrick Born, the city's chief financial officer.
Now why the hell would they want to do that, if according to the report by Minnesota Center for Public Finance Research Board of Directors, "PERA and St. Paul Teachers have less than 80% of the assets needed to pay the benefits owed to active and retired plan members." and "The size of contribution deficiencies for MSRS and PERA are the greatest in 30 years."?
Steve Berg illuminates us in his MinnPost article Just like the movies: Minneapolis cops and shaky pension funds rattle City Hall:
As might happen in an old black and white movie, the funds are controlled, almost exclusively, by the same people who get the pensions. No one has to lose sleep over bad investment decisions because, if stock market bets go bad, the city has to pick up the tab anyway. Not only that, the pensioners get a raise every year based on how much the city pays cops and firefighters who are still working. In the police fund, hundreds of pensioners get raises based on how much three particular high-level officers get paid, including overtime. So, if there's a crime wave or, God forbid, a bridge falls down and the cops have to work lots of overtime, well, ka-ching, ka-ching. The pensioners make out like bandits...There's more. The pension funds don't have to sweat administrative costs, like legal fees, because the city has to pay all of those, too. The funds are organized in ways that seem to invite court challenges if, for example, the city wants changes on how the funds manage taxpayer contributions. When the disputes get inevitably to court, guess who pays the legal fees on both sides? The city. And the more the cases get stretched out in court, the more the city pays.
Gervais also sheds a little light on why:
In 2004, Mayor R.T. Rybak organized the Blue Ribbon Commission on Pensions, which was charged with analyzing the closed pension funds, including the Minneapolis Employees Retirement Fund (MERF), and coming up with solutions to the city's pension problem.
The funds enjoyed the economic boom of the '90s but suffered stock market losses shortly thereafter. The losses, along with earlier-than-expected retirements and state funding formulas contributed a rise in city contributions, according to the Blue Ribbon Commission report. The city, which uses property taxes to pay for the pension funds out of its General Fund, started issuing bonds in 2002 to pay for its pension obligations.
The commission recommended merging the pension funds, along with MERF, into PERA as a way to address long-term issues. Jay Kiedrowski, the commission's chairman and a former Minneapolis budget director, said he still stands behind the recommendation. SBI has an excellent track record, and because it has billions worth of assets under management, it is able to bargain for the lowest possible price to manage those assets, said Kiedrowski, who is currently a senior fellow at the Public and Nonprofit Leadership Center at the Hubert H. Humphrey Institute of Public Affairs.
According to the SW Journal article, Rep. Phyllis Kahn, (DFL-59B) originally elected in 1974, and sits on the Legislative Commission on Pensions and Retirement, said 'the idea that anyone would issue bonds for pension payments is "fiscal outrage."'
Why "fiscal outrage"? Because if you bond the interest, you are paying interest in interest, which would be considered by most to be very bad public policy.
In Gale force win: How neighborhood activist R.T. Rybak's unconventional campaign toppled the mayor of Minneapolis - Case Study, Adam Graham-Silverman describes how Rybak ascended to power:
As the only major candidate who did not hold elected office, Rybak adopted an outsider stance. "The one candidate who didn't cause the problems at City Hall has the unique skills to fix them," his literature repeated again and again. Later in July, a New York bond house downgraded the city's top rating one notch. As Rybak noted in countless literature pieces, it was the first time since 1963 that the city did not have a perfect bond rating.
The problem with the whole bankruptcy scheme is that Minneapolis would likely be prohibited for years from borrowing after declaring bankruptcy, since it would loose its AAA bond rating. Since Mayor Rybak took office, the city of Minneapolis paid off $450M of general obligation bonds to enhance the cities bond ratings. This payment caused the rating agencies to not look as closely at the books as they might have.
Under analysis of the Mayor's 2008 budget and statements made by City officials, the City has been paying down the general fund in an effort to steal from Peter to pay Paul. For example, according to the Mayor's "pie in the sky" budget, crime will be going down 20%. Therefore, Minneapolis won't need to allocate as many resources to fight it. But, crime rates are cyclical, dependant on many factors, like the economy and some question whether or not crime has actually gone down or the lack of trained police officers and slow response time has skewed the numbers downward.
