My Blog

Category: Education

  • Corruption “Widespread” in Illinois

    A new poll finds that a whopping majority of state residents believe that not only state government but Illinois business is plagued by serious misconduct.

    According to the survey of 1,271 registered voters by the Paul Simon Public Policy Institute at Southern Illinois University, 76.8 percent agree that “corruption in Illinois government is widespread.”

    via Crain’s Chicago Business.

    Awhile back there was a long article about why Illinois is so corrupt.  The bottom-line is that the people tolerate it.

    Most people won’t tolerate someone stealing from them.  But in Illinois the people do.  My guess is that the school system is so bad that most folks don’t even realize that all the corruption costs them a boat-load of money.

    People get what they vote.

  • East Coast Liberals: Smartest Students in CPS are the Gang Leaders

    …  Newark, N.J. Mayor Cory Booker and former New York Gov. David Paterson — who spoke Tuesday morning about recidivism and racism at a panel hosted by Stroock law firm — say.

    During the talk, Paterson observed the smartest students in the Chicago Public School system are the gang leaders because they’re giving kids what they need — structure, a way to make money, and some sense of belonging.

    Until society steps up and gives those kids that same sense of security, according to Paterson, this non-stop cycle of people going to prison on nonviolent drug offenses is never going to end.

    via Business Insider.

    These two guys are real pieces of work.  Newark is quite likely the only city in America worst off than Detroit and East St. Louis.  Why doesn’t he fix his own damn problems before telling us who our smart kids are?

    Doesn’t he have any gang leaders smart kids in Newark he can talk about?  Why drag us down to Newark’s standards?

    What a jerk.

  • Embarassing Americans — And These People Vote

    I received this via email this morning.  I thought it was timely because just yesterday Howard Stern played audio of his producers in Harlem interviewing Obama supporters.

    There is something very very wrong with the educational system in this country whereas so many can be so ignorant of the most basic facts.  There is no way that these people can understand anything about finance, economics, job creation, tax theory, or any other subject that would make them an informed intelligent voter.

    [youtube http://www.youtube.com/watch?v=fJuNgBkloFE?rel=0]

    These people do not possess the requisite base of knowledge and analytical skills necessary to determine the implications of their vote.  They ought go into the voting booth and flip a coin.

    This is the result of 60 years of modern liberalism governing our schools.  Modern liberalism has created legions of undereducated men and women who can barely take care of themselves.  We’ve told them that they’re “special” and deserving when they are not even average or in fact normal.  They’re unique only in their ability to articulate idiocy and not be even slightly embarrassed.

    They are the poster children proving that ignorance is bliss.

    This is what the modern unionized public school system has given us.

  • Legislative Change Means $670 million More for Teachers’ Pensions

    The state will have to come up with another $670 million for the teacher pension system in the next budget after a retirement fund panel crunched the numbers and adjusted its assumptions.

    The Teachers’ Retirement System lowered what it expects from investments from 8.5 percent to 8 percent. The pension fund’s leadership also increased a variety of other assumptions, including how long it expects retired teachers to live. The fund covers teachers outside Chicago.  …

    The state is paying $2.7 billion into the fund in its current budget. Without any adjustments, the state would have owed about $2.89 billion in the new budget year that begins next July 1.But the changes approved Friday increased that price tag to $3.37 billion. All told, the state will have to pay $670 million more than this year.

    via Chicago Tribune.

    Consider, we’re going to pay $3.3 billion into the teachers pensions and another $3 billion on debt service.  That’s $6 billion next year that could have gone to pay for services for the poor and the elderly but instead are going to the politically connected and union members (… I realize that’s redundant.)

    But this may be the best line of all:

    Senate President John Cullerton and House Speaker Michael Madigan, both Chicago Democrats, recently suggested that changes to the pension system would have to get done in January at the earliest. That’s a post-election period when more lame ducks are freer to take politically risky votes, and the bar to pass legislation with an immediate effective date drops from three-fifths to a simple majority.

    Allow me to translate:  Fixing the pensions is going to be very unpopular and thankfully our experience is that voters have short memories.  We also don’t care how much more money this costs the state (after all, all the bond holders and the teachers unions are our buddies.) We’re also not sure that we can get all the Democrats to go along.  So we to avoid any embarrassment — and to make sure the unions make the campaign donations they promised before the election — we’re going to put this off until next year.

    The Machine is like a casino… the house never loses.

