The Arizona Daily Star’s suspect pension analysis

Posted by AzBlueMeanie:

I thought the The Brodesky/O'Dell tag team (AKA, the B&O Journalistic Railroad) had left the Arizona Daily Star for greener pastures? Rob O'Dell's classic "fun with facts and figures" that I made up style of reporting shows up in the Star this morning under the byline of Darren DaRonco. City pension plan could cost taxpayers more.

Some questions about this "Star analysis": Who exactly conducted this analysis? Just labeling it a "Star anlalysis" tells me nothing about the capabilities of the individual(s) who conducted the analysis. If it is Star employees, I am confident that they do not possess the background and experience in economics and pension fund management to know what the hell they are talking about.

And why is the "Star analysis" not linked online so that independent experts may peer review your economic analysis? I know some experts who would be happy to review it, as would I.

The article itself concedes that the "Star analysis" is flawed:

Dana Woolfrey, of Gabriel, Roeder, Smith & Co.,
wrote in an email that while the Star’s projections aren’t
“unreasonable,” there are variances between the city’s numbers and those
the Star used. She described the Star figures, which were taken
directly from city financial reports, as more conservative as they
relate to employee contributions versus city contributions in future
years.

She also said the Star’s projections fail to sufficiently
account for savings the city would experience by extending the average
time employees would pay into the system by five years.

She wasn’t sure a person could conclude the city would make up the difference.

Michael Hermanson,
city pension and benefits manager, said taxpayers will be protected
because it is unlikely the city will use a consistent funding level over
20 years, which the Star’s analysis used.

He also said the payroll projections in the Star’s analysis were much higher than what they will likely be in the future.

Hermanson
said the city staff fully vetted the change in the plan before bringing
it forward and stands by it as a sound fiscal move. “We did prudent
management on this,” Hermanson said. “It was a great fix for the plan.”

The Star did find "Michael Bond, a University of Arizona professor of finance, [who] reviewed the Star analysis and said it’s on target."

Hmmm, what the Star does not reveal about this one favorable assessment of its analysis is that Professor Bond serves on the Research Advisory Council of the Florida-based "think tank" James Madison Institute, dedicated "to shape our state's future through the advancement of practical free-market ideas on public policy issues." Here is his Advisory Council bio:

Dr. Michael Bond, Senior Lecturer, Department of Finance, University of Arizona
Michael Bond, Ph.D., is the Senior Lecturer in the Department of Finance
at the University of Arizona. He has taught health care finance along
with numerous other courses. He is an active consultant and has worked
with over 150 law firms and companies on mumerous issues. His work on
Medical Savings Accounts (MSAs) and health-care policy reform has
received national attention and appeared in a wide range of professional
and popular publications, including Health Care Financial Management,
Public Personnel Management, Compensation and Benefits Review, Benefits
Quarterly, and Business Horizons. Along with over 70 articles and
presentations, he is the author of the nation’s first practical guide to
reforming Medicaid using a market based plan (published by the Buckeye
Institute in 2003). This resulted in the establishment of a Medicaid
Commission in Ohio that adopted many of the proposals in their final
report. The State of Florida proposed Medicaid reforms based on his
“Insurance & Provider Exchange Model”. Mike earned his Ph.D., M.A.
and B.A. in economics from Case Western Reserve University and serves as
an advisor on Medicaid to the Governor of South Carolina Governor.

The James Madison Institute hosts writers from the ALEC-connected Franklin Center for Government and Public Integrity, which screens potential reporters on their “free market” views as part of the job application process. Is a Franklin Center reporter the source of this "Star analysis"?

The Franklin Center was launched by the Chicago-based Sam Adams Alliance (SAM), a 501(c)(3) devoted to pushing free-market ideals. Hmmm, where did this organization recently come up? I posted about the Virginia-based ballot initiative activist Paul Jacob, and his Liberty Initiative Fund, the organization behind the Initiative to Bankrupt the City of Tucson (Prop. 201). Tucson City Council Election Preview:

Paul Jacob is also president of Citizens in Charge, a 501 (c) (4) advocacy organization that serves as a
partner to Citizens in Charge Foundation,
a 501 (c) (3) in protecting and expanding the
initiative and referendum process. (CICF is non-partisan and does not
support any initiatives, referenda, or candidates for office.)

The board of directors of Citizens in Charge includes Eric O'Keefe, a private investor and chairman and CEO of Sam Adams Alliance, Dennis Polhill, a Senior Fellow in Public Infrastructure at the Independence Institute in Colorado, William "Bill" Redpath, former chairman of the Libertarian Party from 2006-2010 and is Vice President of a financial consulting firm, and John Tillman, CEO of the Illinois Policy Institute.

The board of directors of Citizens in Charge Foundation includes Eric O'Keefe, a private investor and chairman and CEO of Sam Adams Alliance, Theresa Amato,  "a public advocate and author,"  Michael Foudy, a principal founder and managing member of ATB Productions, LLC, and Chairman of the Board at Stonehenge Capital Partners, Inc. and Toto Communications, Inc., and also Chief Marketing Officer at Gramercy LLC and former founding chairman of AIMS Worldwide, Inc., Grover Norquist, president of Americans for Tax Reform (ATR), William "Bill" Redpath, former chairman of the Libertarian Party
from 2006-2010 and is Vice President of a financial consulting firm,
and John Woodcock III, Chairman of Connecticut Citizens for Ballot
Initiative, CCBI, a non-partisan, issue neutral, political organization
educating citizens/voters, to support ballot initiative in the State of
Connecticut.

We are going to need a Sherpa guide to help us navigate through this seemless web of the "vast right-wing conspiracy" of billionaire-funded "think tanks," political action committees — and embed reporters?

The most glaring flaw in the "Star analysis" in the report today is any analysis of what happens to the city pension fund should Prop. 201 foolishly be passed by the voters. The Initiative
to change pension system could bankrupt city, Tucson official warns:

A planned citizens initiative that would force the city to put more
money into funding employee pensions could bankrupt the city, officials
say.

* * *

While the city would see substantial savings under the proposal 15
years down the road, Finance Director Kelly Gottschalk said, the
increased cost leading up to that 15-year mark is so high it's unlikely
the budget could hold out long enough to experience any benefit.

She
estimates the change would cost taxpayers $24 million extra in the
first year alone and tens of millions more each year for more than a
decade, placing the city in line for potential financial ruin.

One of the biggest potential hits to the Tucson Supplemental
Retirement System is that the initiative mandates all new hires be
offered only the 401(k)-style plan. The city currently has about 2,700
active employees to 2,700 retirees.

With no new employees
contributing to the current system, taxpayers would have to fill the
gap, and closing the system would mean the city must hasten its payments
to fully cover the approximately $340 million in unfunded liability.

So I leave you with this question: is the Arizona Daily Star signaling its support for the Initiative to Bankrupt the City of Tucson (Prop. 201)?