ALEC assault on Nevada PERS: AB 190

AB 190 AB 190 is hitting the light of day [ltn] – and for those advocates of middle class financial security and adequate pensions for former public employees this bill needs to go back down into its pit.  This bill is a bit of ALEC dreamland:

“…relating to public employees’ retirement; providing for the establishment of a hybrid retirement program for certain public employees; requiring the program to include a defined benefit plan and a defined contribution plan; setting forth the required provisions of each plan; requiring certain public employers under certain circumstances to make additional contributions to the Public Employees’ Retirement System to reduce the unfunded liability of the System;…[ NVLeg]

The Hybrid From Hell

This portion of the bill would create a system similar to the one enacted in Utah, and promoted by ALEC in its “State Solutions for Government Pension Reform.” [ALEC pdf] *See Utah Reform, page 18.

There are a couple of crucial point embedded in the ALEC publication.  First is the notion that defined benefit plans are a “problem.”  It doesn’t matter the fiscal state of the pension benefits program – if it isn’t about to send the state into bankruptcy, there are ways to massage the statistics in order to make it appear the state has a monstrous unfunded liability.   Funding from the Koch Brothers partially funds the NPRI’s conclusion that there is a $41 billion current liability.  And, gee whiz – wouldn’t you have guessed it? – they recommend a Utah style hybrid public pension program. *See DB 12/9/14.

Before grabbing the children and heading for the hills in a panic – consider the possibility that we can make the unfunded liability number really big by reducing the advance funding factors.  Translation, if I were to total up the liability for every public employee, working and retired,  and treat it as if it were all going to be paid out tomorrow morning, the number would be really  big – and really misleading and  inaccurate.

What we need to focus on is how well the program deals with liabilities over time.  So, when AonHewitt did an independent review of the NV PERS system what did it find?

“AonHewitt found that NV PERS “funding levels and the discount rates were not uncommon, where NV PERS differs from others is in its Funding Policy and contribution rules which provide much better than average protection, when compared to similar systems. Continued review and comparisons of costs and benefits with other large plans, actuarial audits, and consistent updating of the Funding Policy facilitates NVPERS ability to remain among the best run large public systems.”  [AonHewitt pdf]

Sorry, privatizers and financialists, there really is no reason to adopt any major changes in the current define benefit plan in Nevada because, as the independent comparative review discerned, Nevada doesn’t have the problems associated with other large pension systems in some other states.

There’s Gold In Those Hills (for Someone)

Thus far, ultra-right organizations such as ALEC and associated think tanks like the NPRI have been beating their drums and issuing reports to friendly news outlets about the Problem – which doesn’t exist in Nevada, in the hopes of promoting ALEC’s agenda that brings us to the second major point of the issue:

ALEC, et. al., want to promote defined contribution plans because there’s money to be made.

“On the private side – Continue to tell workers that they’ll be better off with their “economic freedom” (in a defined contribution plan) to finance their own retirement plans with “flexibility,” and they can use their money as they want – just make the management fee structure so complicated it takes a degree in Finance to figure it out, and then operate on the happy assumption that the financial professional’s first duty is to his own firm’s bottom line not with a specific obligation to cover the future retiree’s bottom.   Give us your money, pay us the fees, and just trust us!  Go quietly, and no one will get hurt?” [DB]

AB 190 is a classic assault on a perfectly good public retirement system which is NOT generating an unwieldy unfunded liability.  If the ultimate purpose isn’t to retain the best features of the current system, but to replace it with defined contributions in the future, then the other motive which springs to mind is that the financialists among us have been ogling the coffers of public employee retirement systems and want very much to dip into them up to at least their elbows, if not their shoulders.

What the advocates of AB 190 want to do is fairly easy to see – ultimately hand over wads of money from the public employees retirement funds to wealth management firms who will exact their fees and transactional costs with less public scrutiny than is required in a publicly managed retirement system.  What could possibly go wrong?

Golden Years or Fleeced Sheep?

Not sure this is the case? Then look at the provision in the bill in which individual trust accounts are inserted. [NV Leg pdf Section 4]  Let’s review two problems associated with the individual trust accounts.  First, how many people have the financial training, experience, or acumen to manage their own trust accounts?   The obvious answer is – not many.