  • Quick Pension Analysis

    Ok, so I was getting asked about this the other day both in person and in the comments about why the pensions are really in such bad shape and what the latest GASB positions mean to the funds.  GASB first.

    GASB Changes
    I did some poking around and the recent GASB changes really mean nothing.

    After six years of research and about 400 pages of text, GASB’s statements 67 and 68 do little to provide enough meaningful information about the potential retirement costs faced by the taxpayers. The statements will force the worst of the worse, such as Illinois, to recognize a much larger liability.

    That’s like throwing the zombified Walking Dead under the bus to give the appearance of taking a serious step in providing transparency. Zombies are already dead. You can throw them under a bulldozer; it doesn’t make them more dead.  …

    The new standards still allow most pension funds to choose their discount rates when determining their pension liabilities. In other words, the sworn and civilian plans of the City of Los Angeles can wantonly throw caution to the wind and assume a 7.75% earnings assumption going forward, avoiding any consideration of risk.

    via City Watch LA.

    You can read the policy papers.  It’s pages and pages of nonsense summarized nicely with the zombie analogy above.

    But what the lastest GASB changes point out to us is the danger regarding the assumed internal rate of return.

    Interest Rate Issue
    For giggles I found the 2011 annual report of the Chicago Teachers’ Pension Fund.  It’s 116 pages detailing a underfunded, mismanagement, no financial understanding pension time-bomb with some lipstick.

    From page 13:

    As of June 30, 2011, investments at fair value plus cash totaled $10,456,912,118. This reflects a 16.8% increase from the $8,949,590,783 value of June 30, 2010. The Fund’s investment performance rate of return for the year ended June 30, 2011, was 24.8%, exceeding the projected return of 8% and reflecting a 82.3% increase from the 13.6% performance rate of return as of June 30, 2010. The ten-year rate of return posted by the Fund for the period ended June 30, 2011, was 5.7%, and fell short of the actuarial assumption of 8%.

    That’s a lot of information.  I draw your attention to the incredible swings in the rate of return of the fund over the years.  24.8% one year, 13.6% another, however the 10-year average is a mere 5.7%.   On page 25 we learn that the 5-year average is only 4.7%.  Yikes!!  But the fund assumes that over the long term it will average 8%.

    But what does that mean? So what?

    Well, the fund currently has net assets of $10.344 billion.  When invested at the given rate of returns at the end of 5 years we have:

    Year Value @ 4.7% Value @ 5.7% Value @ 8%
    0 $10,344,100,000.00 $10,344,100,000.00 $10,344,100,000.00
    1 $10,830,272,700.00 $10,933,713,700.00 $11,171,628,000.00
    2 $11,339,295,516.90 $11,556,935,380.90 $12,065,358,240.00
    3 $11,872,242,406.19 $12,215,680,697.61 $13,030,586,899.20
    4 $12,430,237,799.29 $12,911,974,497.38 $14,073,033,851.14
    5 $13,014,458,975.85 $13,647,957,043.73 $15,198,876,559.23

    If the next 5 years are like the past 5 years the fund will earn 4.7% on its assets.  So in 5 years it will have $13.014 billion.

    In the next 5 years are like the past 10 years the fund will earn 5.7% on its assets.  So in 5 years it will have $13.646 billion.

    However the plan assumes that over the next 5 years it will follow the 8% column and have $15.1 billion.  History is against them.

    If the fund earns 5.7% over the next 5 years it will be $1.55 billion short of projections.  That’s 10% less money available.

    If the fund earns 4.7% over the next 5 years it will be $2.18 billion short of projections.  That’s 14% less money available.

    If all the assumptions go on for 10 years:

    Year Value @ 4.7% Value @ 5.7% Value @ 8%
    10 $16,374,178,752.54 $18,007,050,537.73 $22,332,136,064.29

    Earning 5.7% the fund is $4.33 billion short or 19.3%.

    Earning 4.7% the fund is $5.95 billion short or 26.6%.

    So if the next 10 years are anything like the past 10 years from an investment standpoint we can expect the all the state pension funds to have about 20% less money than they’re projecting.  That could easily be another $40-50 billion that someone’s going to come looking for.

    – – –

    Now in all fairness, a historic average suggest that a return rate of 8% could be reasonable.  i.e. These funds may be able to earn an 8% return in the next 5 years.  Why?

