Last week the U.S. Supreme Court took up a pair of redistricting cases giving the court the opportunity - for the second time in two years - to decide whether there’s a constitutional limit to partisan gerrymandering. The cases involve congressional districts drawn by Democrats in Maryland and Republicans in North Carolina.
There appears to be little disagreement that the two maps are overtly partisan. Maryland’s plan ousted a 20-year GOP incumbent by packing his rural district with thousands of urban Democratic voters. North Carolina’s map conceded to Democrats just three districts, in the liberal strongholds of Charlotte, Durham and Raleigh, and awarded the state’s 11 other districts to Republicans, in part by absorbing other liberal urban areas within conservative rural ones. The chairman of the North Carolina House Elections Committee, Rep. David R. Lewis (R), began the state’s drafting session by stating, “I acknowledge freely that this would be a political gerrymander.”
A ruling against either of the maps would potentially rein in a process that some say is only getting more partisan, while a decision upholding the maps would likely have the opposite effect.
The court punted on last year’s gerrymandering cases from Maryland and Wisconsin, sending them back to lower courts for further consideration. But it has actually dodged the issue for decades, deadlocked on whether a standard for determining when gerrymandering is unconstitutional could ever be established and what it would mean for the court if there were such a standard.
The court may be inclined to continue that tradition, with its newest justices, Neil Gorsuch and Brett Kavanaugh, both having suggested during oral arguments last week that independent redistricting commissions were a potential solution to the problem that wouldn’t require court involvement.
But as Emmet Bondurant, an attorney representing those challenging North Carolina’s map, pointed out, redistricting commissions aren’t a complete solution. They’ve largely been adopted in states west of the Mississippi “that allow the people to amend their state constitutions without the consent of the state legislature” by initiative or referendum, he said, adding that “most states east of the Mississippi, including North Carolina and Maryland, do not allow the people of the state to amend their state constitutions without first obtaining the consent of the legislature which usually requires a super majority vote of both houses.”
“Thus, the problem of partisan gerrymandering does not have a ‘political solution’ in the majority of states that do not allow amendments to their state constitutions by initiative or referendum,” he said. (USA TODAY, NEW YORK TIMES, BLOOMBERG)
NEVADA lawmakers are considering legislation (AB 431) that would restore full voting rights to felons upon being released from prison. If the bill is enacted, the state would become the 15th with such a law. (LAS VEGAS REVIEW-JOURNAL)
OREGON Senate Majority Leader Ginny Burdick (D) is co-sponsoring a bill with Sen. Dallas Heard (R) that would boost legislators’ pay by 63 percent, or about $20,000, per year. Lawmakers in the state currently earn $31,200 per year. (KOIN 6 [PORTLAND])
Baltimore Mayor Catherine Pugh (D) announced last week that she will be taking an indefinite leave of absence for health reasons. The news comes in the midst of a scandal over a deal she made with the University of Maryland Medical System while serving on its board that paid her hundreds of thousands of dollars for a series of books she wrote about a girl named Healthy Holly to promote exercise and healthy eating. (BALTIMORE SUN)
-- Compiled by KOREY CLARK
Calling it a “critical public health issue that requires immediate attention,” Florida Gov. Ron DeSantis (R) announced a multi-pronged plan to combat the Sunshine State’s ongoing opioid abuse epidemic.
DeSantis issued Executive Order 19-97, which reestablishes the state Office of Drug Control and creates the Statewide Task Force on Opioid Abuse.
“Substance abuse is a serious public health concern, and although great progress has been made, the opioid epidemic continues to devastate families and communities throughout our state,” DeSantis said at a press conference announcing the task force’s actions. “These issues require effective and immediate action, and my administration is committed to taking the necessary steps to combat this crisis.”
The Office of Drug Control was first established by former Gov. Jeb Bush (R) in 1999. Amidst much criticism, it was abolished by then-Gov. Rick Scott (R) as one of his first acts as governor in 2011. The closing was particularly odd timing given it came as the opioid abuse epidemic was just then reaching crisis proportions. He later rejected a request in 2017 by Florida’s Drug Policy Advisory Council to bring the office back.