Since the City is self-insured and by extension, Minneapolis fire fighters, the budget claims fire fighters' injuries will also be decreasing by 20%. The Mayor doesn't explain how this will be achieved.
Under lawsuit settlements against the City, supported largely by property taxes, the Mayor only allocated $4 million for 2008 in spite of the $7 million paid out by Minneapolis in 2006. Perennial litigant Al Flowers must be giving the City a break in 2008.
In spite of County Commissioner Gail Dorfman's ambitious plan to end homelessness in Hennepin County, requiring an investment of $144 million, the Mayor plans to contribute only $100,000 for Minneapolis' share of Heading Home Hennepin. Talk about spit in a bucket.
There is $500K budgeted for the repair of the 12 bridges under the City's responsibility. This is bad news for anyone waiting for repairs to the City owned Camden/St. Anthony Bridge that crosses I-94, the Mississippi river and the BNSF railroad. According to State nears end of nearly 4,000 bridge inspections by Tom Scheck, Minnesota Public Radio, December 13, 2007:
The city of Minneapolis also placed a weight restriction on the St. Anthony Parkway bridge in the northeast part of the city. Mike Kennedy, the director of transportation, maintenance and repair with the city of Minneapolis, says the city made repairs to the bridge after MnDOT inspectors found some problems. He said they will also monitor the bridge monthly until it's replaced within the next two years. "Because this is a 'fracture critical bridge' and it's in the condition that it's in, and now that MnDOT has made us aware of some additional issues out there," says Kennedy. "This one is the one that is being watched the most. The rest are being watched pretty much on a routine basis...Fracture critical" means like the 35W bridge, a failure of one component could cause the entire span to fall down.
The City touted the sale of a valuable Minneapolis asset on its website. On July 20, 2007, the Minneapolis City Council approved the sale of the eight municipal parking ramps included in this RFP package to three private purchasers. On October 30, 2007, the City closed on the sale of five of these ramps to Alatus Management, LLC with proceeds to the City totaling about $65 million. However, in The City Pages article How Much for the Washington Avenue Bridge? by G.R.Anderson Jr., describes the sale of this supposed drain on the City's budget this way:
Nearly 100 representatives from real estate, construction, and parking lot interests attended the weekday afternoon event. According to Diedre Schmidt, a vice president of Brighton Development, "It really was a who's-who of downtown developers."...All of the structures lay in white-hot sectors of what is apparently an ongoing, odds-defying development boom in downtown real estate. Some ramps, city reps suggested, could be used as part of residential or office projects.
"Some of them had opportunities for housing and retail," offers Bill Bloomberg, who brokers development deals independently. "It was, I thought, an unusual offering."
So unusual, in fact, that most folks can't recall another recent time when the city held such a sale of its assets. The scenario laid out by the city goes like this: For nearly 10 years, a section of the budget called the Municipal Parking Fund has been racking up debt, in part, to prop up the general fund. In short, the city has been taking extra money from the parking fund to the tune of $1 million a year to ensure that other basic services don't go wanting. And in the process, the parking fund has actually become a drain on the city's coffers...The more pressing matter for Born and the city—which has its finance, public works, and planning and economic development offices reviewing the proposals together—is what will happen to the city's bottom line. The city's overall budget for 2007 is $1.3 billion, with $327 million in the general fund. The Municipal Parking Fund budget is $58 million, down $2 million from 2006. In the complicated world that is the Minneapolis city budget, the parking fund has long been a source for "transfers" as high as $10 million to the general fund, and a few years back, city leaders started tapping the fund for an additional $1 million a year. Born says the city's current goal is to get the transfer amount down to $5 million annually in a few years
"Nearly all of the capital costs of the ramps have been financed by debt," the 2007 budget says. "The Parking Fund cash balance for year 2005 was negative $13.9 million." "I was part of the evil cabal that started doing it," admits Steve Minn, a City Council member in the mid-1990s who is now a developer, with respect to the siphoning of extra cash from the parking fund. "The idea was to not have to raise property taxes. It was supposed to be done once."
I may be misunderstanding the situation, but it sounds more like an asset than a liability and since most of the developers that purchased the ramps intend to use them as ramps, how could this have been a wise business decision on the part of the City?
