Archive for the ‘OPEB’ Category

The Local Charter School Fight

Wednesday, July 5th, 2017

Our Shelby County School Board has an aggressive legal bent. They seem ready to sue at any hint of competition from the charter school community or push back from taxpayers. Already they have spent over $340,000 on a lawsuit against the state of Tennessee claiming that education in Tennessee is underfunded and not adequate as required by the Tennessee Constitution. They want the school boards in Tennessee to set an adequate tax rate for education separate from the elected local politicians.

 

Now they are proposing a resolution from general counsel Rodney Moore to “research and pursue any and all appropriate legal and judicial remedies including but not limited to legal action” to stop the Achievement School District from operating grades it wasn’t authorized to operate.

 

The problem here is that the majority of the Shelby County School Board does not want competition from any charter schools or any state imposed Achievement School District schools. They think that they know best and they should not have any competition from other education ideas or other means or educating our children.

 

The old Memphis School Board and the successor Shelby County School Board has a record of failure and cannot point to much success. The old centrally controlled model does not work. Competition schools that are measured against the centrally controlled schools are the answer. Let the best results win.

 

The real prize is the tax money spent on education. Now we have a central bureaucracy which last year spent $11,231 per student. The 45 charter schools got only 70% of that piece of the pie at $7826 per student. A large part of the difference is the bureaucracy and the teachers union. Here is a current copy of the teachers/helpers contract. When you read the contract you will see that the salary schedule Appendix A was left blank. I have asked again for this information but have received no answer yet. Here is the salary schedule from a previous contract. Also here is a comparison article on management salaries between the old Memphis City School administration and the old better run Shelby County School System. The new Shelby County School System needs competition and needs to be leaner and learn to do with less.

 

The charter and alternate schools make their own deals with teachers but the teachers have to meet state teacher licensing requirements. They have more freedom to experiment with new ideas for education. Each year all schools should be tested in a rigorous method that can be checked for cheating and let the results speak for themselves. Stop the lawsuits and let us have education competition so that parents can have a choice.

The Memphis Police Situation

Tuesday, February 28th, 2017

I read Mayor Strickland’s weekly update (https://mail.google.com/mail/u/0/#all/15a4e354e56b4a71) and it was a very thoughtful and informative article on the Memphis police staffing, recruitment and benefit situation. He blames the current shortage of uniformed officers on two things. One was the Memphis pension and OPEB (other post employment benefits, mainly retiree healthcare) unfunded liability. The unfunded liability was so massive that the State of Tennessee Comptroller threatened to take over the city unless it was addressed. This was in 2014. In order to meet this funding requirement retirement healthcare benefits had to be cut and more and more officers decided to retire or resign.

I have written in the past about this situation and it was the fault of past city of Memphis mayors and past city of Memphis City councils that ignored the 2007 GASB 45 regulation that required that pension and retiree health care expenses be recognized as they are earned rather than as they are paid. The Shelby County government did the right thing and the City of Memphis did not and hence the 2014 year of reckoning.

We all want and need good and effective policing as Memphis is earning a bad reputation for violent crime. I want Memphis to hire more qualified officers and apparently Mayor Strickland is moving in that direction. There is one more thing he can do which will help in the future and that is to stop the abuse evident in the City of Memphis pension board. This abuse is the number of LINE OF DUTY DISABILITY approved by this board. In the past I have compared the number of line of duty disability approvals from Memphis to the MLGW and Shelby County. The approval in Memphis is 10 times higher per active employees than Shelby County and the MLGW. Line of Duty disability approval gives the disabled employee a pension of 60% of his highest average salary tax free for life.

The City of Memphis in 2011 had 429 people on line of duty disability costing the City $11.8 million per year. In 2016 the figure is 510 people costing $14.7 million. Compare this with the MLGW employees. In 2008 they had 37 people in this status costing $523,000 per year. In 2015 they had 34 people in this status costing $485,000. Shelby County in 2015 had only 17 line of duty retirees. Compare that to 510 for the City of Memphis. Clearly there is a problem at the City of Memphis and it goes to the Memphis Pension Board and it’s makeup of members. The membership of this board and its rules need to be changed. The numbers of line of duty retirees at the City of Memphis when compared to the MLGW and the County clearly show a problem and the problem should be addressed. Qualified new officers should be paid whatever the market requires but obvious abuses of the system should be stopped.

The City of Memphis OPEB Solution?