DeSantis made clear he was not going to follow suit.
“The importance of restoring its functions could not be more obvious,” DeSantis said in a press release last week.
The drug office will help coordinate local, state and federal government anti-abuse efforts, while the task force will be expected to develop a long-term strategy for dealing with the problem. (ORLANDO SENTINEL, TAMPA BAY TIMES, SARASOTA HERALD-TRIBUNE)
Utah Gov. Gary Herbert (R) has signed a pair of school safety measures, one aimed at colleges and the other at K-12 institutions.
The first one, SB 134, orders Beehive State colleges and universities to develop a campus safety plan that makes clear the rights of sexual assault victims, as well as those of victims of stalking or domestic or dating violence. It came as a response to the shooting death of a University of Utah student by a man she briefly dated. Campus officials and police were accused of failing to share information between one another that might have prevented the murder.
Herbert also signed HB 120, a bill that requires K-12 teachers to take more training on school lockdowns in the event of an on-campus shooter. The measure also funds two new state positions, one a public safety liaison and the other a mental health specialist, both tasked with helping to improve safety in the public school system. (SALT LAKE TRIBUNE)
Saying that his state has “made progress and taken a strong stand against targeted violence,” INDIANA Gov. Eric Holcomb (R) signed a measure last week that for the first time gives the Hoosier State a hate crimes law. GEORGIA, SOUTH CAROLINA, WYOMING and ARKANSAS are the only states remaining without such a statute on the books. (WASHINGTON POST)
MICHIGAN Gov. Gretchen Whitmer (D) signed SB 3, a bill that clearly defines the list of people “allowed to serve an order of eviction and restore the property owner to the full possession of the premises.” The measure adds court officers, bailiffs and local law enforcement to the list of public officials who can serve such an order. (DETROIT NEWS, WXYZ [DETROIT]).
Citing “an unfair wage gap” that “continues to hurt women workers — especially women of color,” NORTH CAROLINA Gov. Roy Cooper (D) issued Executive Order No. 93, which prohibits state agencies under the Governor’s oversight from requesting salary history from job applicants and directs them to avoid relying on previously obtained salary history information to determine an applicant’s salary. (WNCT [GREENVILLE])
Although he says he has not scrapped the idea entirely, LOUISIANA Gov. John Bel Edwards (D) said his administration would not seek to impose Medicaid work requirements as previously announced. The governor’s office instead announced the start of a pilot program to offer Medicaid recipients free job skills training. (ASSOCIATED PRESS)
NEW MEXICO Gov. Michelle Lujan Grisham and DELAWARE Gov. John Carney signed measures that will require their states’ electoral votes in a presidential election to go to the candidate who wins the national popular vote. That brings to 14 the number of states that have adopted such measures since the 2016 election. (KRQE [ALBUQUERQUE], DELAWARE ONLINE)
- Compiled by RICH EHISEN
The TEXAS Senate approves SB 17, which would allow occupational license holders whose licenses are at risk due to professional behavior or speech to cite “sincerely held religious beliefs” as cause for their actions. It requires one more vote in that chamber before it can move to the House (TEXAS TRIBUNE).
NEW MEXICO Gov. Michelle Lujan Grisham (D) signs SB 437, which will incrementally raise the state minimum wage to $12 per hour by 2023 (ALBUQUERQUE JOURNAL).
The MINNESOTA Senate approves HB 400, a bill that would raise state licensing fees on opioid manufactures from the current $235 a year to $55,000 annually. Wholesalers and drug companies would pay $5,000 a year, while companies that sell or distribute 2 million or more units of opioids would pay an additional $250,000. The measure will go to a conference committee for consideration alongside a similar measure passed in the House last month (ST. PAUL PIONEER PRESS).
NEBRASKA Gov. Pete Ricketts (R) signs LB 399, which provides Cornhusker State schools with three different options for students to learn civics: participating in and reporting on a local government meeting, taking the test given to those seeking to become U.S. citizens, or completing a project or paper and a class presentation on holidays such as Veterans Day, Constitution Day or Native American Heritage Day (ASSOCIATED PRESS).
