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Millennials Identify Student Debt, Retirement Savings as Barriers to Entrepreneurship

blue bottle cafe (FLIKR Matt Biddulph)

blue bottle cafe (FLIKR Matt Biddulph)

Majority of millennials currently own or would like to own a business someday; identify student loan payments and lack of an employer-sponsored retirement plan as barriers to launching or growing a business

Washington, DC—A scientific opinion poll released today shows the majority of millennials (ages 18-34) who own a business or would like to start one at some point say student debt and lack of a retirement savings plan are barriers to entrepreneurship.

The poll, conducted Nov. 18-25, 2015, by North Star Opinion Research on behalf of Young Invincibles and Small Business Majority, found that the majority of millennials (51 percent) either own a business or organization, are planning to start a business, or would like to but do not currently have plans to do so.

When it comes to starting a business, millennials identify student debt and lack of an employer-sponsored retirement plan as financial barriers to entrepreneurship. Nearly half (48 percent) of millennials paying off student debt who currently own or have plans to own a business say their student loan payments have impacted their ability to start a business. And nearly 4 in 10 (38 percent) millennials who are interested in opening a business but have no current plans to do so say their student loan payments affect their ability to start a business.

“Right now, I cover upfront necessities for my business, like insurance and marketing materials, out of my own pocket,” said Amanda Golden, co-owner of Designing Local in Columbus, Ohio. “My loans are currently deferred, but as soon as they’re back on the table, using my own money to cover these costs will be out of the question. Student loans are really a burden that restrain my ability to run my own business. Millennials deserve a fighting chance to start small businesses, but student loans are holding us back.” 

Additionally, of those who are still paying off student loans, 43 percent of those who own or have current plans to own a business, and 38 percent who would like to own a business but have no current business plans, say their student debt affects their ability to invest in an organization or hire new employees.

What’s more, three-quarters (75 percent) of millennials who own, plan to own, or would like to own a business say the lack of an employer-sponsored retirement plan is a barrier to entrepreneurship.

“Millennials show exciting levels of interest in entrepreneurship, yet youth entrepreneurship remains comparatively low,” said Rory O’Sullivan, Deputy Director of Young Invincibles. “This poll makes clear that millennials see student debt as a barrier as they explore a pathway to building their own businesses.”

“Entrepreneurship represents the pathway to success for many millennials, but they face significant hurdles to launching and growing their businesses,” said Conan Knoll, Vice President, Entrepreneurship, for Small Business Majority. “As this poll shows, student debt and lack of a retirement savings plan are a real problem for millennial entrepreneurs. Considering the majority of millennials are or would like to become entrepreneurs, it’s important to address these issues that are holding young Americans back from launching their businesses and helping our economy thrive.”

For the full poll report, please visit: http://www.smallbusinessmajority.org/small-business-research/entrepreneurship/millennials

Workers In Right To Work States Are Less Likely To Have Access To Retirement Plans

Pew Analysis Shows Access to Workplace Retirement Plans
Varies Widely Across States

Big differences among industries, incomes, ages, education, race and ethnicities

Wide differences in access to and participation in employer-based retirement plans exist across states, with variations by employer size and industry type as well as by workers’ income, age, education, race and ethnicity, according to a report released today by The Pew Charitable Trusts.

The report, Who’s In, Who’s Out: A Look at Access to Employer-Based Retirement Plans and Participation in the States, examines the rates of access to and participation in plans in all 50 states and assesses the challenges facing workers and employers in ensuring that Americans have sufficient resources to pay for their retirements.

Access and participation is higher in the Midwest, New England, and parts of the Pacific Northwest—and lower in the South and West. The report also finds that among Hispanic workers, access to a plan is around 25 percentage points below that for white non-Hispanic workers. Black and Asian workers also report lower rates of access than white workers.     

“Access to workplace retirement plans varies widely across the states,” said John Scott, director of Pew’s retirement savings project. “Recognizing the savings challenge faced by so many Americans, half of the states are looking at their own solutions.” 

There is a correlation between traditionally strong union states and access to retirement plans.  Workers in Right To Work (for less) states generally have much less access to retirement plans or pensions.

Below is an chart from the report that shows the percentage of workers who has access to some type of retirement plan.