According to a communication from CBAC (Citizens’ Budget Advisory Committee), which advises the Board of Education on matters of budget and finance, Minneapolis Public Schools are looking at a $13 M budget shortfall this year and a projected $25 M next year. It asks, "if some board members want smaller schools, special schools, ask how they would recommend paying for it? It is time to get out of the rhetoric, and into the reality. If they do not know, then they need to examine and study the budget and figure it out? They need to decide what they want to give up or sacrifice to achieve this goal." This sounds to me like spending is out of control by MPS. After six years of Rybak rule, the MPS is ready to close its doors.
Additionally, the City is proposing to give Allina, partner in one of their pet projects Midtown Exchange, a gift of $250K from already dwindling NRP funds. Allina promised 650 high-paying jobs to the neighborhoods at the beginning of the project. Allina also promised to help employees relocate to the Phillips neighborhood. Although Allina has backed out of nearly everything promised, they still expect their $250K and threatening to move their operation to St. Paul if the City didn't cough up the money.
In Steve Brandt's Star Tribune piece City kept saying yes to loans for bureau, detailed how Meet Minneapolis borrowed millions from the city, $9.1 million to be exact, to bail out a deal with a Singapore software developer that still isn't making a profit for the city. The "loan" to be paid back to the City in 10 years, was referred to as "start up costs" in the budget. Local activist Jim Graham wrote regarding the controversy, "A couple of months ago I became aware of the "Meet Minneapolis" boondoggle when being shown some problems in the Minneapolis budget. Afterwards in a meeting with a NRP official I laughed that the same elected officials who questioned the investments that neighborhoods made with NRP funds and the same officials who were attempting to kill NRP were making investments as unreasonable as this. What a joke!" Well Jim, it's no joke! It's in the budget.
According to Steve Brandt’s Star and Tribune article Council Begins Trimming Budget, he mentioned that the “committee withheld final approval of two spending proposals by Rybak that some members believed haven't been fully thought out. One would spend $250,000 from water bills on pedestrian drinking fountains that Rybak proposes to combine with a marketing effort to draw in new suburban customers for Minneapolis water. The council wants more details early next year before it votes on releasing the money.” The proposal has since been approved. It would seem Minneapolis has money to burn for the Mayor's pet projects.
The most devastating blow came to Minneapolis residents when it was announced in 2007 that due to a the loss of local government aid (LGA), Minneapolis Public Libraries would be reducing their hours and mothballing three of their branches, Webber Park, Southeast and Roosevelt. The City began the process of divesting itself of this "financial burden". Star Tribune's Steve Brandt describes the way the deal went down in 12-1 vote by City Council closes the book on Minneapolis-county library merger:
The council vote was 12-1, with Cam Gordon opposed. He said the city should have held a referendum on the merger rather than seeking legislation. He also objected to the loss of an elected library board, felt the city should have better representation on the county library board and wanted the city to be able to recapture proceeds if any libraries are sold. The city will bring a substantial dowry to the wedding of the systems. The $13.9 million it planned to levy for libraries will be forwarded to the county in 2008. Starting in 2009, city residents will pay the county library levy. The city also will pay the county an added $7.8 million in 2008, most of it from state aid that it has used to support libraries. That amount shrinks annually until the last payment in 2017. The city also will pay the county $2.1 million over two years that's mostly intended to cover the cost of reopening the three libraries. City residents also will pay $10.6 million to cover annual payments for bonds already issued for its library construction program and pensions. They'll also pay off $18.1 million in city debt planned to support library construction.
According to the overview of the Mayor's 2008 recommended budget:
· $140 million in bonds approved by voters and $110 million for Central and another $30 million for community libraries.
· $9.3 million in property tax levy for the library referendum included in the 2008 budget.
· Remains a city obligation until 2032.
The City gave approximately $200 million in buildings and another $240 million in collections to Hennepin County because the it was unable to come up with $5.4 million in budget shortfall. I guess the 2002 referendum wasn't enough to tell politicians how much we valued our city libraries. But look at the bright side; we got a brand new library, designed by César Pelli. I haven't heard whether or not we're off the hook for the $2.1 million that Minneapolis was supposed to have set aside for building improvements to the Webber Park library in north Minneapolis. Shucks, with a little creative accounting, that can go to pay for the Mayor's new fountains.