    Interest Rates & Inflation.  In the last 5 – 10 years there has been very little inflation and interest rates have been low.  That’s generally accepted to be a good thing.  However it messes with the long-term analysis as to what something will be worth in the future.

    Given the amount of debt carried by the Feds, and the quantitative easing (a/k/a money printing) that been happening, it’s safe to say that very soon interest rates are going to start going up… fast and dramatically.

    When interest rates go up, the rate of return on these pension funds should go up as well.  If they get close to the 8%, then we’ll only have to worry about the current short fall of billions and billions and billions.

    Any questions?

  • One Word for CPS Teachers: Save

    Save.

    Save as much money as you can.

    Live well below your means.

    The pension time-bomb is coming.

    One of the most vexing problems for Chicago and its teachers went virtually unmentioned during the strike: The pension fund is about to hit a wall.

    The Chicago Teachers’ Pension Fund has about $10 billion in assets, but is paying out more than $1 billion in benefits a year — much more than it has been taking in. That has forced it to sell investments, worth hundreds of millions of dollars a year, to pay retired teachers. Experts say the fund could collapse within a few years unless something is done.

    via NYTimes.com.

    and;

    “Each day we wait to enact comprehensive pension reform, the problem gets worse,” Quinn said in a statement. “The unfunded liability will grow to more than $92 billion by the end of next fiscal year. Illinois is currently on track to spend more on pensions than education by 2016 and that is unacceptable.
    — Pat Quinn

    via Des Plaines, IL Patch.

    If you think that taxpayers are going to fund your pensions, forget-about it.

    If you think you can tax the rich to fund your pensions, forget-about it.

    If you think that people are going to move into a community where their property taxes increase by 7% every year in order to fund failing schools, forget-about it.

    If you think you’re going to get your COLA every year, forget-about it.

    You have two options:  Save every nickel and dime you can, or plan to work until you’re in your 70’s.

    Consider:

    Illinois has an unfunded pension liability of at least $83 billion, according to state figures. It had 45 percent of what it needed to pay future retiree obligations as of 2010, the lowest among U.S. states, data compiled by Bloomberg show.  …

    Illinois had about $28 billion of general-obligation debt as of May 8, according to bond documents. The state of about 13 million people plans to sell $50 million of debt next month for technology projects, John Sinsheimer, the state’s director of capital markets, said in an interview.

    via Businessweek.

    Further:

    Illinois’s backlog of unpaid bills has risen to more than $9 billion because of pension costs and falling federal aid, leaving the state “essentially treading water,” Comptroller Judy Baar Topinka said.

    via Bloomberg.

    $83B + $28B + $9B = $120,000,000,000 in debt.  The extra $50 million at 0.42% of the total is a rounding error.  It should also be noted that this does not include the City of Chicago (or any other municipality or county debt) which is another $12-16 billion in debt depending on who you ask.

    12,869,257 people in the state of Illinois.  Every man, woman, and child owed owes $9,324.54 to the state.  If you live in Chicago you owe another 5,910.34 locally for total of $15,234.89.  (Are you feeling good about your new contract yet?)

    I was just looking over the FY2013 Illinois State Budget as prepared by Gov. Quinn.  On Pg 37 we’re told that Debt Service is 5.42% of all outlays.  That’s over $3.3B per year paying principle and interest on money we borrowed.  That’s $3.3B per year we could use to hire police officers, or teachers, or fully fund the pension funds but will instead go to pay for our bad fiscal decisions of the past.

    More importantly, total expenditures are $61.0B.  That means that if we (a/k/a the State of Illinois) completely stopped operating, fired all the employees, shuttered all the buildings, and spend 100% of the budget on paying off debt we’d be debt free in 2 years.

    Oh, I know what you’re going to say… You’re going to tell me all about how the Chicago Teachers’ Pension Fund is not as underwater as the general state fund.  True, but it’s still broke and broken.  And there’s no money to fix it.

    Then you’re going to say that this is a right guaranteed by the Illinois Constitution.  Oh ya?  Well where’s the money going to come from?  The rich?  You wish:

    When New Jersey governor Chris Christie heard British Prime Minister David Cameron invite France’s wealthy to decamp to England to escape a proposed 75% tax rate, he felt something akin to déjà vu. Every day top executives of Johnson & Johnson (JNJ), Merck (MRK), and other companies commute from their homes in Pennsylvania to offices in Christie’s state, saving roughly two-thirds on their state income tax bill — and costing New Jersey’s treasury $50 million, by one estimate.

    via Fortune (a/k/a CNN).