Screen Shot 2016-01-13 at 11.45.19 AMBelow is the current map of Pro-Labor / Right To Work states.  Notice that the overwhelming majority of Right To Work states have drastically less access to retirement plans. (Note: Wisconsin became a RTW state in March of 2015, Michigan in March of 2013, and Indiana in February of 2012.)

righttowork_uschart2015

Overall, Pew’s analysis, based on a pooled version of the Census Bureau’s Current Population Survey (CPS), found that 58 percent of private sector workers have access to a plan, while 49 percent participate in one. Pew also found that more than 30 million full-time, full-year, private sector workers ages 18 to 64 lack access to an employer-based retirement plan, whether a traditional pension or a defined contribution plan such as a 401(k).

The report notes the numerous efforts at the state and federal levels to increase retirement savings. Illinois, for instance, adopted the Secure Choice Savings Program in 2015, which will start enrolling certain private sector workers in new payroll-deduction retirement accounts by 2017. In another example, the state of Washington created a marketplace in which small employers and the self-employed can shop for retirement plans. In addition, the federal government has rolled out the “myRA,” a new national savings program that is geared toward low-income savers. 

“Workplace retirement savings plans can be a critical piece of the retirement security puzzle,” said Scott. “But for millions of Americans, this piece is missing.”

The collective bargaining process has long been the key to ensuring a fair wage and access to retirement. As union membership declines we are continuing to see a reduction in our wages and access to benefits including retirement plans.  


More detailed information, including state-by-state breakdowns, is available in the report’s online interactive data visualization at www.pewtrusts.org/retirementaccess. 

Click here to download the full report.

Workers In Right To Work States Are Less Likely To Have Access To Retirement Plans

Pew Analysis Shows Access to Workplace Retirement Plans
Varies Widely Across States

Big differences among industries, incomes, ages, education, race and ethnicities

Wide differences in access to and participation in employer-based retirement plans exist across states, with variations by employer size and industry type as well as by workers’ income, age, education, race and ethnicity, according to a report released today by The Pew Charitable Trusts.

The report, Who’s In, Who’s Out: A Look at Access to Employer-Based Retirement Plans and Participation in the States, examines the rates of access to and participation in plans in all 50 states and assesses the challenges facing workers and employers in ensuring that Americans have sufficient resources to pay for their retirements.

Access and participation is higher in the Midwest, New England, and parts of the Pacific Northwest—and lower in the South and West. The report also finds that among Hispanic workers, access to a plan is around 25 percentage points below that for white non-Hispanic workers. Black and Asian workers also report lower rates of access than white workers.     

“Access to workplace retirement plans varies widely across the states,” said John Scott, director of Pew’s retirement savings project. “Recognizing the savings challenge faced by so many Americans, half of the states are looking at their own solutions.” 

There is a correlation between traditionally strong union states and access to retirement plans.  Workers in Right To Work (for less) states generally have much less access to retirement plans or pensions.

Below is an chart from the report that shows the percentage of workers who has access to some type of retirement plan.

Screen Shot 2016-01-13 at 11.45.19 AMBelow is the current map of Pro-Labor / Right To Work states.  Notice that the overwhelming majority of Right To Work states have drastically less access to retirement plans. (Note: Wisconsin became a RTW state in March of 2015, Michigan in March of 2013, and Indiana in February of 2012.)

righttowork_uschart2015

Overall, Pew’s analysis, based on a pooled version of the Census Bureau’s Current Population Survey (CPS), found that 58 percent of private sector workers have access to a plan, while 49 percent participate in one. Pew also found that more than 30 million full-time, full-year, private sector workers ages 18 to 64 lack access to an employer-based retirement plan, whether a traditional pension or a defined contribution plan such as a 401(k).

The report notes the numerous efforts at the state and federal levels to increase retirement savings. Illinois, for instance, adopted the Secure Choice Savings Program in 2015, which will start enrolling certain private sector workers in new payroll-deduction retirement accounts by 2017. In another example, the state of Washington created a marketplace in which small employers and the self-employed can shop for retirement plans. In addition, the federal government has rolled out the “myRA,” a new national savings program that is geared toward low-income savers. 

“Workplace retirement savings plans can be a critical piece of the retirement security puzzle,” said Scott. “But for millions of Americans, this piece is missing.”

The collective bargaining process has long been the key to ensuring a fair wage and access to retirement. As union membership declines we are continuing to see a reduction in our wages and access to benefits including retirement plans.  


More detailed information, including state-by-state breakdowns, is available in the report’s online interactive data visualization at www.pewtrusts.org/retirementaccess. 

Click here to download the full report.

