Location: The Westin South Coast Plaza, 686 Anton Blvd., Costa Mesa, CA 92626.

According to the flyer (see below): “FCD Chair Chris Cox will moderate an in-depth discussion with SEC Commissioner Daniel Gallagher and Paul Atkins, CEO of Patomak Global Partners and former SEC Commissioner, about the Financial Stability Oversight Council, which was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act.”

Registration: FCD Members: $50.00. Non-members: $85.

rsvp: www.cvent.com/d/14qgby/4W

PRI guests, enter code: PRI2014FCD on the payment page to receive member discount.

Here's a little more background from the study:

“Municipalities have rarely defaulted on their debt. As a consequence, municipal debt is regarded as having an extremely low risk for investors. There are disconcerting trends developing that may change this historical view. The combination of the weak U.S. economy, high municipal debt levels, and large under-funded pension liabilities coupled with unfunded retiree health benefits raises the likelihood that more municipalities will become insolvent going forward.

“Declaring bankruptcy (officially Chapter 9 bankruptcy) is an option available to a financially troubled municipality— more precisely to state leaders who must consent to a municipality’s bankruptcy filing—if they meet the eligibility conditions. A municipality can only declare bankruptcy if it is insolvent and only after the municipality has conducted good faith negotiations with its creditors to resolve its financial obligations.

“To provide greater perspective on this subject, this study overviews the purpose of Chapter 9 bankruptcy and then reviews the bankruptcy (or near-bankruptcy) of several prominent cases including: Vallejo, California; Detroit, Michigan; Stockton, California;  San Bernardino, California; San Jose, California; Jefferson County, Alabama; Harrisburg, Pennsylvania; Scranton, Pennsylvania; and New York City, New York.”

“There are important similarities across these high-profile municipal bankruptcies and near bankruptcies that provide  valuable lessons regarding how financial insolvency arises and the value and limits of bankruptcy protection.”

Here's the link.

Her new article in Forbes updates the reader on the latest developments, “Don’t Be Fooled By Kathleen Sebelius’s Healthcare.gov ‘Progress’ Report.” Excerpt:

This month, Health Secretary Kathleen Sebelius trudged up to Capitol Hill for her second public grilling over the flaws with the Obamacare healthcare exchanges. Sebelius was insistent that HealthCare.gov has vastly improved since its October launch, noting that about a quarter of a million new people signed up in November.

That brings total site enrollment to about 365,000. That’s nowhere near the White House’s initial enrollment projection for 2014 of 7 million. But the administration would have you believe it represents a profound step-up from the glitch-plagued weeks of the initial rollout.

But these sign-up numbers are deceiving. Don’t let them fool you. Just because someone has successfully submitted an application through an exchange doesn’t actually mean he or she will have health coverage come January. The exchange network is still so opaque and plagued by operational flaws that many applicants are likely to get their plans covertly cancelled….

Tony Felts, a spokesman for Anthem Blue Cross and Blue Shield, has a particularly politic way of describing the situation: “As far as the quality of the data that’s coming in, I can’t say that everything has been completely accurate.”

Truth be told, the government is hard at work fixing this mounting mass of 834 errors — by hand. Literally. During her congressional testimony, Secretary Sebelius said — proudly and publicly — that “we are in the process of actually hand-matching individuals to insurance companies.”

Yes. You read that right. In an age of iPhones, self-driving cars, and interstellar space exploration, that’s the sophisticated problem-solving tool now deployed by public healthcare bureaucrats.

Come January 1, millions of exchange enrollees are likely in for a rude awakening. They thought they’d signed up for coverage. But government incompetence led to that plan getting cancelled. And they’re still uninsured. This is life under the liberal lunacy of Obamacare.

Read the rest here.

“We see political spending as distorting markets in policy making and creating a skewed playing field,” said Bruce Freed, founder of the Center for Political Accountability, in a recent debate over corporate political speech.