So if you're still with me, you're probably wondering what all this has to do with the 61B race. Here's the rub. If you're a politician who is beholding to AFSCME and their endorsement, they're the last group you want to piss off, even if they're sucking the City dry. The candidate, who gets their endorsement, gets access to their precious AFSCME phone bank. The phone bank translates to votes, which translates to winning elections, which translates to control and power. Katch had made the unforgivable mistake of mentioning aloud that he wanted to address the under funding of the public employee pension funds. While City leaders can ignore the 800-pound gorilla in the room, not everyone else is so short on spine or character.
Hayden claimed in a January 6th KSTP interview, "We have to keep the seat in the DFL if we're going to get things done in St. Paul. The DFL has to keep the majority and hopefully get the super majority," he said.
I guess voters need to ask Jeff, if he and his endorsers in the DFL get what they hope for, what will they do with it? Will they be making backroom deals with AFSCME to keep the pension discussion off the table? Does Hayden plan to commit political suicide by addressing the under-funding crisis when he gets into office? Would he go to AFSCME and ask them to restructure their contribution plan? Is he even capable of comprehending the current plan? Does he have the political where-with-all to work across the political aisle to resolve this catastrophe? Are any of Hayden's political supporters willing to cross the aisle or openly and honestly discuss the financial situation with constituents? If and when the City and possibly the State are forced into bankruptcy by the pension under-funding disaster and its enormous drain on the public purse, will there even be an AFSCME left to utter an objection? Already, many new government workers are only working part-time and not contributing to the retirement fund. Is this part of the DFL plan too?
According to one calculation based on the plans' under-funding, the outrageous expectation of an 8.5% return on fund investment, projected rate of retirement of government workers, adjustments for inflation built into the plan, etc., in addition to what we are currently paying, we will be paying a property tax increase of $1382 per year per household. Of course, that's assuming that the fund is actually able to achieve an 8.5% rate of return, which all any one has to do, is check out the rates of 30 year bonds on MSNBC.com to see that that's not happening. The 8.5% rate of return is after the money manager has taken his 1-2% cut for managing the fund. For example, if the fund managers were investing in AAA mortgages, how could they possibly return at a higher percentage rate than the mortgage rates charged to the borrower? Any rate of return of 9.5% to 10.5% would have to be in extremely speculative investments, a.k.a. a high risk ventures, like sub-prime lenders, junk bonds, etc. Are you getting the picture as to how all of this might have started?
Is there a solution to all of this? Providing we haven't waited too long, here's what Minnesota Center for Public Finance Research suggested in May of 2006:
To Improve the Design and Function of Minnesota’s Defined Benefit Pension System
Permanently end benefit increases based on superior investment returns and provide only capped inflationary adjustments.Develop quantifiable standards of replacement income to be achieved through pension benefits.When the Basic Funds are under-funded and the Post Fund is fully funded, transfer only the fractional reserves necessary to keep the Post Fund “whole.”Should conditions return that result in surpluses for both the Basic and Post Funds, give first priority to reducing employee and employer contributions, then possibly to providing for self managed accounts or “13th checks” for retirees, but only when an established “maximum funded ratio” in the Post Fund is exceeded.
Was Michael Katch the answer to all of our problems, the proverbial Golden Boy? Could he have magically restored the fund levels to where they need to be to meet the demand of present and future retirees? Could he have saved the City from the fiscal mismanagement of City leaders and the greed of the unions? No, but he was willing to speak openly and frankly about the unpleasant reality of our City and State's current financial situation. He's someone who understands the numbers and these are some big numbers. Since the DFL lapdogs have made the decision for us, I guess we'll never know.
Associated links:
http://www.swjournal.com/index.php?&story=10878&page=152&category=63http://www.ci.mpls.mn.us/council/2008-meetings/20080118/docs/NRP_Allina_RCA.pdf
http://minnesota.publicradio.org/display/web/2007/12/13/bridgereport/
http://www.ci.minneapolis.mn.us/parkingrfp/
http://citypages.com/databank/28/1361/article15025.asp
http://www.startribune.com/local/west/12758977.html
http://findarticles.com/p/articles/mi_m2519/is_1_23/ai_82757253/pg_4
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