In this instance a newly hired heavy equipment operator for NDOT might be given his “freedom” to establish an individual retirement trust account.  This freedom has a price tag.  There will be transactional and management fees associated with this account. There will be transactional decisions made about the portfolio and contents of the account.  If the basis for the transactional decisions is “proprietary” information within the wealth management firm handling the account, then how is the NDOT employee to determine if the transactions were made in his or her best interests?

This brings us to the second problem, not only do many public employees (or other regular folks for that matter) lack the financial expertise to track their own individual retirement trust accounts, but if the system isn’t very carefully structured, and the contracts exceedingly open – the employee may not be able to find out how and why investment decisions were made on his or her behalf.  However, the wealth management firms will be delighted.

Half of the Research is false, ergo Half the Products are false

If these two problems aren’t enough to may a person queasy, there’s one more issue to explore.  Financial firms are happy to inform investors that their investment decisions are based on empirical research.  Sounds nice, doesn’t it?  Wait.  Evaluating trading strategies has proven to be a mare’s nest of research forms, leading the Journal of Portfolio Management to report that,  “Most of the empirical research in finance, whether published in academic journals or put into production as an active trading strategy by an investment manager, is likely false. This implies that half the financial products (promising outperformance) that companies are selling to clients are false.” [Economist]

Do the advocates of AB 190 comprehend what the JPM author’s are saying when they conclude that:

“In summary, the message of our research is simple. Researchers in finance, whether practitioners or academics, need to realize that they will find seemingly successful trading strategies by chance. We can no longer use the traditional tools of statistical analysis that assume that no one has looked at the data before and there is only a single strategy tried. A multiple-testing framework offers help in reducing the number of false strategies adapted by firms. Two sigma is no longer an appropriate benchmark for evaluating trading strategies.” [JPM]

Let’s translate:  If there is a 50-50 chance that the research is wrong, then there’s a 50-50 chance the financial product sold on the basis of that research will be falsely assumed to be a good product to put in a retirement portfolio.   How is our NDOT equipment operator, our public school teacher, our firefighter, our police officer, our assistant county administrator, our receptionist in the Department of Education, supposed to track his or her retirement account IF the research isn’t made available, and if it is, it might very well be inaccurate?

We might revert to the previous advice from the management firm – give us your money, don’t ask too many questions, go quietly, and no one will get hurt – in this firm. You, might be another matter.

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One Cost Benefit Analysis the Right Doesn’t Want to See: Gun Injury and Fatality Costs

Guns Costs

As of 2013, Nevada retained its position as a state with a higher than the national average ranking in the death by firearm category. [vpc] The number was 14.16 per 100,000.  The correlations are almost straight-forward, those states with lax gun laws and high rates of gun ownership have higher levels of per capita deaths caused by firearms.  However, this dismal ranking (15th) is not sufficiently lax to give comfort to the gun proliferation movement (read: NRA) and its allies in the Nevada Legislature. [LVRJ]

Perhaps it’s about time for an application of the popular “cost-benefit” analysis to Nevada’s gun laws?  For example, we have AB 148 which would allow a person to carry a firearm in airports (non-secure areas), schools, and day care centers.  And, IF there is money available a local sheriff may offer firearm safety classes pertaining to the use of guns in an “educational environment.”   There’s SB 175, which was initially drafted to prevent domestic abusers from retaining their firearms while protection orders were in place. The bill is now laden with reciprocity provisions, and an expansion of ‘stand your ground,’ and fails to adequately address the issue of victims of domestic violence.  But, the proliferators like it.

These bills, and the handful of other measures on offer in the Nevada Legislature should take into consideration what gun deaths and injuries actually COST.

The national cost has been estimated:

“Each injury caused by a firearm sets in motion a prolonged series of events. There’s a car-ride to the emergency room…or the morgue. An officer investigates. A jury perhaps deliberates. A judge presides.

This chain adds up. To the sum of $564 per American. All told, firearm injuries cost the United States more than $174 billion in 2010, according to new data from the Pacific Institute for Research and Evaluation. Most of that expense came from deaths; fatalities accounted for $153.3 billion.” [Forbes]

As we consider a cost-benefit analysis for bills which seek to soften Nevada’s gun regulations there are some factors which must be included.  Opponents of common sense gun regulations attacked the study, and accused media outlets which gave space and time for it as “hyping” the anti-gun report. However, that still doesn’t mean we ought not consider both the governmental and person costs of gun violence.  For example, in the governmental category we ought to include costs associated with police activities, and  the associated costs for the criminal justice system.  In economic terms we need to consider the loss of work/productivity, medical care (both physical and mental)  and associated costs such as emergency transport, insurance claims processing, and the loss of income for the family of the victim. [see PIRE pdf]

In short, any legislation which makes the purchase of firearms easier, and seeks to proliferate the number of firearms in the state, or increases the likelihood of a gun being used in public spaces,  should be analyzed in terms of its potential costs to the taxpayers and businesses of the state.