Freed’s organization and other leftist groups have been pressuring corporations to eliminate or at least disclose their political spending. But a recent Common Cause study of $220 million in independent expenditures for candidates in California from 2000 to 2012 shows that unions spend much more than businesses.

“[L]abor unions are the largest source of independent spending, focusing primarily on governor’s races,” the study states.

Some findings:

— Union-backed independent expenditure committees outspent business-backed committees three-to-one: $90 million to $27.7 million.

— Three-quarters of the donations exceeding $1 million came from unions.

— Seven unions are among the top 10 donors.

— Business-backed committees accounted for 12.5 percent of independent expenditures.

— Chevron, the largest corporate contributor to independent expenditure committees, ranked 28th among all donors.

Professors target corporate speech

But a political playing field skewed in favor of unions hasn’t deterred a group of law professors from filing a petition with the Securities and Exchange Commission that has the potential to significantly decrease corporate political spending.

“We ask that the Commission develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities,” the July 2011 petition states.

It makes several assertions:

— Public investors have become increasingly interested in receiving information about corporate political spending.

— In response, a large number of public companies have voluntarily adopted policies requiring disclosure of the company’s spending on politics.

— Disclosure is important for the operation of corporate accountability mechanisms, including those that the courts have relied upon in their analysis of corporate political speech.

Fifty of the 465 shareholder proposals on company proxy statements in 2011 were related to political spending, including one-fourth of the S&P 100, according to the petition.

The petition addresses the pro-corporate speech argument that there are already numerous regulations governing corporate political spending. It states that the information is scattered “among several federal, state and local government agencies, presented in widely varying formats, and is ill-suited to giving shareholders a good picture of a particular corporation’s political spending.”

And much information remains undisclosed, the petition states, including contributions to intermediaries like 501(c)(4) organizations that are not required to disclose their donors. The petition concludes:

“Shareholders in public companies have increasingly expressed strong interest in receiving information about corporate spending on politics, and such spending is likely to become even more important to public investors in the future. Furthermore, shareholders need to receive such information for markets and the procedures of corporate democracy to ensure that such spending is in shareholders’ interest. Still, while many large public companies have begun to provide such information, no existing rule requires disclosure of this information to investors, and corporate political spending remains opaque to investors in most publicly traded companies. The Commission should address this lack of transparency and, drawing on its expertise and experience in designing rules for disclosure of other information that is of interest to investors, should adopt rules concerning disclosure of corporate political spending.”

Not a priority for SEC — so far

The SEC has yet to act on the petition, and may take its time doing so. The petition was recently placed in the long-term action category of the “reg flex” agenda, said SEC general counsel Brian Cartwright at the Society of Corporate Secretaries & Governance Professionals conference.

“If I were advising [SEC Chairman] Mary Jo White, and she decided this is something she was not interested in, I would advise her to put it in the long-term action category rather than take it off the reg flex agenda altogether,” said Cartwright. “Because you would have to take a whole bunch of arrows you don’t need to take if you do that. So I would say for the near term this has been very substantially downgraded for SEC action. This late in the year nothing could impact the 2014 proxy season.”

When the petition does reach the SEC board, at least one commissioner, Daniel M. Gallagher, may be skeptical, judging by his remarks at the SCS&GP conference on July 11. He agreed that there are benefits for investors from more disclosure, but he draws a tighter line on how much needs to be disclosed.

“[T]he disclosure regime was [not] meant to guarantee that investors receive all information known to a public company, much less to eliminate all risk from investing in that company,” said Gallagher. “Instead, the point has always been to ensure that they have access to material investment information.”