The ARKANSAS Senate approves HB 1684, which would allow so-called “dreamers” – students under the Deferred Action to Childhood Arrivals, or DACA – to pay in-state tuition rates at Razorback State colleges and universities. The measure moves back to the House (ARKANSAS TIMES [LITTLE ROCK]).
NEW MEXICO Gov. Michelle Lujan Grisham (D) signs SB 76, which makes it illegal to organize or take part in coyote-killing contests (SANTA FE NEW MEXICAN).
The COLORADO House and Senate give final approval to SB 181, a sweeping oil and gas reform measure that would, among many things, give local governments the power to regulate oil and gas operations in their jurisdictions. It moves to Gov. Jared Polis (D), who is expected to sign it into law (WESTWORLD [DENVER]).
The IDAHO Senate approves SB 1204, a bill that would require able-bodied Medicaid recipients who fail to meet certain work requirements to make a copay when seeking medical services. The measure moves to the House (ASSOCIATED PRESS).
COLORADO Gov. Jared Polis (D) signs HB 1028, which legalizes the use of medical marijuana to treat autism in children (COLORADO SPRINGS GAZETTE).
NEW MEXICO Gov. Michelle Lujan Grisham (D) signs HB 322, which requires health insurers to cover autism spectrum disorders without age or dollar-amount limits. Lujan Grisham also signs HB 324, which adds PTSD to the list of conditions presumed to have been caused by firefighters’ jobs and requiring employers to provide medical treatment for it (SANTA FE NEW MEXICAN).
The GEORGIA House and Senate each approve HB 324, which would allow private companies and Peach State universities to grow marijuana for medical purposes. The measure moves to Gov. Brian Kemp (R), who supports the bill and has indicated he will sign it into law (ATLANTA JOURNAL-CONSTITUTION).
MASSACHUSETTS lawmakers give final approval to HB 140, which would ban conversion therapy, which seeks to change a person’s sexual orientation, on minors. It moves to Gov. Charlie Baker (R), who has indicated he will sign it (MASSLIVE.COM).
NEW MEXICO Gov. Michelle Lujan Grisham (D) signs SB 323 a, a bill that decriminalizes possession of small amounts of marijuana. The new law decreases penalties for possession of up to half an ounce to a $50 fine (FORBES).
VIRGINIA Gov. Ralph Northam (D) signs SB 1604, which makes any form of cruelty toward animals a felony in the Old Dominion. Previous law required an animal to have died from such abuse before a felony was warranted. The new law takes effect July 1 (ABC NEWS).
The Pittsburgh City Council approves a package of bills that would ban the use of armor-piercing ammunition and high-capacity magazines and allow the authorities to temporarily seize the firearms of anyone determined to be dangerous. Opponents have vowed to challenge the new statutes in court, arguing that PENNSYLVANIA law bars local governments from enacting such prohibitions (YAHOO NEWS).
TENNESSEE Gov. Bill Lee (R) indicates he will sign HB 1021, which would ban local governments from regulating certain plastic bags and utensils. The move is intended to override local ordinances in Memphis and Nashville that impose taxes or other regulations on those products (NASHVILLE TENNESSEAN).
Rest easy, Colorado, the great lemonade blockade is over. Yes, as the Denver Post reports, Gov. Jared Polis signed a bill last week that will allow young ‘uns who want to make a few bucks with a good old fashioned lemonade stand to do so without government interference. The measure bars local governments from requiring entrepreneurs under 18 from having to get a city business license for small and “occasional” businesses like a lemonade stand. The bill was born out of the frustration of three Denver brothers, ages 7, 5 and 3, who had their stand closed down by the city last Memorial Day. Denver officials had already changed the ordinance within city limits, but state lawmakers saw a good opportunity to pile on in the name of free trade and they took it.