Tuesday, January 3rd, 2017

 

January 3, 2017

 

OPEB is Other Post Employment Benefits. This means retiree medical expenses and life insurance.

Mayor Strickland has been wrestling with this problem for some time including his stint on the City Council before he became Mayor. He is trying to solve a tough unfunded liability problem that has been brought about by the City’s (and I mean past mayors and past city councils) refusal to face the problem since 2007. In 2007 the government accounting standards board warned the city and the county as follows.

“The Governmental Accounting Standards Board issued statement No. 45 (GASB 45) Accounting and Financial Reporting by Employers for Post Employment Benefits Other Than Pensions; GASB 45 requires that other post employment benefits (OPEB) be accounted for similar to pensions in that the expense must be recognized as the benefits are earned rather than as they are paid.”

As of June 30, 2008 when Willie Herenton was Mayor and Jim Strickland was on the City Council, the unfunded OPEB liability was $857 million. The County OPEB unfunded liability as of June 30, 2007 when AC Wharton was county Mayor was $319 million.

Now fast forward to recent reports. The OPEB unfunded liability of the City of Memphis was $700 million as of June 30, 2016. The OPEB unfunded liability of Shelby County Government as of June 30, 2015 was $101 million.

WHAT IS THE CAUSE OF THE DIFFERENCE IN THE ABOVE NUMBERS?  The original cause of both the City and the County was that they allowed retirees under the age of 65 to stay on their subsidized health care plans of which the City and the County paid 70% of the premium. This was regardless of length of service or whether the retiree spouse had a private sector plan which could include the retiree or whether the spouse was on Medicare.

The county passed Item 32B on June 18, 2007 and was signed by Mayor Wharton which addressed and solved the problem. The City did nothing until the recent actions which has resulted in the reported conflict between the Mayor and retirees. Mayor Strickland has come up with his solution “Explaining the path to pre-65 health subsidies”.

The real blame for this huge problem of unfunded liability is the non-action of past City Councils and past City Mayors since the 2007 notice contrasted to the actions of past Shelby County governments. City Mayor Wharton should have known better and past City Councils should have had more courage and foresight.

In the future I will post City, County and MLGW health care costs and let you compare them to what you will be paying privately. I would appreciate your thoughts on these matters.

Open Records At City Hall

Tuesday, August 2nd, 2016

Open Records At City Hall

August 2, 2016

It seems that the Commercial Appeal has finally had a falling out with City Hall on the subject of open records and transparency. (Read the Ca article from last Saturday).

I have been an advocate of open records and full and complete access to all records for many years. I have filed numerous successful lawsuits to enforce my access. You only have to look at Washington DC to see what lengths politicians will go to hide their thoughts and actions.

Now I am not accusing Jim Strickland of doing this. I know Jim and he is a good person. I think he is on the right path financially to right the Memphis ship. Finances are improving as long as he stays on basics and away from expensive new dream projects.

Now as to what the changes he has put in place. Basically he wants to control the message and he does not want the public and particularly the media to contact his people directly. Now the Tennessee Open Records Law has a section that says the following.

(2)  (A) All state, county and municipal records shall, at all times during business hours, which for public hospitals shall be during the business hours of their administrative offices, be open for personal inspection by any citizen of this state, and those in charge of the records shall not refuse such right of inspection to any citizen, unless otherwise provided by state law.

(a)  (1)  (A) As used in this part and title 8, chapter 4, part 6, “public record or records” or “state record or records” means all documents, papers, letters, maps, books, photographs, microfilms, electronic data processing files and output, films, sound recordings or other material, regardless of physical form or characteristics, made or received pursuant to law or ordinance or in connection with the transaction of official business by any governmental agency.

I have seen the best and the worst of transparency in government. My opinion is that the City of Memphis under Jim Strickland has improved from past administrations. Most of the information that I want is online such as pension, OPEB and CAFR financial reports. The main area needed is access to electronic communications such as emails, text messages and other forms of social media communications. Concerning emails and text messages I would propose a new protocol for the future.

As seen with the recent Germantown emails controversy, here is what I propose to solve the high cost of paying lawyers to redact open records requests for a series of emails.