State of the Union Highlights Importance of America’s Entrepreneurial Spirit

Statement by John Arensmeyer, Founder & CEO of Small Business Majority,
on President Obama’s final State of the Union address

We’re glad the president highlighted the importance of entrepreneurship and innovation to a thriving private sector in his final State of the Union address tonight, and we agree that small businesses need to have their voices heard in our growing economy.

As noted in his speech, our economy is truly on a path to recovery, with more than 14 million new jobs and our unemployment rate reduced by half. We agree that creating smart policies that support working families and the middle class—small businesses’ primary customer base—is the most common sense way to ensure our economy continues down this pathway to prosperity.

In order to truly ensure small businesses and our economy thrive, we need policies like those discussed tonight on closing corporate tax loopholes, expanding retirement savings, mobile benefits and paid leave programs, and supporting an innovative economy. This will bolster our nation’s entrepreneurs and their middle class customer base. This includes:

  • Closing corporate tax loopholes that put small businesses at a disadvantage, and cutting the top corporate tax rates. Small Business Majority’s opinion polling found 75 percent of entrepreneurs believe their small business is harmed when big corporations use loopholes to avoid taxes, and 90 percent believe big corporations use loopholes to avoid taxes that small businesses have to pay.
  • Supporting the growing freelance economy and identifying and fixing tax issues unique to freelancers. A healthy freelance ecosystem can provide an innovative and singular pathway for women, minorities, youth, veterans, disabled people and immigrants to enter the mainstream American economy and build income and independence.
  • Providing access to affordable health insurance for small businesses by upholding and implementing the healthcare law in full. The law creates more avenues for small business owners and the self-employed to secure affordable coverage and reduce costs, which encourages entrepreneurship and small business growth.
  • Moving forward with policies that help small businesses provide paid leave to their employees and raising the minimum wage. These changes can improve employee productivity, reduce turnover and increase spending at small businesses to strengthen our economy overall.
  • Supporting easy-to-implement mechanisms for entrepreneurs and small business employees to access retirement benefits, such as the myRA program.
  • Implementing the president’s plan to make two years of community college and technical school free to responsible students, which would help address our nation’s crippling youth unemployment, and small business owners’ struggle to find qualified workers.

These policies can play a valuable role in promoting an environment where small business can grow, but Washington needs to act on them. It’s vital that policymakers make it a priority to level the playing field for small businesses and break down barriers to innovation and entrepreneurship through smart economic policies. By taking action on these issues and more, we can help small businesses thrive and strengthen our economy.


About Small Business Majority

Small Business Majority was founded and is run by small business owners to focus on solving the biggest problems facing small businesses today. Since 2005, we have actively engaged small business owners and policymakers in support of public policy solutions, and have delivered information and resources to entrepreneurs that promote small business growth and drive a strong economy. We regularly engage our network of 45,000 small business owners and more than 2,000 business organizations, along with a formal strategic partnership program of more than 125 business organizations, enabling us to reach more than 500,000 entrepreneurs. Our extensive scientific polling, focus groups and economic research help us educate and inform policymakers, the media and other stakeholders about key issues impacting small businesses and freelancers, including access to capital, taxes, healthcare, retirement, entrepreneurship and workforce development. 

NH Politicians Continue Assault On State Retirees’ Health Benefits

Senator Gerald Little and Representative Ken Weyler
Lead Crusade against State Retirees’ Health Benefits

Earlier today, the NH Fiscal Committee voted to increase the monthly cost share (premium) of retirees who are under age 65. The amount is a 5% increase, which, when announced, caused an audible collective gasp from a room packed with State retirees.  These are the people who have served the State for decades and had planned their lives and retirement according to promises that had been made at the time of employment and are being broken today by state politicians.

The increase moves the monthly cost from 12.5% to 17.5% of the premium, which currently means retirees under age 65 will be paying an additional $46 per individual covered each month.

“This vote is a continuation of breaking promises that were made to people who spent their careers serving this state,” said Rich Gulla, president of SEA/SEIU Local 1984. “Today, a handful of politicians decided the fate of over 3,000 devoted, hard-working former employees and their dependents.  The committee kept talking about no other alternatives. There were plenty of alternative ways to fill the deficit in the retirees’ health benefit plan. They just took the easy way out today – on the backs of retirees.”

Committee members repeatedly attempted a blame game. They tried to blame the Governor, they tried to blame increasing medical costs; they tried to blame everything and everyone other than themselves. However, after all the grandstanding, they were the ones who voted for today’s state retiree’s health plan changes. They could have found another way to plug the budget hole including opening up the State budget and finding the dollars someplace else.

