The Public Pension Problem: Illinois Teachers -- The Problem Runs Deep

     Josh Barro and Stuart Buck have produced a good backgrounder on the status of public pension funds for teachers on behalf of the Manhattan Institute for Policy Research, a conservative, market-oriented think tank. Among their findings are that the shortfall between promised benefits and actual assets in the plans is almost $1 trillion, declines in investments account for less than a quarter of that amount, and no reasonably foreseeable increase in investments will make up the shortfall. Only two relatively small states, Montana and North Dakota, have no deficit in teacher pension funds to make up while California, the most populous state, has a deficit of nearly $100 billion. That’s a lot larger than the official deficit of $42 billion because states aren’t required to follow generally accepted accounting principles as you or I would be.
     The reason for this development is obviously the willingness of state and local politicians to make extravagant promises about future benefits coupled with a complete lack of willingness to fund these promises, a perfect example of the Wimpy strategy of public policy.
     His willingness to underfund or even raid teacher pension funds to finance his new programs is one of the several reasons I opposed now-impeached Illinois Governor Rod Blagojevich. Illinois’s problem may not be unique but it is certainly distinctive. The state constitution of Illinois prohibits the state from reducing public pension benefits. Article XIII, Section 5:
     Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.
     That’s been fully litigated (the pensions of state supreme court justices are paid from a state retirement system, too) so that in Illinois the only way to change it is to amend the constitution, politically very difficult particularly in a state in which both houses of the state legislature and the governor’s mansion are held by Democrats beholden to public employees’ unions.
     The only likely solution to the problem is a tiered system in which current teachers remain under the defined benefit program now in force and future teachers are enrolled in something more like a defined contributions plan. We’re still going to need to cough up what we’ve promised to today’s teachers and, in the absence of the political will to raise the state income tax, that means that every other government program in the state will suffer.

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By: Dave Schuler on April 15, 2010

State and Local Pension Funding Deficits: A Primer

Pensions, Budget Deficit

     The financial health of state and local pension funds has been transformed from a yawn-inducing topic to a frightening one in a few short years. By some measurements, the shortfall across the nation adds up to over $3 trillion or more than two years' worth of state and local tax revenues. In a few states, such as California and Illinois, pension funding has become a major political controversy. This primer focuses on the following key questions:

• What is the problem?
• How big is it?
• How binding is the legal obligation?
• Why do we care about the problem?
• What caused it?
• How can we solve it?

     This primer does not address the somewhat similar issue of retiree health care, since it differs considerably from pensions both in its legal status and in the level of predictability of future payments, among other things. To the extent that states are underfunded on that score, as many are, it will doubtless make it still harder to solve the pension problems.
 

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Douglas J. Elliott, Fellow, Economic Studies, Initiative on Business and Public Policy
The Brookings Institution

If it Ain't Broke, Break It!!

     We’re all familiar with the old saying, “If it ain’t broke, don’t fix it.” While this advice may have once been wise, it has no validity in today’s fast-paced, increasingly competitive global small business economy.
     Now is a great time for all business owners to take a good, in-depth look at their businesses. Obviously you need to fix what’s broken. But if you want to stay on top of today’s trends, to stay one step ahead of your competitors and to thrive, instead of merely survive, you need to do more than that. To put it bluntly, you need to recharge your business—and one of the best ways to do that is to adopt an “If it ain’t broke, break it” philosophy.

Why would I fix what’s not broken?

     I can hear the protests now: “Why would I fix what’s not broken?” All businesses can benefit by taking a fresh look at what is working, then seeing if those components can be retooled to provide even more revenues. For instance, can you expand your existing product line and offer it to a new demographic? If you are selling online, can you expand to a physical storefront? If you have a retail business and you’re not selling on the Web, you need to start immediately.
     If you’re a service provider, consider teaming up with other business owners in related industries and offer referrals and discounts to one another’s customers. Or think about actually partnering with them. For example, a Web designer and a copywriter could likely charge much more for their joint services than either could pull in singularly.
     Take a look at your pricing structure. Americans have permanently changed their purchasing behaviors. They’re looking for value—are you providing that? What other ideas can you come up with to entice people to buy more from you?
     Examine your marketing efforts. Too often this is the first area where small businesses cut back during tough economic times, and usually it’s the area you can most easily re-energize. Make sure you incorporate social media into your overall marketing mix.
     We’re all operating in a whirlwind. Things change on a dime. That’s a world entrepreneurs should be very comfortable in. But even the most successful among us cannot afford to rest on our laurels. Make the time to review your business—and then take the time to recharge your efforts.