Mirror, mirror on the wall, who’s the tallest pol of them all? According to the Guinness Book of World Records, that would be New York City Councilman Robert Cornegy, Jr, who stands 6-foot-10. But wait! As the Associated Press reports, nobody checked in with North Dakota’s Insurance Commissioner Jon Godfread, a former college basketball player who stands just a tick over 6—foot-11. But wait some more! Another former college and NBA hoopster, Warrensville Mayor Brad Sellers, stands 7-feet even. And as long as we’re gonna be all competitive about it, nobody can quite reach the heights of yet another former NBA star turned politico, Chinese icon Yao Ming. The one-time Houston Rocket turned delegate to China’s National People's Congress comes in at a towering 7-feet-6.
A governor’s daily schedule can be hectic, so every little thing that eases the pressure can be a help. Which is why, as the Associated Press reports, Illinois Gov. J.B. Pritzker’s schedule includes suggested attire for most of the events on his calendar. What, aren’t governors always dressed in business attire? Not if your Pritzker, who favors khakis and blazer over suits and ties whenever possible. As such, his calendar includes suggestions like “Business: suit and tie,” “button-down and pullover,” and “polo with Columbia jacket.” The gov retains final say, so anyone trying to prank him by suggesting big floppy shoes and a rainbow wig is likely to be disappointed.
Oklahoma City Mayor David Holt will not be cowed by your cow-tipping obsession. Yes, as the AP reports, Holt recently celebrated the removal of all T-shirts being sold at the city’s airport that referenced cow-tipping, where rural youths allegedly sneak into a pasture at night and push over a cow that is standing but asleep. We say allegedly because cows don’t actually sleep standing up, so such activity is about as legitimate as a snipe hunt. Holt wasn’t a fan of the shirt, which definitely did not convey the image of the city he wanted the world’s travelers to see.
- By RICH EHISEN
Most risk management professionals know the adage, “An ounce of prevention is worth a pound of cure.” But in the digital age, you need more than an ounce of prevention when it comes to mitigating regulatory and reputational risk. It’s a lesson learned the hard way by one of the largest health insurers in the country when it discovered that personal data on nearly 79 million people was exposed through a cyberattack. Last fall, the company paid $16 million for non-compliance with HIPAA security rules after an investigation found that insurer lacked an enterprise-wide risk analysis process and failed to identify and quickly respond to suspected or known security breaches.
Regulatory fines only part of the cost of failed risk management
The $16 million penalty was just a drop in the proverbial bucket, however. Just a year before, the company settled litigation over the hacking incident—which occurred in 2014—for a whopping $115 million, which will be used to pay for two-years of credit monitoring for all those who had data exposed in the breach.
Beyond regulatory fines and class-action lawsuits, companies must consider hard-to-calculate costs like reputational damage and loss of trust, as well as business distraction. It’s hard to be forward-thinking and strategic when you’re looking over your shoulder all the time.
Unfortunately, hackers are just increasing the frequency and ferocity of attacks. What’s more, according to research by the Ponemon Institute, nearly 90 percent of healthcare organizations had a data breach in the past two years and 45 percent had five or more breaches. In fact, estimates based on the Ponemon study puts the cost of data breaches at $6 billion.
Moreover, healthcare-related organizations—from hospitals to pharmaceutical and bio-med manufacturers—face risk exposure from more than data breaches.
Complex supply chains increase risk exposure—from bad actions by the third-parties they rely on to disruption due to environmental disasters. Take Hurricane Maria which hit Puerto Rico in 2017. Puerto Rico happens to be the fifth-largest territory in the world for pharma manufacturing, producing about half of the world’s top-selling patented drugs.
The country is also a major source for IV bags that hold saline solution. Months later, hospitals across the U.S. were still struggling to bring in adequate supplies, particularly because of the severe flu season that hit on the heels of the hurricane.
At the time, CBS News reported, “Days of interruption and damage to manufacturing plants are affecting international supply chains for products such as cancer and HIV treatments, immunosuppressants for patients with organ transplants, and small-volume bags of saline, which are necessary for patients who need intravenous solutions.”
As a result, some hospitals postponed elective surgeries—an area that is typically a profit-center—to conserve their short IV bag supplies for critical care.