It was apparent to attendees that the outcome of the meeting was pre-determined prior to its convening. “They knew full well how they were going to vote, even before today’s meeting began. They had already made up their minds to put the screws to the retirees who are under age 65,” said Gulla.

Last month, the committee voted to increase the co-payment for prescriptions for all retirees. “In combination, these increases are going to present a significant hardship for our retirees. The average pension for a NH State retiree is about $13,000/year.  Our retirees will literally be deciding between paying their heating and grocery bills or paying for medical care. It just sickens me,” said Gulla.

“The only way to stop this assault on our retirees is to vote out those Representatives and Senators who voted for this atrocity today,” said Gulla.  Senator Little made the motion to accept today’s plan and Representative Weyler seconded the motion.

It is also important to know that Senators Lou D’Allesandro and Andy Sanborn and Representatives Daniel Eaton and Cindy Rosenwald voted against the increases and in favor and respect of our state retirees. “For that, we thank them,” said Gulla.  The remaining Fiscal Committee members voted against the retired workers.  “Our members will not forget this; you can be sure they will remember exactly who was with them and against them next fall as they cast their ballots.”

Buying (and Selling) the Future on Wall Street

Verizon as a case study of why our economy doesn’t work, part six

The “ah-ha!” moment came during a conversation with a friend. What we realized: the way we usually talk about the stock market doesn’t match the reality of our modern economy. Things we assume about stock ownership often aren’t really true.

NYSE_09_26_1963_US_News_World_Report

New York Stock Exchange, 1963 (Photo by US News and World Report via Library of Congress)

Start with the basics: what is a share of stock? Most of us think “Investors give a business money and get back shares of stock that give them a fractional ownership of the company.”

But try applying that concept to Verizon, and it doesn’t fit. Verizon stockholders buy and sell shares on the open market – and none of that money goes back to the corporation. The money that investors pay when they buy stock… goes to the investors who sold the stock.

So buying stock isn’t “an investment in the company”… it’s an investment in the stock itself. If you later sell that stock for more than you paid for it, that profit is what’s known as a “capital gain.” If you sell it for less than you paid for it, that’s a “capital loss.”

Stock ownership does give shareholders a “fractional ownership of the company.” But what does that mean? There are more than 4 billion shares of Verizon stock outstanding.  If you own one of those shares, you don’t have rights to any particular network router or mile of transmission line.  Instead, you own slightly less than one-four-billionth of the corporation’s “stockholder’s equity.”  That means if the corporation were to be liquidated tomorrow, you – along with all the other stockholders – would share whatever remained after the corporation’s assets were sold and its other debts were paid.

And that’s probably when, if you were a stockholder, you would start remembering the $49 billion in long-term debt that Verizon acquired in 2013.

And that’s probably when you’d realize that Verizon’s corporate balance sheet shows less than $12.3 billion in “total stockholder equity.” And there are more than 4 billion shares of stock outstanding.

Which means each share of stock represents less than $3 in stockholder equity.

VZ stock chart

Verizon Share Price

Verizon has been trading above $40 a share since… April Fool’s Day 2012. (Back when there were less than 3 billion shares outstanding and the balance sheet showed stockholder’s equity of about $11.76 per share.)

That’s a huge difference between the per-share value of stockholder equity and the per-share price stockholders have been paying… for years now.

So… what else are stockholders buying? (in addition to that minuscule percentage of a relatively small amount of stockholder equity)

Each share also confers the right to receive a dividend, when and if the corporation issues dividends.  And – no surprise – Verizon has been issuing steadily-increasing dividends for more than a decade.  At this point, it’s issuing dividends that total more than $2.20 a year.  With shares trading between $40 and $45, that means stock purchasers can expect to make back – in dividends – about 5% a year on their investment. Which is way more than the rest of us can get in bank interest right now, if we put money into a savings account.

But although those dividends represent a whopping big “return on investment” – there’s still the risk that you could lose money on the stock itself.  Think about it: if you bought a share of Verizon stock last October, you paid about $49 a share. Since then, you’ve received about $2.20 in dividends. But the price of each share of stock has dropped to about $44. So even though you’ve received 5% in dividends… if you sold the stock now, you would still have “lost” about $2.80 per share.

So corporate executives pay a whole lot of attention to share prices.

VZ_Exec_Comp_Program_from_ProxyFor two reasons. First, because executives’ compensation is largely “pay for performance.” For Verizon executives, 90% of compensation is “incentive-based pay.” And what’s the objective? “Align executives’ and shareholders’ interests.”