For every gun fatality in the state there is a police call. For every police call there is “officer(s) time,” vehicle fuel, vehicle mileage depreciation, and the attendant costs of emergency medical services including their personnel time, management, vehicle fuel and use, and supply expenses.  Every time the legislature makes it more likely a gun injury or fatality may occur the tax payers are expected to pick up the tab for additional calls.

For every gun fatality there is a trip to the morgue, the autopsy, the report, and the assessment of criminality.  Which means, of course, that there are expenses involved for the transportation involved, the supplies and equipment, the production of the report, and personnel costs.  Again, every time the legislature makes it more likely there will be a fatality – the tax payer is on the hook for the costs.

For every gun fatality there are economic costs.  The most obvious is the loss of the victim’s income.  That is money the family cannot spend on housing, food, transportation, clothing, and other basics in the local economy.  What we might not think of quite so often are costs to the employer.  For example, the individual’s productivity, often associated with years of experience and training, is lost to the business owner.  The business owner is now required to shell out the costs of recruiting a replacement, and the costs of training a new employee.   In the interim, work schedules have to be adjusted, shifts expanded, over-time to cover shifts paid out, and all the other expensive inconveniences which accrue to the employee replacement process.  The cost of training alone should give some of the members of the legislature pause:

“The costs to replace an employee vary by their earning level, so training costs also vary. The Sasha Corporation averaged the results of 15 studies that determined average costs to replace an $8 per hour employee, determining an average cost of $9,444.47 per turnover. Even when the 33 percent of estimates with the highest prices were removed from calculations, replacement costs were $5,505.80 per turnover. Chartcourse estimates it costs $40,000 on average to replace a nurse, while technology companies can run up replacement costs of more than $125,000 per vacancy.” [HBC]

If the average cost to replace a nearly minimum wage employee ranges from $5,050 to $9,500 any action on the part of the legislature to make a replacement necessary because of a gun related fatality or disabling injury should be taken into consideration.  Those who consider themselves champions of small business should be especially careful about any legislation which would pass these kinds of costs on to their constituents. 

We seem to be happy to require “cost-benefit” analysis for regulations pertaining to clean air and water – why not apply the analysis to regulations which make guns more available to more people?  The numbers support this:

“People of all age groups are significantly more likely to die from unintentional firearm injuries when they live in states with more guns, relative to states with fewer guns. On average, states with the highest gun levels had nine times the rate of unintentional firearms deaths compared to states with the lowest gun levels.” [LCPGV]

If the legislature wants to make guns easier to procure and more conveniently at hand, then it behooves them to apply some thought to the costs of intentional and unintentional fatalities and disabling injuries in economic terms.  

The Proliferation Lobby asserts that more ‘concealed carry guns’ mean safer communities.  By extension, we might assume this means there will be fewer gun fatalities?  However, if we look at the numbers for the status of concealed carry individuals involved in fatal shootings the numbers aren’t supportive of the argument from 2003 to the present:

“…544 incidents in 36 states and the District of Columbia resulting in 722 deaths. In 84 percent of the incidents (455) the concealed carry killer committed suicide (218), has already been convicted (177), perpetrated a murder-suicide (44), or was killed in the incident (16). Of the 69 cases still pending, the vast majority (60) of concealed carry killers have been charged with criminal homicide, four were deemed incompetent to stand trial, and five incidents are still under investigation. An additional 20 incidents were fatal unintentional shootings involving the gun of the concealed handgun permit holder. At least 17 of the victims were law enforcement officers. Twenty-eight of the incidents were mass shootings, resulting in the deaths of 136 victims.” [vpc]

A cost benefit analysis should incorporate the expenses involved in the suicides of concealed carry permit holders, the costs of murder-suicides, and the costs associated with police involvement in both intentional and unintentional shootings.