My ANSWER to this redaction problem is a new email protocol that should be adopted by all bodies subject to the Tennessee Open Records Law. This new protocol would apply to all new emails and text messages. Under this protocol the body of the email or text message would be public information. If needed there would be two types of attachments to the basic email text. #1 attachment would be any data that is open to the public. #2 attachment would be any information that is specifically mentioned in the Tennessee open records law as not public information such as addresses, social security information, restricted medical information and exempted legal communications. Then when a request for emails comes in from the public, the requested emails could be easily sent without any #2 attachments containing redactable information. This would do away with the high priced lawyers reading through a bunch of emails. The creators of the emails would have to be trained in the new electronic communications protocol. No personal messages would be allowed on public paid for email services. A public transparency board should be created in each Tennessee County to periodically review randomly selected emails and text messages to insure compliance with the new protocol.

Let’s face it. Generally politicians hate open records and transparency and they will use the expense gambit to restrict public access to their records. I would appreciate your thoughts on my proposal for a new public records creation protocol. It seems to me a low cost answer to the “I have to hire a lawyer to redact those email requests” from local politicians. Transparency and open records comes from the top. Lack of transparency comes from the same place.

The Open Records Fight

Monday, July 25th, 2016

July 25, 2016

There was an interesting editorial in the Commercial Appeal last Sunday concerning Germantown open records and the battle with Jon Thompson and Sarah Wilkerson-Freeman in order to get information on Germantown government salary, insurance and other perks. Congratulations to Thompson and Freeman. I have been fighting this open records battle since 2004.

 

Recently I asked the MLGW for current electronic copies of their annual pension and OPEB reports. I asked by email. I received an electronic copy of an open records request form which I filled out and signed electronically and sent it in. I then received the following message.

 

“Good afternoon, your documents are available for pickup. You can come to the Administration building and the documents will be at the security station.” I then objected to this bureaucratic requirement and sent my objections to Mr. Thompson (MLGW), Mayor Strickland and many others. I eventually got the electronic copies that I asked for and you can now look at the MLGW pension report and the MLGW OPEB report at www.memphisshelbyinform.com.

 

Now the Tennessee Open Records law does not require furnishing electronic copies but governments with a fully open records policy will furnish the information in electronic format because it is cheaper and easier and nearly all data is already in electronic format. If they want to discourage open records requests they will require you to travel down to their office and pick it up at the security desk.

 

I like the MLGW and their utility services. Very professional. President Jerry Collins is a great manager and runs a well trained and effective company. I call on the MLGW to put this information (pensions and OPEB) on their website and keep it updated. I also ask them to publish a return on investment report for their smart meter program to show the public how this program will be paid for and the return on the rate payers’ investment.

Now as to the pension and OPEB reports. Shelby County published their annual pension and OPEB reports online. The City of Memphis and MLGW do not.

 

The MLGW pension fund has a net value of $1.32 billion and $118 million of unfunded liability.

 

The City of Memphis pension fund has a net value of $2 billion and $533 million of unfunded liability. The City of Memphis does not publish their annual pension report online.

 

The Shelby County pension fund has a net value of $1.1 billion and $316 million of unfunded liability.

 

The MLGW OPEB fund has a net value of $333 million and $461 million of unfunded liability.

 

The City of Memphis OPEB fund has a net value of $17 million and $730 million of unfunded liability. The City of Memphis does not publish their annual OPEB report online.

 

The Shelby County OPEB fund has a net value of $197 million and $101 million of unfunded liability.

 

The trouble spots are shown underlined above. Again Shelby County leads in local government in open records policy and fiscal responsibility. I urge you to let local governments know what information you think should be put on their website. What are your thoughts on transparency in government?

 

 

 

 

 

Who Is Responsible For The OPEB Debacle?

Monday, January 11th, 2016

January 11, 2016

Who Is Responsible For The OPEB Debacle?

The City of Memphis, The State of Tennessee and the active and retired employees of the OLD (no longer existing) Memphis City Schools woke up recently as there was a noise rattling around in the closet. When they opened the closet door out jumped the ghost of over $1 billion dollars of unfunded OPEB (other post employment benefits). (OPEB is the promise of furnishing retirees health care and life insurance at a highly subsidized rate without putting the money aside to pay for it).

Now everyone is saying the ghost doesn’t belong to me. Well here is the story which I have been pointing out for years.

Every politician has been ignoring the OPEB ghost for years. However some have been more responsible than others.

The most responsible people again have been Shelby County people, the old Shelby County School Board and the Shelby County Government. They recognized the problem after the 2007 GASB-45 (Government Accounting Standards Board) regulation. See the attached page showing the 2010 actions of the Board in reducing the unfunded OPEB liability from $548 million in 2007 to $242 million in 2009. They reduced the retiree benefit rules.

