STUMP » Articles » Pension and Finance Roundup: Monday, April 11 - Surprise Election Issues? » 11 April 2016, 07:10

Today I’m updating two ongoing stories: the Puerto Rican de facto bankruptcy, and the cuts to pensions for Central States. Also, a new one: double-dipping by California lawmakers.

PUERTO RICO

First, Puerto Rico, last seen in this post. The Puerto Rican Development Bank, which was being used to fund the government. The story I quoted was pretty straightforward, but others last week were of the “No, no, no, everything’s fine, we’re not going to go into receivership, yadda yadda” variety.

Well, guess what.

Puerto Rico governor declares emergency at Government Development Bank

Puerto Rico’s Governor Alejandro Garcia Padilla declared an emergency at the island’s Government Development Bank (GDB) on Saturday, suspending its lending power and freezing most withdrawals as the bank struggles to avoid default on a crucial May 1 debt payment.

The announcement followed Garcia Padilla signing a law this week authorizing him to take steps to avoid receivership at the GDB, the U.S. territory’s primary fiscal agent, and prevent a run on the bank.

Puerto Rico faces $70 billion in total debt, a 45 percent poverty rate and a shrinking population. Garcia Padilla has said the GDB cannot afford the looming payment. While the island has defaulted on small debt payments in the past, a default at GDB would be the most serious yet.

This week’s order prevents GDB’s depositors, such as municipalities and public agencies, from withdrawing their money, except to fund essential services.

It also suspends minimum reserve requirements at GDB, and prevents the bank from lending money or making payments on debts that it guarantees.

However, Garcia Padilla declined to exercise his authority to declare a moratorium on GDB’s own $422 million May 1 debt payment, citing continuing restructuring talks between GDB and its creditors.

So this is an interesting way to go about bankruptcy, and some states (like Illinois) could be taking notes.

Because the states can’t declare bankruptcy the way municipalities can. Neither can the federal government, but that’s a bit different because they can print money (which causes different problems).

But they sure can make similar moves in just deciding to not pay bonds.

As for it being an election issue, at least one person last year pointed out that this could come into play:

Florida’s large and growing mainland Puerto Rican population — it’s approaching 1 million and is about 20 percent of the Hispanic population in the state — has a lot of votes that the 2016 candidates want. Their votes played a critical role in boosting the share of the Latino electorate that supported President Obama. Those votes have been widely credited with helping to deliver Florida to Obama in 2008 and 2012.

And Florida has 29 electoral college votes — a tally no sane candidate will dismiss. It’s by far the biggest state that both parties actually compete for and where each side suspects that they have a chance to win. It is, in short, the ultimate swing state, and the Puerto Rican population is big enough that it matters plenty.

Back to the crisis. This month, stories about the risks and benefits of bankruptcy have been published in the Spanish-language media. And over the long holiday weekend, Puerto Rico’s governor, Alejandro García Padilla (D), talked about the role that mainland Puerto Ricans can play in helping the island get the legal changes needed for a bankruptcy on the nation’s second-highest rated Spanish-language network, Telemundo. All of which is making Puerto Rico’s bankruptcy efforts a political matter on the mainland.

I saw some things more recently as well.

I’m in New York, which also has a large Puerto Rican population, but we’re rarely seen as being in play. I think it’s probably still true (note: I was not a conservative when I moved here), even if Trump runs as the Republican nominee or third party, but just wanted to note it.

CENTRAL STATES PENSION FUND

I most recently wrote about the Central States Pension Fund in March, and I had written about it in October 2015.

I focus more on public pensions than private pension issues, such as Central States, but there’s a political angle in that their pensions are being cut now (as opposed to cut a hell of a lot more in a decade, when the money ran out) due to bills passed not that long ago.

This is an issue that may hit Congressional races in addition to the Presidential race. Because it was a bill passed by Congress that is causing cuts to occur this summer:

Rep. Adam Kinzinger ® speaks out after a law he supported in 2014 has truck drivers outraged.

Protesters lined up outside the Statehouse last week against the Multi-Employer Pension Reform Act. It cuts benefits for workers and retirees because the fund is in danger of running out. But, that means some 400,000 retired truck drivers saw pension paychecks cut in half. Kinzinger says that’s unfortunate, but can’t be helped.

“At the end of the day, you can’t invent money,” said Kinzinger. “Illinois is doing the same thing trying to invent money that doesn’t exist. You have benefits that are promised that simply aren’t paid for and you have to find the best way out to preserve those benefits for people.”

A Rockford retired truck driver says he’ll rally in Washington, D.C. next week in support of a federal proposal to suspend the cuts.