Let’s review.  More guns equates to more fatalities.  More fatalities bring with them costs both to local and state government agencies and to the local economy.  Merely because an individual has a concealed carry permit doesn’t mean the individual won’t be involved in an intentional or unintentional tragedy – with associated expenses.   Ergo, it is incumbent on a state legislature to attend to the governmental and economic costs of gun proliferation and associated fatalities and disabling injuries.

Since the costs are significant, there’s an argument to be made that before any legislation which seeks to proliferate the acquisition or availability of firearms is considered a good old fashioned cost benefit analysis needs to be done.

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Everybody Wants to Bargain: Nevada’s SB 158

gridlock

The intent of SB 158, currently being discussed in the Nevada Assembled Wisdom, is relatively apparent – make the provisions of collective bargaining agreements between local governments and teachers, firefighters, police and law enforcement personnel, etc. publicly available 10 days prior to the meeting during which the agreement is to be voted upon.

If I’m reading the current law correctly, such agreements must be part of a public meeting agenda, duly posted, and subject to all the rigmarole associated therewith.  A copy of the “supporting material” available to the board or commission is also to be made available to the public. [NRS 288.153].  So, why SB 158?  Time.  From three working days prior to the hearing to “ten days before the date of the hearing.”

Superficially speaking this might allow for more time for public commentary and consideration of the agreement or master contract.  Realistically speaking, there are very few interest groups which are enamored of plowing  through contractual language and financials – the negotiating committees from labor and management, and the “anti-government” organizations which delight in microscopically examining supporting materials for clues to how “over-time is being abused,” or how “teachers are overpaid and underworked.”

SB 158 clearly gives the latter a few extra days to gather opponents of the collectively agreed upon contract prior to the hearing.  School Board members and County Commissioners already know the contents – they’ve been scrutinizing them throughout the bargaining process.  Members of union negotiation committees already know the contents – they, too, have been engaged in the same proposal, counter-proposal, amended proposal, process as their counterparts across the table.

The object is always that the employer (Commission or Board) will give the most they can without jeopardizing the priorities of the government entity, and the employees’ representatives will accept as little as they can without having to face a truly unpleasant mass meeting session with their membership.  The bargaining process itself can be competitive without being combative.  When things get combative there are ways out of the bind – mediation and arbitration.  And, herein lies the problem with SB 158.

Let’s assume that both sides in a bargaining agreement between, say. the Firefighters and the City have been negotiating in good faith.  The city has been forthcoming about its revenue projections, and the firefighters have been rational in their wage breakdowns.   They discussed hours and working conditions along with other related matters in a rational way.  They’ve avoided mediation and arbitration processes by agreeing to a collectively bargained contract. Now, we come to the question – why do opponents of the agreement need those extra days to round up their forces prior to the meeting?

  • Is it that the opponents of the agreement don’t trust the negotiating team from the city, district, or county?
  • Is it that the opponents of the agreement want to scuttle any deal which includes a modification of hours, adjustments in working conditions, or increases in pay?
  • If the negotiations hit a hard patch, and mediation or arbitration has adjusted the proposed agreement, then do the opponents want to scuttle the decision of the mediator or arbiter?

If the “scuttle strategy” is in place and the anti-government types want extra time for their media releases, press conferences, and the like, then what we have is an instance of obstruction at a key moment – a moment in which the intentions of both sides (both labor and management) are questioned and if the strategy is successful they’re both back at the bargaining table – and not where they want to be, which is home for a nice evening with the families.  In other, less delicate terms, Gridlock.

Public employee union representatives and members of school boards, city councils, and county commissions have donated countless hours of their own time to bargain these agreements.  They’ve authored proposals, revised them, spoken to them, adjusted them, and agreed upon compromise positions, usually on their own time and their own resources.  In this they should be praised – and should not be subjected to more organized (often professional) opposition which seeks to shoot down their efforts with shots below their Plimpsol Lines.

The burden of proof is on the proponents of SB 158 to demonstrate that the posting and publication of materials associated with the bargaining efforts of labor and management in the public arena, must allow for extra days for the processing and analysis of those materials – and NOT merely more time for the professional nay-sayers to advance their own narrow agendas.