Taking a more proactive approach to risk management
Organizations across many industries face increased risk—evolving regulations, global supply chains, viral news and more. Keeping on a healthy trajectory demands a more robust approach to risk management.
Risk is inevitable, but companies that respond quickly and transparently are better positioned to control the situation. How confident are you in your current process?
3 Steps to Take Now
The telecommunications sector has taken some hits in recent years when it comes to anti-bribery and corruption compliance. Earlier this month, the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) announced a settlement related to FCPA violations by Russia’s largest telecommunications provider, Mobile TeleSystems PJSC (MTS). The result? $850 million in penalties, forfeiture and disgorgement. Download our new factsheet on bribery and corruption risk.
Bribes to win business a losing proposition
The March settlement comes on the heels of two other significant resolutions for similar bribery schemes with officials in Uzbekistan—a $965 million resolution with Swedish company Telia in 2017 and a $795 million resolution with Netherlands-based VimpelCom Limited.
All of these cases share a common denominator on the investigation side—cooperation from regulatory authorities and enforcement agencies around the globe, including those in the Netherlands, Norway, Sweden, Switzerland, Latvia, UK, Ireland and France.
The latest case resulted from an estimated $420 million in bribes made to an Uzbek official related to the former President of Uzbekistan. The payments were disguised as acquisition costs, option payments and charitable donations.
According to Charles E. Cain, Chief of the SEC Enforcement Division’s FCPA Unit, “The company engaged in egregious misconduct for nearly a decade, secretly funneling hundreds of millions of dollars to a corrupt official. Building business on a foundation of bribery leaves the business and American investor interests at the mercy of corrupt officials.”
But the cost of bribery and corruption goes beyond penalties and prosecution for those involved.
Lise Kingo, CEO & Executive Director of the UN Global Compact writes, “From legal and reputational risks, to the financial costs of corruption, to the erosion of trust among employees, shareholders and other stakeholders, there is a high risk to businesses that fail to effectively combat corruption. No company, no matter the size or the sector, is immune to corruption, and the potential for damage is considerable.”
The world pays the price for unchecked corruption
Analysis by the International Monetary Fund (IMF) has found that bribery alone costs the global economy nearly $2 trillion annually. Moreover, Transparency International’s analysis for its annual Corruption Perceptions Index finds:
In its 2018 release of the Corruption Perceptions Index, Transparency International reports, “Our findings suggest that strengthening institutions that provide democratic checks and balances, bridging the gap between laws and their implementation, and supporting public accountability and press freedoms, are interventions that can contribute to not only fighting corruption but also to the preservation and consolidation of democratic institutions and norms.”
How can you combat corruption?
Is it time for universities—and the foundations that fundraise on their behalf—to adopt the rigorous due diligence and risk monitoring processes that global companies use? Based on the latest bribes-for-admission scandal to hit the headlines, the answer is a resounding, “YES!”
Bribery allegations tarnish university’s reputation
One school currently under fire—the University of Southern California—is no stranger to controversy. Inside Higher Ed points out that USC was known as a party school back when competition to get in was less intense, noting, “People joked that USC actually stood for ‘University for Spoiled Children.’ In more recent years, however, the university had adopted more selective admissions requirements.
When the most recent corruption scandal hit the newswires, prosecutors named names—and the story took on a life of its own after the charges resulted in celebrities trading in their typical publicity photos for mug shots.
Headlines focused on the $25 million paid by Hollywood and corporate elite to win spots for their children at elite universities, sparking interest and outrage.
Subsequent photos of one of the benefactors of the fraud enjoying spring break in the Bahamas—on a yacht owned by USC Board of Trustees chairman Rick Caruso—added fuel to the fire.
Inside Higher Ed writes, “Many USC students, alumni and influential benefactors are deeply disappointed and angry about the latest turn of events and are highly critical of the administration under whose watch the bribery apparently occurred undetected.” But that’s not the only hurdle the university must overcome.