Second reason: because most corporate executives own a lot of stock in their company.

VERIZON SHARES OWNED by executivesAs of this past February, when stock incentives were awarded, Verizon’s top 10 executives reported owning a total of more than 645,000 shares of corporate stock – worth, at the time, $49.31 per share… or, more than $31.8 million.

But Verizon stock is now trading at about $44 per share. That means those same executives’ shares are now worth only about $28.4 million.

So is it really a surprise that corporations spend trillions of dollars buying back their own stock, to bump up share prices?  Is it really a surprise that corporations borrow money to pay dividends and fund buybacks?

I don’t see anything here that provides an incentive for corporate executives to grow a company long-term.  Nothing that provides an incentive to pay employees a fair wage.  Nothing that provides any incentive to “create jobs” (no matter how low the tax rate goes).

The only incentives are: to keep stock prices high and to pay dividends. (And an incentive for corporate executives to take as much money as they can, however they can, while it’s still available.)

And so for the rest of us, the economy doesn’t work.

— — — — —

retirement eggWondering why you should find time to care about this, with everything else that’s going on right now?

Because of that huge difference between the per-share value of shareholder’s equity and the actual price per share.

And what happens during recessions.

And the fact that almost everybody’s retirement money is – in one way or another – invested in the stock market.

Here in the Granite State, the NH Retirement System lost 25% of its value in the last recession.

In June 2007, before the Wall Street meltdown, the NHRS had $5.9 billion in investments, including
•  $29.7 million of stock in Citigroup, Inc.
•  $23.5 million of stock in American International Group, Inc. (AIG)
•  $14.0 million of bonds issued by Federal Home Loan Mortgage Corp. (Freddie Mac)
•  $13 million of bonds issued by Federal National Mortgage Association (Fannie Mae)

Two years later, when the recession was in full force,
•  Citigroup stock had plunged to only about 6% of its former value
•  AIG stock was worth only about a penny on the dollar and
•  Freddie Mac and Fannie Mae had both been placed into federal conservatorship

That’s what happens to stock values, during recessions.

Remember hearing about the Detroit bankruptcy? Which supposedly was triggered by unsustainable public employee pension costs? The Detroit pension systems were fully funded, as of June 2008. Then the recession hit.

All those defined-contribution 401(k)s? Across the country, families lost an estimated $2 trillion (with a T) of their retirement savings when stock values plummeted during the last recession.

Artificially-high stock prices hurt almost everybody, in the long run.

— — — — —

Yes, there’s more.

Smashed Piggy Bank RetirementVerizon’s balance sheet includes $24.6 billion of “goodwill” and $81 billion of “intangible assets.” And if you factor those out, Verizon has “net tangible assets” of minus $93.4 billion. That’s what most of us would think of as a negative net worth… of about minus $23.35 per share. While investors are paying about $44 per share to buy the stock.

The good news, from the investors’ perspective: they’re not personally liable for that $116 billion in long-term corporate debt. If – and this is purely hypothetical – if Verizon were to declare bankruptcy and default on that debt, stockholders would not be expected to pitch in $23.35 per share to satisfy the corporations’ creditors.

The bad news is, somebody out there would take that loss… and retirement systems across America invest in corporate bonds. (At last report, the NH Retirement System owned more than $433 million worth of corporate bonds.  Can’t tell, from here, whether any of those include Verizon.)

— — — — —

Photo by Stand Up to Verizon via Flickr

Photo by Stand Up to Verizon via Flickr

If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.

Stand Up to Verizon is on Facebook here.

Part one of this “Verizon as a case study” series is here.  It focuses on Verizon’s $5 billion stock buyback last February, and the short-term bump in stock prices which followed.

Part two of the series, showing how Verizon executives benefited from that $5 billion buyback, is here.

Part three, looking at the disconnect between Verizon’s reported profits and the dividends it pays its stockholders, is here.

Part four, about phantom stock and how Verizon executives are avoiding taxes by investing in imaginary assets, is here.

Part five, about how Verizon is borrowing money to pay stockholders and executives while demanding givebacks from unions, is here.

This is part six.  And yes, there will be more.

Federal Protective Service Union Applauds Bill Extending Law Enforcement Retirement to Officers

AFGE Logo 2

Legislation by Rep. Carson also increases number of FPS officers, improves security at federal facilities

WASHINGTON The American Federation of Government Employees today applauded legislation introduced by Rep. André Carson of Indiana that would extend law enforcement retirement coverage to Federal Protective Service officers and make other improvements to the security at federal facilities.