‘Regulatory creep’ leads to information overload

He went on to say:

“Arguably, the Commission’s disclosure regime has been subject to the classic Washington scourge of regulatory creep, in spite of the principle that investors should have access to ‘basic facts.’ The beauty of the disclosure regime as created by Congress almost 80 years ago was that it did not require government regulators to judge the merits of a company, its board or management structure, or its business practices –– those judgments were intended to remain in the hands of investors armed with the knowledge provided by the disclosure of material information. Today, however, some of our disclosure rules are being used by special interest groups, who do not necessarily have the best interests of all shareholders in mind, to pressure public companies on certain governance and business practices.”

Gallagher also warned about the potential for information overload:

“As Justice Thurgood Marshall warned almost 40 years ago, disclosure requirements with ‘unnecessarily low’ materiality standards risk ‘simply bur[ying] the shareholders in an avalanche of trivial information — a result that is hardly conducive to informed decision making.’ When investors are inundated with immaterial information, it increases the likelihood that they will miss key disclosures. Even more likely is the possibility that investors, despairing about the voluminous compilations of corporate minutiae contained in company filings, will never even look at disclosure documents. In either case, the result is that investors are left less informed when making investing decisions than they would be if presented with a document that didn’t require a magnifying glass to read and a PhD to understand.”

The quantity and length of the documents needing to be reviewed by shareholders has increased by about 50 percent from 2003 to 2011, he said. As a result, Gallagher pushed for streamlining regulations.

“Given the importance of this issue, it is critical for the Commission to engage with issuers and shareholders to rethink whether the mandatory disclosure rules in their current form are still valuable, and whether in some cases it may be better for investors if there was a lower volume, but an overall higher quality, of disclosure,” he said. “As I’ve noted repeatedly, disclosure is not costless to issuers, and we cannot forget — because far too many policy makers do forget — that it’s the shareholders who ultimately bear the burden of increased costs on issuers.”

Overreach of SEC authority seen

Former SEC Commissioner Paul Atkins is strongly opposed to the disclosure petition. He discussed the issue at a Pacific Research Institute luncheon in San Francisco last year, and wrote a petition response, “Materiality: A Bedrock Principle Protecting Legitimate Shareholder Interests Against Disguised Political Agendas.” It makes several arguments:

— The SEC does not have the authority to require disclosure of information on these sorts of expenditures because such information is immaterial.

— Should the Commission decide to proceed, which would harm rather than protect investors, the Commission would be unable to satisfy its legally mandated cost-benefit analysis because the alleged benefits are outweighed by the significant costs of mandated disclosure.

— It would be inappropriate for the Commission to move forward with a rule-making related to corporate public policy spending at a time when it must address myriad issues related to the financial crisis of 2008, as well as those that are central to the economically important capital-raising functions of the capital markets.

“Ultimately, the SEC is not the appropriate body to address this issue, primarily because SEC does not have the authority to require disclosure of information on these sorts of immaterial expenditures,” wrote Atkins. “Rational shareholders, considering their economic interests and not political interests, do not consider this information material to their investment decision making.

“Even if the SEC were to forge ahead and consider a rule, an impartial economic analysis of the costs and benefits of such a requirement would find that the costs exceed the purported benefits, because the narrow interests of an extremely vocal minority of shareholders (and even non-shareholder activists) could more easily intimidate value-creating corporate behavior, create brand damage to the disclosing companies, and stifle corporate speech, all of which would have a detrimental economic effect on the company and its shareholders.”

One of the disclosure advocates, Freed, suggested that he might not be bothered were the SEC to reject the disclosure petition.

“I think when you’re looking at the work we have done on political disclosure, we are not talking about regulations,” he said. “We are talking about companies adopting policies that govern their political spending practices. This is very, very important. Voluntary disclosure as a result of shareholder engagement has laid a strong foundation for broader disclosure.”

Even if SEC passes, state-level action proceeding

But if the petition is rejected, corporations won’t be able to breathe easy. Disclosure advocates have started lobbying state legislatures.