In the past two years, USC administrators have come under fire for sweeping complaints about sexual harassment and abuse under a rug. The article notes that students, alumni and supporters of the university are frustrated by an administration that is constantly focused on damage control instead of proactive reputation management.
College athletics play a role in reputational risk too
Admissions isn’t the only area of risk on campuses across the country. Last fall, two Adidas employees and an agent were found guilty of fraud in a scheme that paid student athletes to choose certain universities. Four coaches were also arrested in connection with the case and will go to court soon.
Universities need to take the bull by the horns when it comes to corruption and reputational risk. John R. Thelin, professor of history of higher education and public policy at the University of Kentucky, contends that “A principle of leadership and organizations is that ultimately a leader should know and be responsible for what goes on, especially with important programs and units.”
Thelin goes on to say, “I think this holds for universities. Intercollegiate sports programs, especially in the Power Five conferences, are sufficiently visible and significant that it’s fair and right to expect a coach, an athletics director and a president—and the Board of Trustees—to know. If college sports are, indeed, the ‘front porch’ of the university, all those high-profile and highly paid leaders are responsible and should know. No excuses.”
Risk management takes center stage on campus
Increasingly, universities and the foundations that support them are recognizing the need to better prepare for risks and opportunities on the horizon. Whether you are recruiting students for NCAA teams or donors to support your fundraising initiatives, the threat of reputational, regulatory, financial and strategic risk is constant—especially in the age of viral media.
A survey by United Educators finds that 70 percent of institutions report having a formal enterprise risk management process in place and 69 percent say that institutional risk is a topic at the boardroom table. What issues pose the greatest reputational risks to universities? The top risks universities expect to face in the future?
Chances are high that you’re reading this on a holiday.
Whether it’s something fun like the International Pancake Day (March 12) or a day with a bit more weight such as World Malaria Day (April 25), hardly a day passes by that isn’t noted for a national or international observance of some event, hobby or anniversary.
That means that no matter what product or service your organizations offers, it’s exceedingly likely that there is a day or two every year for your brand to use the calendar as a way to get the public’s attention.
What that looks like and where that plays out—on your own social media channels or as a featured segment in the news—depends on the popularity or notoriety of the day and the planning and execution you put behind it.
We’re unofficially declaring today the unofficial International Day of Made Up Holidays, and to celebrate here are three tips to get you going on your own holiday adventure.
Identify Your Holiday Well in AdvanceUnless you want to be on the sidelines with an impromptu celebration of Awkward Moments Day (March 18), it’s important to identify relevant days of observation several months beforehand so that you can plan your media strategy accordingly.
There are many online resources available to make this easy. For days that carry a bit more reputational weight behind them, the United Nations publishes an annual calendar of international days of observations. These typically revolve around matters of global importance to mark or commemorate historical events and achievements, or to promote awareness for ongoing global initiatives. The list is diverse and backed by U.N. resolutions voted upon by member countries.
On the other hand, other websites research and identify less “official” holidays and observances that tend to be a bit sillier in nature. These may not have the weight of international legal resolutions behind them but they still tend to have some sort of following around the world. Beyond these resources, pay attention to local and regional governmental entities. Legislative and executive bodies often pass resolutions or sign declarations to note one-off or annual observances. When these occur, because they’re specific to a certain area, they often have a built-in captive audience. This leads us to our next piece of advice…
If You Can’t Find It, Make ItIf you’ve checked all the resources and still find yourself yearning to celebrate an occasion that just doesn’t exist yet, there’s really nothing stopping you from taking a leap and creating a holiday or observance of your very own. To add legitimacy to your desired observance, you can reach out to members of a city council or mayor’s office (or your local equivalent) for support in making the day officially recognized.
This is a great tactic to employ if you’re observing an event or milestone that has local or regional impact. This can include things like a new capital investment that will generate new jobs, a major anniversary milestone or expanded product offerings, especially if that product is novel or attracts a strongly dedicated fanbase. Local officials who have the authority to declare or support the declaration of official observances are benefitted by associating themselves with the project and organizations benefit from the ability to leverage the officially declared event for publicity.