Now look at the old Memphis Board of Education report from 2010. They did nothing and the unfunded OPEB liability was $1.5 billion dollars. This is 6.3 times higher than the county but the active payroll of the city schools was only 2.5 times higher than the county school payroll.

Clearly the irresponsible parties are the Old Memphis City School Board, the Old Memphis School Administration and any politicians (City and County) who ignored the growing OPEB problem.

Now, how do we solve the unfunded promise? Unfortunately we have to do to the school system retirees what we had to do to the City of Memphis retirees and to a much lesser extent what the Old County School system had to do to their retirees in 2010. We have to cut their retiree health care benefits. Promises were made by elected people who should have known better or made regardless of knowing better and the chickens are coming home to roost.

A Year End Report Card From Joe Saino

Wednesday, December 30th, 2015

December 29, 2015

A Year End Report Card From Joe Saino

Looking back over more than 10 years of reporting on local government I have hope for the future of Memphis and Shelby County. My score card for the major local governments is as follows.

Shelby County Government- A

MLGW- B+

City of Memphis- C

Shelby County Schools- D

This is not a scientific scoring, just years of experience and dealings with these large government entities. Hopefully the City of Memphis will improve with the inauguration of our new Mayor, Jim Strickland. I have high expectations for him. Past problems at the City can be laid at the feet of past mayors and especially the voting majority of past City Councils. They refused to make the hard choices until the State of Tennessee came in with the fiscal bullwhip.

MLGW under Jerry Collins is well run and efficient. I could wish that they publish more information on their website like annual pension and OPEB reports so that customers do not have to ask for this information through an open records request.

Shelby County has a proven record of good management and is open and above board. Their record on pension and OPEB management compared to the City of Memphis and the old and new school boards has been outstanding.

The old Memphis School System and the new replacement Shelby County School System is a puzzle. The new school system at first looked like they wanted to enter the modern open records world but then when they had the chance; they closed the door on common sense requests. Then they filed a huge lawsuit against the state which is going to cost millions in legal fees and are also trying through the Tennessee School Board Association to charge the public a fee just for asking for access to public data and records. It is a puzzle. They are saying in effect “We know best how to educate your children, so shut up with your requests for information.”

Enough of my scorecard so here is some real data from recent pension reports that I obtained from Memphis, Shelby County and the MLGW.

Active employees:

MLGW                       2526

Memphis                  5756

County                      5208

Payroll of active employees:

MLGW                       $152 million

Memphis                  $340 million

County                      $243 million

Retirees and beneficiaries

MLGW                       2597 receiving an average of $38,601 annually

Memphis                  4239 receiving an average of $34,014 annually

County                      $3598 receiving an average of $19,914 annually

Those disabled

MLGW                       33 receiving a total of $491,000 annually

Memphis                   653 receiving $17,370,000 annually

County                      72 receiving $1,506,240 annually

Need I say more? The problem at the City of Memphis is obvious. We need to change the pension board makeup and go to the County disability system.

Any questions?

Oh No, A Water Rate Increase

Tuesday, November 24th, 2015

November 24, 2015

Oh No, A Water Rate Increase

As a former MLGW board member, I have a history of praising and criticizing the Division. I follow and read the Division’s annual financial reports. The latest report is for the calendar year 2014 which ended December 31, 2014. The 2015 year report will not be out until well into 2016. However I am sure the Division knows what will be in the report.

Division President Jerry Collins went before the City Council to ask for a 22% water rate increase. He said that the rate increase is necessary to keep the water division from recording its second straight year of negative net income at the end of 2016. A state board is required by state law to step in and set rates after two straight years of negative net income. He said the board has consistently favored higher rates, including a 42 percent increase in Bartlett’s rates.

I have looked at the past financial reports and the Water Division has had a very slim margin (changes to net assets) in 2013 and 2014. Apparently they know that 2015 they are going to show a decrease in net assets (a loss) and without an increase they will lose more in 2016 due to losing a large customer, Cargill Corn Mill. Two years of losses would bring in the state board to dictate an increase in water rates according to state law.

The usual suspects on the City Council refuse to study the facts as they demonize the Division as heartless and cruel. Facts do not make any difference to them as they play to their voting base. Another fact is that the Water Division has been paying $2.5 million dollars per year due to the City Council agreement to finance the FedEx arena. The agreement is effective through the year 2028. During 2014 the Water Division was authorized and directed by City Council, per City resolutions, to make an additional annual $1.9 million transfer payment each year through fiscal year 2017. Transfer payments to the City for 2013 as compared to 2012 increased due to a City resolution authorizing and directing an additional payment of $1.8 million in exchange for the release of any rights the City may have had to receive water from the Water Division free of charge during 2013 under the MLGW Charter.