“Yesterday, Americans marked the 20th anniversary of the terrorist attack on the Alfred P. Murrah Federal Building in Oklahoma City, which claimed the lives of 168 people,” said David Wright, president of AFGE Local 918, which represents more than 800 FPS officers. “Today, by introducing vital legislation to reform and expand the one federal agency charged with protecting federal buildings and their occupants, Rep. Carson has taken an important step in preventing a recurrence of this tragedy at another federal building in the U.S.”

Federal Protective Service officers are sworn law enforcement officers who protect federal workers and visitors at 9,000 federal facilities nationwide, yet they do not receive the law enforcement retirement benefits provided to all other law enforcement agents within the Department of Homeland Security.

“FPS officers carry guns, make arrests, perform investigations, and apprehend criminals,” Wright said. “They are law enforcement officers in every sense of the word, and they should be entitled to law enforcement retirement benefits.”

Wright said FPS has suffered from recruitment, retention and morale problems because officers aren’t under the same retirement system as other federal law enforcement officers, including special agents within FPS. Under law enforcement retirement rules, officers are subject to mandatory retirement at age 57 with at least 20 years of service, compared to age 60 with 20 years of service for other federal employees.

Rep. Carson’s bill, HR 1851, would apply only to FPS officers hired after the legislation is enacted.

A separate bill by Rep. Carson, HR 1850, would make a number of other reforms to FPS to security at federal buildings, including:

  • Increase the number of FPS employees to at least 1,870, including at least 1,318 in-service field staff, up from the current floor of 1,400 total employees;
  • Allow FPS to deploy more law enforcement officers in the field by excluding desk-bound managers from the definition of in-service field staff;
  • Clarify that FPS is the law enforcement agency responsible for protecting and policing all civilian, non-atomic federal facilities, not just those owned or controlled by the General Services Administration;
  • Mandate a training compliance tracking system for contracted security guards;
  • Require a report on the feasibility of converting all or part of the protective security officer workforce to federal employees;
  • Clarify the right of FPS officers to carry their firearms while off-duty;
  • Require agencies to install security countermeasures recommended by FPS.

“Security in and around federal buildings has been given short-shrift for too long,” AFGE National President J. David Cox Sr. said. “This legislation is long overdue and would provide FPS with the resources it needs to carry out its mission.”


The American Federation of Government Employees (AFGE) is the largest federal employee union, representing 670,000 workers in the federal government and the government of the District of Columbia.

Another WIN for Wall Street… and a huge LOSS for the middle class

Happy Hour

So, late last night… Congress decided that it was just fine to bailout Wall Street bankers again, if they should happen to get into trouble again. Gotta make sure the ol’ FDIC is there in times of trouble.

BUT… gosh… that old PBGC?

Oh… Congress doesn’t want to risk the possibility that taxpayers might have to bailout Middle Class pension funds. At last estimate, “the fund that backs multi-employer plans is about $42.4 billion short of the money needed to cover benefits” for pension plans that are expected to fail.

And what have private employers been doing, to keep those pension plans financially sound? Well… Hostess declared bankruptcy. Peabody Energy declared bankruptcy. Verizon “de-risked” itself of pension obligations. And that’s just what immediately comes to mind.  But I’m digressing.

So last night… LATE last night… Congress included in the “must-pass” budget bill something called the Kline amendment. The measure will allow multi-employer pension plans that are underfunded to significantly cut benefits to retirees under age 75.

Because… why would Congress want to risk having to have the PBGC bailout those middle-class pension funds? … when cutting benefits to retirees under 75 will accomplish the same thing.

Yep, what’s good for Wall Street… isn’t even a possibility for Main Street.

Want to know what I noticed?

One Federal Reserve economist put a number on how much that FDIC guarantee is worth to the Big Banks. He estimated it was worth $450 to $900 billion a year to the financial services industry.

OK, so this “government insurance policy” is coming to Wall Street through the efforts of the GOP-controlled House of Representatives.

And yes, those are the same Republicans who are such firm believers in the “free market economy” and “privatization” and “pull yourself up by your bootstraps.”  

And now they’re… giving a government benefit to the banks.

What happened to “the free market will take care of it”? Why can’t these banks buy their own insurance on the open market? From a private insurance company?

But I’m digressing again.