Research Past and Current CoverageWith so many holidays and observances assigned to days throughout the year, there can be a certain amount of fatigue associated with the celebrations. To stand out among the crowd of celebrants—and an audience that can be largely apathetic—do your due diligence in researching and analyzing how the media and public have responded---or not responded—to similar events in the past.
Media monitoring services like NewsDesk can be employed to run searches around phrases keyed in for specific holidays and observances. You can also be specific in outlet type, with narrowed searches in either mainstream news outlets or trade publications that are more industry specific.
Don’t spend all your time looking at earned media coverage, however, as many “viral” holiday hits first gain traction on social media. The right hashtag coupled with a clever enough idea or stunt can get people talking. If you need inspiration for just how quickly people can flock to the wacky or extreme, just check out this campaign built around National Unicorn Day (a made-up holiday based on a made up animal—that’s a new one!) that was promoted by a breath mint brand.
Adequate media research to glean inspiration and uncover best practices can inform a strategy built for executional success. Unlike more mainstream holidays, however, don’t stick with tradition and merely copy or repeat the tactics of a past celebration—bring something new each and every year. It’s the novelty that these campaigns bring that really give us reason to celebrate.
Pension reformers won a narrow victory this month in the California Supreme Court, but the justices dodged a decision on the “California Rule,” a restrictive provision cherished by public employee unions.
In a nationally watched case, the California high court upheld a pension reform initiated by former Gov. Jerry Brown (D) that stripped a retirement perk from public employees. The perk, known as air time, allowed public employees to purchase credits that boosted their pensions by up to five years as if they had worked that time.
The unanimous decision in Cal Fire Local 2881 vs. CalPERS found that these credits were not part of core pension benefits and therefore could be eliminated.
The court explicitly avoided a decision on the California Rule, which makes the pension an employee receives when hired a vested right that can’t be cut unless offset by a comparable new benefit.
“We have no occasion in this decision to address, let alone to alter, the continued application of the California Rule,” the court said.
The court did not tip its hand on what it might do in four other pending cases on which it has yet to schedule oral arguments.
The rigidity of the California Rule has long made it a target of pension reformers. In an interview with the Sacramento Bee last December before he left office Brown called such rules a “one-way ratchet to fiscal oblivion.”
A dozen other states adopted the California Rule, according to the Public CEO website, but nine of them have modified it. In California the rule is embedded in the state constitution.
The California Supreme Court cited the rule in overturning voter-approved pension cuts in San Diego and San Jose. San Diego appealed to the U.S. Supreme Court, which on March 18 declined to review the case.
The Cal Fire decision came as states, cities and school districts across the country come under increasing pressure from unfunded pension liabilities.
In Illinois, a perennial trouble spot, new Gov. J.B. Pritzker (D) has proposed selling $2 billion of bonds to inject cash into the state’s retirement system.
Pritzker said he won’t make the mistakes of past governors and use the money to cover annual payments, which pushed Illinois’s credit rating to near junk bond status. Instead, he proposes also to raise taxes and turn over some government assets, such as office buildings, to the retirement system. In Kentucky, reports the Louisville Courier-Journal, $38 million in increased pension costs could shutter health departments serving 42 Kentucky counties in the coming fiscal year. Kentucky health leaders are pressing lawmakers for a one-year reprieve to allow time to overhaul a public health system facing a financial crisis. The higher pension costs could lead local health departments serving an additional 22 counties to run out of reserves and force them to close the following year, state officials said. In Michigan, 250 public bodies have been flagged by the Michigan Treasury Department for carrying significant unfunded public debt. Small communities in the largely rural Upper Peninsula have been particularly hard hit. Iron Mountain, a one time mining community with a population of 7,400, typifies these small cities. It has 41 employees, down from 55 a decade ago, and nearly $1.5 million in retirement health care debt. Jordan Stanchina, Iron County’s City Manager, told Bridge magazine that pension costs have diverted funds from basic functions such as road repair. He said he’s put off water and sewer projects and delayed replacing worn-out