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By Rieva Lesonsky

Tips for Smart Shopping During the Holiday Season

Here are eight easy ways you can shop smart, and help keep your identity safe this holiday season:

In Stores
1. Be aware of your surroundings and protect your personal space at the ATM and registers.
2. Inspect ATMs and points of sale terminals and look for tampering before swiping cards.
3. Keep cards in sight when paying to deter dishonest cashiers.
4. Store all receipts, and closely check your monthly statements to verify transactions.

Online
1. Be sure your anti-virus software is installed properly, and up-to-date.
2. Shop with retailers who you trust, and have a positive Better Business Bureau rating.
3. Avoid links. Instead, visit shopping sites by directly typing in their website addresses.
4. Don't purchase items while using public computers or shared wireless networks.

Another friendly tip from your friends at JWBI

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How to Create an Effective Communications Calendar

 Although this article is centered around the financial services sector, it can be quite useful in many other enviorments.  We hope this will help you in your planning.

Client segmentation and scheduled marketing campaigns are
keys to efficient communications.

      “It’s clear from so many client surveys that performance is on the list, but communications is at the top,” said Dan Kraus, a Raymond James advisor and branch manager in West Palm Beach, Fla.
     That’s just one reason—albeit a vital one—that advisors carefully consider their client communications strategy. Here’s another one. “Most people look at advice as a commodity, so the best way to differentiate yourself is through your communications and service.”
     Kraus is a strong proponent of the 12-month communications plan, a marketing calendar that includes a variety of client touches. “Have it structured on your desktop and make sure you follow though,” he counsels.
     Kraus concedes that the most effective way to communicate with clients is face to face, “but time is your scarcest resource, so you’ve got to merge email, phone and face to face,” he says.
Planning is essential because even scheduling client reviews is a challenge. “You can’t meet with 100 households in one quarter,” he says. “So segment your book and split those segments into thirds.”
     For example, Kraus might have 30 A client, 90 B clients and 110 C clients. He’d split the A clients into A1, A2 and A3, and do the same with the other groups. The A clients get quarterly reviews, so he’d meet with 10 of those every quarter. He meets B clients every six months and C clients annually, also scheduled into the first three quarters of the year. He saves the fourth quarter just for A clients, the other groups having already been dealt with.
     By better coordinating client reviews, Kraus has more time for other communications. He sends out a weekly market analysis, penned by Raymond James’s chief investment strategist, conducts monthly campaigns and sends out a quarterly letter on the market that he has pre-approved by compliance.
     Monthly campaigns are based on themes. January’s campaign is about planning for the coming year, for example, whereas February’s is about collecting 1099s and preparing for taxes. “We keep on track and in touch with clients so I can delegate a lot of it to my assistant,” Kraus says. “These campaigns are more service/planning oriented, which gives me a reason to get on the phone with people.”
     Two years ago, “I used to come in without a game plan,” he says. “My goal for November was to put in five client calls per day about tax trades or swaps. These calls add value and let clients know that I’m thinking about them, and that can lead to more business. November is also the holiday season, so I’d ask clients whether they want to have a family meeting.”
     Now his communications plan is scheduled, Kraus says he has more time for other activities. He’s also a branch manager, so the system allows him to stay on top of those duties while staying productive on the sales side.
     “I encourage other advisors to do this because it’s really in their best interests,” he says. “Those advisors that use this system here have found it valuable.” One advisor even turned the plan around and used it to let clients know that this level of communications is what they should expect from him and that he expects them to make themselves available for quarterly meetings.

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By: Howard J. Stock

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