“At the state level there’s quite a bit of ferment,” said Freed. “Disclosure laws have passed in Iowa and Maryland. There’s strong support for disclosure legislation in Texas and Montana. The Texas legislature passed a very strong disclosure bill that was vetoed. In Montana there was very strong bipartisan support. In New York state, regulations were issued by the attorney general requiring  501(c)(4) disclosure. California is getting very active in this area. So there’s quite a bit of ferment there.”

Between the fomenting from disclosure activists and the regulatory fermenting in state legislatures, free market supporters will need to stay alert lest the already-skewed political playing field be totally forfeited to one team.

Dec. 7, 2012

By John Seiler

A new study by the Pacific Research Institute shows that compensation for the public sector in California is soaring far above that of the private sector. PRI is CalWatchDog.com’s parent think tank.

For California state and local governments, “a key driver of the budget crises is overly generous government compensation packages,” the study found. “Consequently, California’s budget crises will never be sustainably resolved without addressing the problem of overly generous state and local government compensation.”

“Policy Reforms to Control Rising Government Compensation Costs” is written by Wayne Winegarden, Ph.D., a PRI senior fellow and a lecturer in economics at Marymount University.

Winegarden’s key findings:

1. “California’s government compensation costs are already excessive.” He cited a 2011 study by Jason Richwine and Andrew Biggs, which found:

“In the case of California public employees, wages are slightly lower in the public sector. Initially, benefits appear only slightly higher, implying rough parity in compensation between the public and private sectors. However, properly accounting for retiree health benefits and defined benefit pension plans generates a public compensation premium of around 15 percent. The additional job security granted to public-sector employees is equivalent to an approximately 15 percent increase in public compensation, meaning that the total public-sector pay premium in California may be as high as 30 percent.”

I would add that Richwine and Biggs just came out with an op-ed in the Wall Street Journal which found that government workers (teachers were not included) put in about a month less time on the job every year than do private-sector workers. They wrote:

“Based on the most detailed and objective data set available, the private sector really does work more than the public sector. This fact may hold different lessons for different people, but our own take is simple: Before we ask private-sector employees to work more to support government, government itself should work as much as the private sector.”

In sum, government workers get paid 30 percent more than private sector-workers, but work 8 percent (one month) less. Nice part-time work for full-time pay if you can get it.

However, I’m also mindful of the old libertarian maxim, “We’re lucky we don’t get all the government we pay for.” I would be happy if every regulator in the state, even while getting paid their hefty salaries and benefits, stayed home and played video games.

Widening pay gap

Back to the PRI study by Winegarden. He also found, “California’s government compensation premium over California’s private sector is widening.” That means:

“The benefit premium of state and local government workers is not a new phenomenon …. over the past 40-plus years California’s government compensation premium relative to California’s private sector compensation levels has been growing and is currently near historic highs.”

Even as the private sector that pays for everything through record-high taxes shrinks, the government sector that lives off it keeps growing.

Compensation higher than other states

Winegarden also found, “California’s government compensation premium relative to other states cannot be justified based on California’s relatively higher incomes and cost of living.”

Certainly, California’s cost of living is higher than in other states — in part because of the high cost of taxation and the regulations imposed by all those highly compensated functionaries.

But Winegarden wrote:

“State and local government workers in California receive a compensation premium over state and local government workers in Texas and the U.S. that is consistently greater than the compensation premium received by California’s private sector workers compared to private sector workers in Texas and the U.S.”

That makes sense. If you’re in the private sector, you’re competing against not only other Americans, but all 7 billion people on the globe. If costs go up, then worker pay has to go down — or the company moves to another state or country, or goes broke.

By contrast, when government costs go up, taxes are raised — as we just saw with the passage of Proposition 30 and Proposition 39, as well as scores of local taxes and bonds.

There is some check on government because departing businesses and workers then don’t pay taxes in the place from which they were exiled. But that check usually takes a few years to dig in. And governments also commonly meet funding crises by cutting services, such as parks and roads, rather than reducing generous employee pay, perks, pleasures and pensions.