    You don’t understand the Laffer Curve.

    The study, by the anti-tax group Change Maryland, says that a net 31,000 residents left the state between 2007 and 2010, the tenure of a “millionaire’s tax” pushed through by Gov. Martin O’Malley. The tax, which expired in 2010, in imposed a rate of 6.25 percent on incomes of more than $1 million a year.

    The Change Maryland study found that the tax cost Maryland $1.7 billion in lost tax revenues. A county-by-county analysis by Change Maryland also found that the state’s wealthiest counties also had some of the largest population outflows.

    via CNBC.

    You’re confused how a state and raise taxes and lose revenue.  It happens all the time.  I wrote a piece about cigarette taxes in Cook County; raised taxes, lost revenue.

    The more you tax something the less of it you get.

    You tax income, you get less income.  You tax babies, you get less babies.

    Even the left-loving Bono (of U2 fame) moves his wealth around to avoid taxes.

    In Illinois, if we quadrupled the state income tax on those with adjusted gross income over $500k it would take over 13 years just to get current state pension liabilities square.  This would not cover the additional debt of Chicago Teachers, Chicago Police & Fire, or any of the billions and billions of general debt.

    So take your 16% raise and start saving.  Save like your life depends on it.  Because it does.

  • Student Denied Entry to Michelle Obama’s Speech

    A conservative student was denied entry into a rally featuring First Lady Michelle Obama at the University of Florida on Wednesday because he was wearing a t-shirt in support of Republican John McCain’s (R-Ariz.) 2007 campaign for the White House.  …

    A conservative student was denied entry into a rally featuring Michelle Obama at the University of Florida because he was wearing a McCain t-shirt.

    “I was waiting in line wearing a ‘Gators for McCain’ shirt when a guy [representing the Obama campaign] comes up to me to just intimidate me,” Pesek told Campus Reform. “[He then] asks me for my ticket saying… this is an event with only Obama supporters.”

    via Campus Reform.

    Hummm…

    I guess Michelle was not too confident in her message being persuasive.  When you can’t change minds, just lock the door.

     

  • Harvard vs. South Dakota Mine School

    Which Grads make more?

    Harvard University’s graduates are earning less than those from the South Dakota School of Mines & Technology after a decade-long commodity bull market created shortages of workers as well as minerals.

    Those leaving the [SDSMT] college of 2,300 students this year got paid a median salary of $56,700, according to PayScale Inc., which tracks employee compensation data from surveys. At Harvard, where tuition fees are almost four times higher, they got $54,100. Those scheduled to leave the campus in Rapid City, South Dakota, in May are already getting offers, at a time when about one in 10 recent U.S. college graduates is out of work.via Bloomberg.

    Good old fashioned job.

    Man I wish we had some of them around here.

  • Wealthy Donors Work to Improve Schools

    The union and HuffPo object:

    Stand for Children is a non-profit education reform group advocating for the inclusion of standardized test scores in teacher evaluations, charter schools and decreased teacher union power. Over the past three years, the group’s political action committee has raised more than $4 million and doled out more than $1 million to politicians, political parties and other political committees in Chicago and around Illinois. That’s more than double the $460,000 the Chicago Teachers Union PAC has given to political campaigns and other committees over the same period of time. While contributions from the Illinois Federation of Teachers bring the two sides into closer competition, much of IFT’s contributions went to a Supreme Court race in 2010.

    via HoffPo.

    It’s bizarre to me how anyone can get behind the current union, CPS model.  It’s so clearly failing.  …  Well maybe what we have is a tale of two school systems — one that services the middle-class on the North and Northwest Sides and South Loop, and another that dooms the poor kids on the South and West sides to lives in poverty.  But that’s a topic for another post.

    What we have is CTU standing in the way of progress.  They don’t want teachers to be accountable for anything.  When 79% of 8th graders are not proficient in reading and Karen Lewis says, “Give us more money” and “You can’t evaluate teachers” the message is clear that she, a/k/a the union, have no interest in teaching… only the money for even the worst of the worst.

  • Dark Energy Camera — Science Rocks!!

    The highest-resolution camera ever built has begun its quest to pin down the mysterious stuff that makes up nearly three-quarters of our Universe.

    The Dark Energy Survey’s 570-million-pixel camera will scan some 300 million galaxies in the coming five years.

    via BBC News.

    Very  v e r y  cool.