That’s this week a rally was supposed to occur. There have been rallies and protests in the midwest for months now, but it rarely makes the big East Coast news dispensers.

But I have a feeling this “flyover country” issue could have some effect on politics, Congressional and Presidential, this year. I could see both Trump and Sanders making this their issue.

And here is more on the upcoming rally:

Rally to focus on plight of pensioners

Denise Wheatley spent 32 years working as a clerk at Standard Forwarding, a trucking company in East Moline.

Now retired, she’s counting on the $2,850 monthly pension she earned on the job.

In a few months, though, that could be cut in half.

Wheatley, 58, is among 40,000 people in Iowa and Illinois who are part of the Central States Pension Fund, which last fall asked the federal government to approve a plan reducing payments by $11 billion. Short of a federal bailout, the pension fund’s trustees say, the cuts are the only thing that will keep the plan’s nearly 400,000 members from losing practically everything.

The proposal has sparked protests across the country, and Thursday thousands of people are expected to descend on Washington, D.C., hoping to draw attention to their plight — and attract the notice of lawmakers who approved a little-noticed provision in a big spending bill a year and a half ago that paved the way for the potential cuts.

And more:

Iowans Struggling, Fearful of July 1 Pension Cuts

DES MOINES, Iowa — Teamsters rallied on the steps of the Statehouse on Thursday to protest pension cuts.

After a bill passed in 2014, struggling pension funds were allowed to cut pension plans in order to stay afloat.

Teamsters are fearful that pension cuts slated for July 1 will change the way they live.

“They’re telling us it’s a 50 percent cut, but maybe it’s a 60 percent cut. And after forty years of being in the union, he was supposed to get over $3,600 per month,” said Judy Vandall, whose husband is a 68-year-old truck driver. He’s still working because his pension is in doubt.

…..
The group that organized the rally, the Committee to Protect Pensions, is planning a trip to Washington, D.C. on April 12 to lobby members of Congress.

So there will likely be some news this week surrounding this. We’ll see how large a crowd they managed to get — I bet it could be sizeable because:

• the cuts are hitting current retirees, and specifically ones under age 80
• those cute are pretty large (not as large as if they waited for all the funds to run out, tho)
• these people had driven long-haul trucks for a living.
• gas is relatively cheap now

So it might finally make East Coast news.

DOUBLE DIPPING POLITICIANS IN CALIFORNIA

Double-dipping in public pensions is when you’re drawing on a pension from the government and still on the government payroll.

The most suspect form of this is when one retires and draws a pension and then get hired back by the exact same governmental entity to do essentially the same job (though sometimes they change the job title to try to give cover). Some states have banned that.

What’s more common is stuff like this:

Two checks: State lawmakers collect public pensions and legislator’s salaries

Republican state Sen. John Moorlach of Costa Mesa has emerged as a leading voice in the Legislature against skyrocketing debt piled up by public pension systems.

But some in the pension reform movement say the former Orange County treasurer may be contributing to the problem: Moorlach receives an $83,827 government pension check from the Orange County Employees Retirement System while making $100,113 a year as a senator.

At least 16 other state lawmakers collect two checks each month, including Assemblyman Jim Cooper (D-Elk Grove), who retired two years ago at 50 as a captain in the Sacramento County Sheriff’s Department. When added to his legislative pay, Cooper’s annual pension of $173,820 brings his total income each year to $273,000.

It’s not a partisan issue, btw. It’s a lifelong-sucking-off-the-public-fisc issue. Which many of these professional politicians have done.

Let’s go back to the article:

“It’s a form of double-dipping, which makes a lot of people angry,” said former San Jose Mayor Chuck Reed, who is planning a pension reform initiative for the 2018 state ballot. “Most of us have to work until we are 65 or 67 before we can retire when Social Security kicks in.”

It’s legal under current rules, said Dan Pellissier, president of the group California Pension Reform.

“But the optics are poor, certainly for an elected official to be taking another public salary after retiring,” Pellissier said.

The information was gathered by a search of pension system records by the Los Angeles Times just as public policy makers are debating both legislative pay and excesses in public pensions.

….
When asked about several legislators collecting pension checks on top of salaries, Moorlach said, “It’s not the people who are bad. It’s the system that’s bad. We’ve got to fix the system.”

Here’s the deal. You don’t have to take your benefits while you’re still working. You can wait. It’s a privilege to be representing others.

And if I were an up-and-coming wannabe lifelong politician, it would be easy to attack these incumbents were they up for election.

California State Assembly elections are happening this year. Some nice juicy targets for local politicians who want to climb the ladder!