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Filling in the Potholes: Highway Funding Options

NV road construction funds

The Nevada Department of Transportation lists 13 current projects [NDOT] and the planning division suggests another round of major projects running from 2015 to 2018. [NDOT pdf]  This makes sense given that the population of Nevada in 1990 was 1.221 million, the population was 2.019 in 2000, and the population grew to an estimated 2.839 million as of 2014.  The problem, of course, is how to pay for the construction and maintenance of roads and highways to meet escalating population demands.  The current financial resources are explained by NDOT:

“State highways maintained by the Nevada Department of Transportation are financed with dedicated highway-user revenue and federal funds. No General Fund (general tax) revenue is used. State and federal highway funds are principally derived from vehicle fuel tax and registration fees.” [NDOT]

Clark and Washoe counties index their taxes to the price of fuel, a ballot measure in 2016 would make such indexing statewide, and this should be considered in the light of two factors. First, the relative volatility of fuel prices, and second, the increasing population of the State, up 132% since 1990. [LVSun]  So, where does the money come from?

“Figures compiled by The Associated Press show the total amount of money available to states from the Federal Highway Trust Fund has declined 3.5 percent during the five-year period ending in 2013, the latest year for which numbers were available. During that span, the amount of inflation-adjusted federal highway money dropped in all states except Alaska and New York.

In Nevada, the 6 percent drop from 2008 to 2013 comes in spite of a 41 percent increase from 2003 to 2013. At the same time, needs in Nevada are mounting. Current funding levels only provide 60 to 70 percent of what’s needed to maintain state highways, according to a recent report card from the American Society of Civil Engineers.” [LVSun]

The idea that current funding levels from both state and federal sources only meets 60 – 70% of our needs isn’t an appealing thought.  Could it be that the state might see more assistance from Federal sources?

“A temporary funding patch on highway funding is scheduled to expire in May and lawmakers in Congress have been at odds over a long-term plan. A federal fuel tax increase appears unlikely.” [LVSun]

We should note that the last time the Federal gasoline tax was increased was in 1993, when it was raised to 18.4 cents per gallon. [WaPo]  That was when the population of Nevada stood at approximately 1.411 million, and the price of a gallon of gasoline was about $1.16/gallon. Nevada’s state gasoline tax was 24 cents in 1993 and has dropped to 23.804 (-0.2%) as of 2014. [TPC pdf]

One of the obvious problems with pegging highway construction and maintenance financing to the price of a gallon of gas is that more fuel efficient cars on the road means fewer trips to the pump.  Another factor to consider is the increasing use of public transportation.  Indeed, in spite of the drop in fuel prices recently, national transit ridership figures are up. [NYT]  While increasing revenues from higher gasoline taxes would help resolve some immediate funding issues, the source is less robust than we might need in the long run.

As noted previously, AB 21 introduced in the Nevada Legislature as of December 20, 2014, calls for the issuance of ‘special obligation bonds’ for the financing of highway projects. Specifically, it allows for extending the maximum maturity from 20 to 30 years.  This, too, is problematic.  The extra ten years may allow for an extension of repayment schedules, but it also allows for the piling up of interest.  If the “coupon” on a transportation related bond is approximately 4.0% [MuniNV] then that extra 10 years could be rather expensive.

At compound interest rates, $10 million would end up costing about $21 million in 20 years, or about $32.4 million in 30 years. [MC] Even simple interest rates would add $8 million to the cost of a $10 million project at 20 years, and $12 million in 30.

There’s always the Throw Up Your Hands and Let Someone Else Do It Solution, i.e. Privatization.

“Another idea tossed around in the Legislature is high occupancy transit lanes — better known as toll roads. The fast lanes, aimed at reducing congestion, could be financed by a private company, which would own the lane and keep the toll revenue for a set period of time.

“We’re going to look to private industry to help us with some of our issues,” said Republican Assemblyman Jim Wheeler, who chairs the Assembly Transportation Committee.” [LVSun]

This, too, comes with some significant costs.  A few of these can be categorized under the general heading of “public control.” For example, how can taxpayers be assured of the implications of “non-compete” clauses? Must adjacent municipalities add traffic lights and decrease speed limits in order to guarantee usage rates (i.e. toll revenues) for privatized roadways or access lanes?  Is the state required to agree to compensation clauses which demand that the state pay the investors if it adds an exit ramp or other fixture which might reduce toll revenues?  What of the effects of clauses which seek to divert traffic to the toll lanes or roads? For example, if a state were to contract with a private corporation for a toll road it might agree to 4.5% of the revenue if the speed limit were set at 45 mph, or 9% if it agreed to set the limit at 60 mph?  What implications might that have for public safety and general transportation policy? [PIRG pdf]

There’s also the old business adage to consider: You can’t control what you don’t own.  This leads to more questions.  Does the contract require that the private corporation adopt the best practices and most modern maintenance standards?  Will the state get what it is due?  Again, if the contract is for 99 years and the investors are assured they’ll get their returns in 20, then is the state actually losing money on the deal?  When speaking of long term contracts, it’s also important to consider how long the contract should last.  It’s not only difficult to value projects over a 50 year period, it’s also a iffy proposition to determine if that 50 years is too much to give away to private corporations. [PIRG pdf]

Sometimes, getting things done “on the cheap” can lead to more problems than the initial ‘solution’ intended.