Excessive and growing

Winegarden concluded, “[T]he evidence regarding California’s state and local government compensation costs are clear: when all benefits are included, these costs are excessive and growing.”

The reasons:

“California implements policies that encourage excessive compensation. These policies include mandating collective bargaining, empowering public sector unions, and, in some areas, mandating binding arbitrations. These policies have led to practices such as excessive pension spiking, low retirement ages, covering health care services during retirement, generous pension levels, and permitting the practice of receiving both a government pension and a government salary. When coupled with the declining asset values of California’s pension system, these trends have created a crisis waiting to happen.”

So, that’s how it is as we rush toward 2013. The private sector shrivels under the immense burden of government, even as the government functionaries work less and are paid more — and as taxes are jacked up to record levels to pay for everything.

Until the system falls down and all Jerry Brown’s horses and all the unions’ men couldn’t put it together again.

By Lance T. Izumi

Last week, I wrote about Governor Jerry Brown’s weighted-student-formula proposal, which attached a base state-funding amount plus various supplemental amounts to individual students that would then be collected by school districts.  The plan sought to increase funding flexibility for school districts, which now face an array of earmarked categorical programs that force districts to spend a significant percentage of their funding on state-mandated priorities.

Brown’s fellow Democrats in the Legislature, however, couldn’t stomach the governor’s mild reform of the funding process and eliminated weighted-student-formula from the Legislature’s budget package that came out at the end of the week.

An aide to Assembly Speaker John Perez, D-Los Angeles, said the Legislature’s action was taken because of concerns that, while Brown’s plan gave spending flexibility for districts, it did not contain accountability for results.  This criticism has some merit.  Brown’s original budget proposal in January didn’t contain any specific accountability provisions, although Brown had indicated that he planned to add a performance component to his weighted-student-formula plan sometime in the future.  Democratic legislative leaders, however, missed the more important problem with Brown’s plan.

As I pointed out, the real problem with Brown’s plan is its failure to make funding truly portable with students.  Brown sent funding to school districts, instead of backpacking dollars with students so that they could take funding to the individual school, public or private, of their choice.  Giving students and their parents this choice through vouchers or other similar portable-funding options would create incentives for all schools to improve their performance in order attract education consumers.

In their critique of Brown’s plan, Democratic legislative leaders are as guilty as the governor in failing to recognize the absence in the public school system of any significant market incentive to improve its own performance.  This blind spot prevents lawmakers from proposing a better alternative to Brown’s proposal.  The public is therefore left with a warmed-over status quo.

— Lance T. Izumi is Koret senior fellow and senior director of education studies at the Pacific Research Institute, CalWatchDog.com’s parent think tank.  He is the author of Obama’s Education Takeover (Encounter Books, 2012).

The Pacific Research Institute, CalWatchDog.com’s parent institute, earlier this month released a study showing that Prop. 23 would create 1.3 million jobs by 2020. It would do so by suspending, until unemployment dropped to 5.5% for a year, the anti-jobs AB 32.

The study is being questioned. The Sacramento Bee reported:

But [Ben] Zycher’s study makes a faulty causal link between rising energy prices and increased unemployment, said Jasmin Ansar, climate economist for the Union of Concerned Scientists, a strong supporter of AB 32.

Just because energy prices and the jobless rate are rising doesn’t mean that one is causing the other, she said.

“It’s like saying sales of ice cream go up at the same time as bikinis, and therefore one causes the other,” Ansar said.

That’s the wrong analogy. A correct one would be that ice cream prices rise at the same time as milk prices, therefore one causes the other.

Ansar said a more accurate economic study would look at the actual jobs being created or destroyed as a result of AB 32.

But we can’t do that yet, can we? AB 32 doesn’t start nuking jobs  until about 9 p.m. on November 2, when the election returns come in and show Prop. 23 failing — as will happen, alas — and the U-Haul trucks pull up in front of thousands of businesses across the state.

Oct. 24, 2010