Here’s what I noticed: it looks to me like the annual “value” of what Congress gave away last night is about the same amount as what Congress spent on the infamous TARP program.

TARP, of course, was a one-time thing. (Or at least… hopefully… not a very frequent thing.)

The FDIC insurance is ongoing. Every year, the big banks are going to get that government-subsidized insurance policy. Underwriting their risky investments.

It’s like a TARP program, year after year after year.

While all those retirees… get their benefits cut.

Enough is enough!

Smashed Piggy Bank RetirementToday the Nashua Telegraph posted the article, “Pension tension: New research dispels old notion that public employees make less than private sector peers,” which highlights supposedly “new” research focused on public employee pensions.

There are many things wrong with this article and I feel obligated to correct some of these inaccuracies.

Let’s start with the fact that the “new research” they cite was written in 2012, hardly making it breaking news. It was based on surveys taken in 2004 and 2006. The report basically says that while public employees do make less per hour than their private sector counterparts, when you include their retirement benefits public employees make more.

Here are the facts.

1) Research from the National Institute on Retirement Security (NIRS) shows that public employees earn 11-12% less than their private sector counterparts. There is no denying that public workers have a better benefits package than private sector employees – however, even when you add in retirement benefits, public sector employees still fall behind private workers by 6-7% overall. Many people choose to work in the public sector for less pay because they want the better benefits and a real retirement plan.

Unfortunately the trend in the private sector is to take away defined benefit pension plans and force workers into 401(k) programs. This makes employees responsible for funding and managing their own retirement plans. Employers are able to reduce their contributions, reducing what they pay for the benefits they offer. This shifts the entire burden onto the employee. This is also why private sector worker are paid slightly better: because they are expected to save that extra pay for their retirement.

2) Public sector employees are better educated than private sector employees. NIRS found that only 23% of private sector employees have a college degree – compared to 48% of public sector employees with a college degree.

This is easy to understand when you think about some of the jobs in the public sector. You have thousands of literal rocket scientists at NASA and thousands of doctors and medical professionals at the Center for Disease Control. Every teacher is required have a college degree. The result is a highly educated public workforce.

3) It is an outright lie to blame public employees for underfunding of the NH Retirement System. The fact is that in 1999, the NHRS was 100% funded – until Wall Street shenanigans started cutting into its value.

As reported by Liz Iacobucci, “the Trust Fund lost 10% of its value in the recession of 2001.” The NHRS Trust Fund continued to decline and hit rock bottom during the 2008 economic meltdown. “It lost another 25% of its value in the 2008 recession,” said Iacobucci. In 2008, the NHRS had more than $5.9 Billion in investments – and when the stock market crashed, that created what many are calling an unfunded liability.

Think tanks often spin the numbers, calculating that if every employee retired today, the trust fund would be short by “X” amount of money. The fact is that new employees replace the retiring workers, and the new employees pay into the Trust Fund. Investment returns are hugely important to the Retirement System: about 75% of NHRS pension benefits are funded by investment returns. The employers’ contributions are – literally – just pennies of each dollar paid.

Wall Street has rebounded nicely from the 2007-08 crash. The stock market has been setting new records for almost 18 months now. The NHRS has recovered much of its lost ground – and as the market continues to grow, so will the NHRS Trust Fund.

I also can’t believe that Charles Arlinghaus, president of the Josiah Bartlett Center for Public Policy Studies, is suddenly so concerned about municipal budgets. His conversion is almost laughable. In the article, he says “Your town budget is higher than it would be because the pension system is more expensive than it should be. That’s money that’s not going to hospitals, to universities.”

But the Bartlett Center was one of the biggest proponents of “pension reform” bills during the 2011-12 legislative session – and back then, Arlinghaus didn’t talk about the impact those bills would have on municipalities. Cities and towns are paying more now for employee pensions thanks to the hard work of Arlinghaus and the JBC.

Enough is enough!

We need our elected leaders and these Koch-funded “think tanks” to stop lying to the people. The media pits worker against worker when these think tanks are given unwarranted publicity.

Blaming workers for the consequences of two stock market crashes isn’t “new research” – it’s political spin.

Calling retirement benefits unaffordable – without mentioning the fact that the Legislature underfunded the NHRS for years – isn’t honest “research,” it’s political spin.

And we as workers need to change the conversation away from “look at what he gets” – and start asking, “why am I not getting that?”   We as workers, both public and private need to stop blaming each other, and start demanding better from our employers.