There are other ideas we might want to consider:

#1. Take some of the pressure off the road/highway system by improving options for public transit.  If congestion is causing havoc in some urban areas, consider light rail or bus transport to ease the problems.  Some consideration might be given to comparative costs involved in installing options from funding sources other than the highway funds, and providing the public with transit choices other than using private cars. This could be especially useful in crowded urban areas.

#2. Give some consideration to options other than in 10 year intervals for special obligation bonds. If the costs are increased with a 20 year bond, then they’d be less at 25 than they would be at 30.

#3.  Consider the current structure of Nevada’s vehicle registration fees, some of which are earmarked for transportation needs. 

There are no magic solutions, no silver bullets, when it comes to addressing public infrastructure projects like roads and highways.  What is needed is some careful study of the implications of transportation policy with an eye towards Nevada’s future population trends, projected revenues, and estimated capacity to pay for long term projects.

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Filed under gasoline prices, highways, Infrastructure, Nevada economy, Nevada politics

The NRA race to the bottom: Reciprocity

 Guns ab 175 Here’s an important point: “Nevada now has reciprocity with only 16 states that have requirements equal to or greater than those required in Nevada, including live-fire training.” [LVRJ]

Here’s another: “The proposal is contained in SB175 and Senate Bill 171, which was also heard by the Senate panel. It was also the focus of Assembly Bill 139 heard in the Assembly Judiciary Committee earlier in the day. […] All three measures would require Nevada to recognize concealed carry permits issued by all states.” [LVRJ]

Now, here’s something to consider from one of those ‘other’ states: “SB 347 (West Virginia) “this permitless carry legislation, introduced by state Senator Dave Sypolt (R-14), would recognize your right to legally carry a concealed firearm without the burdensome requirement of having to obtain a costly and time-restrictive Concealed Handgun License (CHL).” [NRA]

Under the provisions suggested by Republicans in the Nevada Legislature, if West Virginia enacts “permitless carry” legislation then Nevada would be obligated to grant reciprocity?

In Kansas, the GOP controlled State Senate has just approved SB 45, also a “permitless carry” bill. [Kan.Com]  Should this legislation be finalized does Nevada have to grant reciprocity under the terms of the revisions suggested as “reforms?”

There are reasons for those “burdensome requirements.”  One of which is that some time is necessary to determine if a person is a convicted felon before issuing a concealed carry permit.  Under Nevada Statutes a person must not be an undocumented foreigner, a convicted felon, a juvenile without parental supervision, or an adjudged mentally ill individual in order to purchase a firearm.  Wouldn’t it make sense to allow local authorities and responsible gun dealers to have some time to make the necessary checks?

Yes, it’s “inconvenient” to have to follow state and local regulations concerning firearms and how they might be concealed – but does Nevada need to stoop to the lowest common denominator in terms of reciprocity?

Another common sense reason to restrict concealed carry permits is that some states, Arizona for example, do not require live fire training.  Just buy the gun, stash it in your pocket or purse, and off you go.  Somehow, the explanation, “Well, the clerk at the hardware store showed me how to shoot it,” doesn’t leave me feeling all that safe in terms of the capacity of my fellow human beings to know how such a firearm should be handled.  The recent tragic story of the Michigan lady who killed herself while adjusting her bra holster comes to mind. [NYDN]

Nevada doesn’t need to produce any more stories like that one.  We also don’t need to add to the grim statistics which report at least 722 non-self defense gunshot fatalities in the U.S. since 2007.

“More gravely, the study found that the fatalities included 17 law enforcement officers shot by people with legal permits along with 705 slain civilians. […] In studying the 544 shootings, the center found 177 cases where people with gun licenses were ultimately convicted of crimes, including homicides, and 218 cases where the permit holder used the gun to commit suicide. There were 44 total lives taken by licensed individuals who first murdered others, then committed suicide.” [NYT]

If we are speaking of “public safety” then we ought to consider how to better protect our law enforcement officers and prevent suicides. As with any legislation, AB 171 and AB 175 should be heard – but as with suggestions that we’d all be safer if more people – no matter how ill trained – should be wandering about in public places with concealed firearms once heard should be enough.