The MLGW has a history of being fiscally responsible and being run mostly by professional management. Their employees are well trained and do a tough job. However the City Council would be well advised to look in to areas such as MLGW’s OPEB program. They should bring their rules concerning the cost and availability of retirees and their spouces health care to match the same rules as Shelby County Government retirees. Shelby County has these rules in effect since 2007. The MLGW pension and OPEB funds are in good shape due to funds paid for by MLGW’s customers’ utility rates. Compare their pension and OPEB funds to those at the City paid for by property, sales and other taxes.

As a final note I have been informed by President Collins concerning Sewer Rate Fees. “Sewer fees are governed by Public Works. To the best of my knowledge Public Works is not planning a sewer fee increase.” MLGW is just used as a collection agency for 1) Sewer Charge, 2)Solid Waste Fee, 3)Mosquito/Rodent Control Fee and 4) Storm Water Fee.

 

 

 

Pilot Promises! Are They True?

Monday, August 17th, 2015

August 17, 2015

Pilot Promises! Are They True?

There was an editorial in the CA August 16th about Pilots and attached tax breaks. This is a subject that is up for discussion and debate. On one side is EDGE (economic development growth engine) led by Reid Dulberger. On the other side is many of the local unions and other groups who wonder where is the promised benefits of EDGE’s website.

If you look at EDGE’s website you will see $711 million dollars in projected new tax revenue. WOW!! Boy do we need that. No future pension and retiree health care problems. We are on easy street.

But looking back on City and County revenues for many years I don’t see any such massive flow. Revenue just seems flat but with some inflation increases.

What we have here is a lack of facts. Here are some problems and suggestions that I would suggest could shine some light on the PILOT discussion.

If you look at Shelby County Trustee website (currently under David Lenoir) you will see a list of annual County Pilot reports. In those reports is a section entitled Contracts Aged by Expiration Date.  This section shows how much the property should pay in Shelby County property taxes and how much they are in fact paying under the Pilot reduction.

In order for the public to have some basis for confidence in the pilot program, some entity should look back at the expiration date of each pilot and determine if after the pilot expired, did the property pay the full amount in the future or did they get an extension, a reduction, or did they leave town or whatever.  This does not sound too hard but it is beyond my resources.

Another problem is that the City Treasurer (the City equivalent of the County Trustee) does not publish a similar report. We are talking millions and millions of dollars in abated taxes. Once the pilot expires, are we getting the full amount or not? I say Prove it.

Joe Saino 901-7540699

Let’s Take a Look At OPEB, Retiree Health Care Costs!

Tuesday, July 28th, 2015

Let’s Take a Look At OPEB, Retiree Health Care Costs!

July 28, 2015

Yesterday there was an article in the Wall Street Journal entitled “Relief for Cities’ Budget-Busting Health-Care Costs”. It talked about new accounting rules for retiree health care plans. Nationwide the total unfunded liability is close to $1 trillion dollars.

For the first time the Government Accounting Standards Board (GASB) will require local government to report their obligations to retirees as liabilities on their balance sheet. (Side Note: The Federal Government wants cities to report this but the federal government continues to ignore their multiple front unfunded liability.)

So I decided to take a look at Memphis, Shelby County, Shelby County Schools and Nashville.

Unfunded Liability for OPEB, 7/1/2014

Memphis                                          $716 million

Shelby County                                 $243 million

Shelby County Schools                 $1.43 billion

Nashville Metro                              $2.03 billion (including metro schools)

The striking thing about this is that the only adult in the above group is the Shelby County government. There was a warning back in 2007 from the GASB about unfunded OPEB liability and Shelby County took action and forced retirees over 65 who were eligible (or their spouse was eligible) to use Medicare as the primary payer with a County supplementary plan as the backup. They required those retirees under the age of 65 without a Medicare eligible spouse to pay a higher health care premium based on years of service. The City and apparently Nashville did nothing. This led to the above huge numbers.

The City of Memphis finally took action which has led to the current turmoil among the retirees and the unions. The school system and Nashville are finally facing their fate and will be required to make hard choices. I call on the City of Memphis to not go back on their late hard choices on retiree health care costs and go forward with their adopted but late difficult decision.