AFT-NH Legislative Update: NH Retirement Lawsuits, and Finishing Up Education Bills

It is that time in the 2014 legislative session for Committees of Conference. Bills that were amended by either chamber will need a recommendation of concur, non-concur, or non-concur with a request for a Committee of Conference from the committee in which the bill originated.  At the moment, the following bills will be moving to Committees Of Conference, and both chambers have till June 4th to act on these bills.

HB 1128, establishing a committee to study issues related to students receiving special education services while attending a chartered public school. AFT-NH is in support of the bill’s intent.

Around 2011-2012 the state passed a bill which mandated that local districts must pay for support services for special education students enrolled in Charter schools. This means that a district must send someone to the Charter school, contract out the service, or pay the Charter school to provide the services. All of which can add up to tens of thousands of dollars. We need to have a clear picture on what it is costing districts to educate special education students enrolled in a Charter school in or out of their home district. Because this is a mandate from the State we also need to have the discussion on who should be paying for these services.

HB 1494-FN, relative to administration of the New Hampshire retirement system and authority of the board of trustees.We were originally opposed to this bill but when amended we came out in support.  This bill moves to a committee of conference, AFT-NH will monitor this process.

The original bill was a policy overreach by the NHRS, but Rep. Goley’s amended version ensures this is just a housekeeping bill that establishes a procedure for the determination of the costs of purchase of service credits, clarifies the ability to earn service credit while on a salary continuance plan, changes the date for the approval of the comprehensive annual financial report (CAFR), adds a penalty for employers who fail to timely remit data on compensation paid to retired members, and repeals obsolete provisions.

RETIREMENT LAW SUITS

This past Thursday, May 15, 2014 the Supreme Court heard oral arguments on our Merrimack County I (rate case).

In this case, the Superior Court found that the recently imposed rate increases were substantial and were not justified by any particular public policy requirements.   The rate increases were, thus, improper for any employee vested in the Retirement System under the Contract Clause of the NH Constitution.  The Contract Clause prohibits the state from breaching its contracts.  The judge, however, found that employees do not become vested in the Retirement System until they complete ten (10) years of service.

The Retirement Coalition appealed because it believes employees become vested upon achieving permanent status, not at ten years.  The State appealed because it claims employees do not ever vest or do not vest until they actually retire.   The Retirement System also filed a brief in which they claim not to take any positions, but at the same time claim that the Retirement System should not be required to refund any monies that become due.  The NH Municipal Association and the NH School Boards Association filed a brief that essentially sides with the State.

It will be a few months until the Supreme Court issues its written decision; once it is out I will send out a summary as to their ruling.

RETIREMENT LAW SUITS STILL WORKING THEIR WAY THROUGH THE COURTS

Merrimack County II (COLA and Special Accounts).In this case, the Superior Court found that employees do not have vested rights in their COLAs and no right to challenge the defunding of special accounts.  The judge also repeated his findings about a ten (10) year vesting period for other aspects of the Retirement System.

The state’s brief are due May 20, 2014, our response is now due July 7, 2014, their response to us is now due August 5, 2014. The next step will be for the Supreme Court to schedule oral arguments.

Hillsborough County (Definition of Earnable Compensation, Benefit Structure).In this case, the Superior Court found that employees vest in the Retirement System upon achieving permanent status.   The judge ruled, however, that she cannot tell without a trial whether definitional changes made by the Legislature regarding factors such as what constitutes “earnable compensation” are substantial enough to have violated petitioners’ rights.   (Merrimack I and II were determined on an agreed statement of the facts, without a trial).

Case Status:  Over our objection, the Hillsborough County judge stayed proceedings in this case pending the outcome of the Supreme Court appeals.  As a result, there is not pending activity in this case.

If you have any questions or concerns please email me at lhainey@aft-nh.org.

Thank you!

In Solidarity,
Laura Hainey

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UPCOMING COMMITTEE HEARINGS

TUESDAY, MAY 20

LEGISLATIVE ADMINISTRATION, Room 104, LOB
10:00 a.m. Interim study subcommittee work session on HB 1440-FN, including the writing, promoting, or distributing of model legislation to elected officials as lobbying and requiring disclosure of scholarship funds, money, or other financial support received from such lobbyists by elected officials.

WAYS AND MEANS, Room 202, LOB
10:00 a.m. Full committee work session on Revenue Updates.

THURSDAY, MAY 22

10:00 a.m. Senate in Session

WEDNESDAY, JUNE 4

10:00 a.m. House in Session

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