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Pistol Packing Mama’s Baking Soda Solution

Fiore 2

The Wisdom of Michele Fiore (R-NV Assembly 4) might be amusing if (1) it stayed within the boundaries of the Silver State as an inside joke, or (2) if much of it was within the realm of reality.  Neither appears to be the case.

Think Progress has picked up the latest Fiore Story, as has MSNBC.  Thus much for keeping the story to ourselves.

However, there’s more to this adventure into an alternate reality.  First, the suggestion that campus rape might be prevented if the “hot little girls” were packing pistols in their purses ignores some valid questions.

First question, if all the girls are allowed to carry firearms on campus, would that not also apply to the men – the potential predators stalking the “hot little girls?” And, if this is the case then what we have is a formula for escalating violence not necessarily prevention.  Secondly, the incidence of rape among college women is far below that for non-college females. Ergo, while any rape isn’t acceptable the fact that college women aren’t carrying firearms doesn’t put them at necessarily greater risk.  Third, there’s the incapacitation factor.  Campus rapes tend to be associated with physical restraint, and/or voluntary or involuntary intoxication.  The gun in the purse under these circumstances probably wouldn’t be an option. [USAT]

Secondly, there’s the long debunked cancer treatment advice.  “If you have cancer, which I believe is a fungus, and we can put a pic line into your body and we’re flushing with, say, salt water, sodium cardonate through that line and flushing out the fungus. These are some procedures that are not FDA-approved in America that are very inexpensive, cost-effective.” [Ralston]

The American Cancer Society’s position is crystal clear on this matter:

“No peer-reviewed articles in medical journals were found to support the theory that cancer is caused by a fungus infection or a yeast infection. Available peer-reviewed medical journals do not support claims that sodium bicarbonate works as a cancer treatment in humans.”

So, where did the baking soda idea come from? Assuming Fiore meant “sodium bicarbonate.”

“The main proponent of sodium bicarbonate as an alternative cancer treatment is Tullio Simoncini, MD. Information on the Internet describes how Dr. Simoncini concluded that cancer is caused by Candida albicans and can be cured with baking soda. The sequence of events and timeline are not described in detail.

According to the Cancer Treatment Watch website, “[Dr. Simoncini] has been using unsubstantiated cancer treatments for 15 years… in 2003, his [Italian] license to practice medicine was withdrawn, and in 2006 he was convicted by an Italian judge for wrongful death and swindling… [ACS]

Now we have the specter of a bill introduced into our Assembled Wisdom promoting “alternative” treatments such as one practiced by a defrocked Italian doctor who’s been convicted of wrongful death and swindling.

Perhaps we can only hope (1) that Assemblywoman Fiore manages to stay out of the media spotlight long enough for us to catch our breath before the next foray into insanity, and (2) her health and welfare advice is ignored long enough to prevent escalating violence on campuses, and to prevent cancer patients from suffering the fraudulent attentions of defrocked quacks.

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How NOT to finance public works: The Capital Appreciation Bond Saga

Capital appreciation bonds God help school board members. They don’t get paid for their service, and they certainly aren’t compensated for the bombastic late night calls from irate parents when Little Fauntleroy isn’t selected for the lead in the annual 5th grade play.  That said, let’s explore one more reason for them to go gray while doing their civic duty: Swimming with Financial Sharks.

In late 2012 the Los Angeles Times reported that approximately 200 California school districts and community colleges had been talked into Capital Appreciation Bonds which promised to mitigate the problems associated with financing school construction costs. So, what could go wrong?

“CABs, as the bonds are known, allow schools to borrow large sums without violating state or locally imposed caps on property taxes, at least in the short term. But the lengthy delays in repayment increase interest expenses, in some cases to as much as 10 or 20 times the amount borrowed.”

Only, it wasn’t 10 or 20 times the amount borrowed – given the $500 billion borrowed could turn into $2 trillion in future repayments.

“Wall Street exploited the school boards’ lack of business acumen and proposed the bonds as blank checks written against taxpayers’ pocketbooks. One school administrator described a Wall Street meeting to discuss the system as like “swimming with the big sharks.”

Wall Street has preyed on these school boards because of the millions of dollars in commissions. Banks, financial advisers and credit rating firms have billed California public entities almost $400 million since 2007. Lockyer described this as “part of the ‘new’ Wall Street,” which “has done this kind of thing on the private investor side for years, then the housing market and now its public entities.” [SF.com]

This was lucrative business for such firms as Piper Jaffray, which pocketed some  $31.4 million in fees for brokering 165 CAB deals, or for Goldman Sachs which earned $1.6 million for a single deal in San Diego. [SF.com]

The argument in favor of Capital Appreciation Bonds is deceptively simple.  Most bond issues have steady repayment schedules and are limited to 30 years or less.   Capital Appreciation Bonds assume that the asset will appreciate in value or generate revenue for longer than 30 years or less – so, why not spread out the repayment schedule over a longer period? Here’s why, and here are two things to watch as the sharks circle:

(1) Watch for interestingly engineered estimates of future revenues.  If you are looking at property values that are expected to increase exponentially, then imagine the shark grin facing in your direction.  “Gee,” sayeth the Shark, “The recession can’t last forever, and property values will increase. Therefore, why not spread your borrowing costs over a longer period when you’ll be generating larger incomes?”

(2) Watch for the piling up of fees and interest.  Yes, the repayment schedules were such that school districts in California could construct gyms, classrooms, and other facilities that couldn’t get past voter disapproval of bond issues – but as with all loans the longer the repayment schedule the more interest will be paid. For example, the Savanna School District (Anaheim) took on $239,721 in CAB obligations in 2009 on which it will pay approximately $3.6 million by the 2034 maturity date. [Alter]  There are, unfortunately, other examples in Orange County, CA:

“Over the next 40 years, these bonds are projected to cost districts $2 billion as they repay them at rates of 1.1 times to 15 times the principal, according to figures provided by the state treasurer’s office. Conventional bonds typically carry a 2-to-1 or 3-to-1 debt ratio.” [OCR]

It’s entirely possible to call for more infrastructure construction and asset enhancement without having the specter of the Capital Appreciation Bond salesman showing all fifteen rows of teeth in each jaw.  We should also call this kind of dealing what it is – predatory lending.  The Roosevelt Institute provides a summary:

“The financialization of the United States economy has distorted our social, economic, and political priorities. Cities and states across the country are forced to cut essential community services because they are trapped in predatory municipal finance deals that cost them millions of dollars every year. Wall Street and other big corporations engaged in a systematic effort to suppress taxes, making it difficult for cities and states to advance progressive revenue solutions to properly fund public services. Banks take advantage of this crisis that they helped create by targeting state and local governments with predatory municipal finance deals, just like they targeted cash-strapped homeowners with predatory mortgages during the housing boom. Predatory financing deals prey upon the weaknesses of borrowers, are characterized by high costs and high risks, are typically overly complex, and are often designed to fail.” [RooseveltInst]

High cost, high risk, overly complex, and sold to the school boards as a way to finance capital projects without breaking the “no new taxes” pledges.  The thought of paying out at 15:1 when the debt costs should have been no more than 3:1 is possibly worse than the ranting of Fauntleroy’s mother after the 5th grade play cast was announced. And so we come to the camel’s nose into Nevada’s tent with a recommendation for infrastructure funding:

“Along these same lines, there may be instances where changing legislatively imposed requirements relating to bonding may benefit from increased flexibility. For instance, bonds for capital projects are generally limited to terms of less than 30 years. However, in a limited number of cases, such as projects which generate user fees or for which the useful life of the asset extends beyond 30 years, there may be instances where longer financing terms may be useful to accelerating the timeline of a needed capital project.” [Applied Analysis]

What is Applied Analysis (client list includes Chambers of Commerce) recommending?  “More flexibility” in bonding requirements? This sounds ominously like California’s infamous AB 1388 which launched the CAB craze in our western neighbor.  Lengthen the repayment period to the life of the asset? The average functional life of a school building is 40 years. [NCES] So, a capital appreciation bond could be issued for 40 years – go back to the unfortunate example of the Poway School District, wherein borrowing $150 million ended up costing $1 billion.

School board members, as well as city and county officials, should approach suggestions that they want “more flexibility” and “longer repayment schedules” with exactly the same trepidation they’d approach the water when the shark alert sign goes up.

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