equipment. Similar narratives have played out across the United States as thousands of local governments have trimmed services, delayed capital improvements or reduced staff because of pension pressures. Santa Barbara, California, a coastal city of 92,000 in a relatively well-off area, never fully recovered from the Great Recession of 2007-2009, says Bob Samario, the city finance director. The city had 662 full time positions in 2008; it now has 624. Samario expects “unprecedented” pension costs and an uncertain economy from 2019 to 2025. He predicts that Santa Barbara will survive but says some cities would file for bankruptcy because of pension costs. “This is the real deal for some cities that aren’t financially strong,” he told the online newspaper Noozhawk. “It will hit them hard.” In the past decade pension liabilities played a role in the bankruptcies of three California cities: San Bernardino, Stockton and Vallejo during or soon after the Great Recession. That recession made the public aware of the strain put on state and city finances by generous retirement benefits and enabled Gov. Brown to win legislative approval of a package of reforms embodied in the Public Employee Pension Reform Act of 2012 (PEPRA). One of these reforms, as upheld by the California Supreme Court in the Cal Fire decision, banned air time. Both sides in the ongoing pension debate have attempted to put a positive spin on Cal Fire. “This ruling offers hope that California can take reasonable steps to ensure that our pension systems can always pay all the benefits our employees have earned without driving cities, counties, and school districts into insolvency,” said Chuck Reed, a former San Jose mayor and founder of Retirement Security Initiative. Ted Toppin, chairman of the union-backed Californians for Retirement Security, said he was pleased that the court had left the California Rule in place, “holding that vested benefits cannot be impaired.” Dan Pellissier, president of California Pension Reform, said the Cal Fire decision could become a “building block” in other cases. Next up before the court is a case known as Alameda, in which public unions in three California counties are attempting to overturn a provision of PEPRA that banned pension “spiking.” This practice allowed employees to increase their pensions by adding the value of unused vacation, leave time and other benefits. Cities and counties have saved tens of millions of dollars in retirement obligations since spiking was banned. Unfunded liabilities for the 50 states reached $1.6 trillion in fiscal year 2017, the last year for which full figures are available, according to Moody's Investors Service. Nonetheless, there are some reasons for optimism. The first reason is that public awareness of the peril of unfunded liabilities that arose during the Great Recession has not abated. Pension issues are frequent discussion items on the agendas of governing bodies of cities and councils. They’re on state legislative agendas, too. Colorado, Illinois, Kentucky and Minnesota, took steps to mitigate their respective pension funding crises in 2018. Pension issues are front and center this year in Illinois, the state with the most unfunded liabilities. Nine states now perform regular stress tests on their public retirement systems and report the results. These states are California, Colorado, Connecticut, Hawaii, Kentucky, New Jersey, Vermont, Virginia and Washington.
Another reason for optimism is that some retirement systems have improved their investment practices, among them the California Public Employees Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). CalPERS, the nation’s largest retirement system, had an 8.6 return on investments in the 2017-2018 fiscal year; CalSTRS had a 9 percent return.
Even more encouraging, CalSTRS and the Teachers Retirement System of Texas (TRS) are investing directly in businesses, a practice known as co-investing that was pioneered by Canada.
Public pensions already put billions of dollars into buyout firms such as Blackstone LP, bringing a median annual return of nearly 12 percent. Co-investing, in which pension funds buy direct stakes in companies, promises even bigger gains but requires a highly sophisticated investment staff that smaller funds may be unable to afford.
All in all, states and their pension funds are facing up to the recurrent problem of unfunded liabilities to an unprecedented degree.
It’s imperative that they do since these liabilities pose a clear and growing danger to the fiscal health of state and local government.
In 1955 the California Supreme Court ruled in Allen v. City of Long Beach (1955) that workers enter a contract with their employers from their first day on the job, and their pension benefits can’t be reduced unless they’re replaced with comparable benefits. The so-called “California Rule” was adopted by 12 other states, according to an article by Amy Monahan, a professor at the University of Minnesota Law School, published in the Iowa Law Review in 2012. Monahan noted that three of the 12 states modified the standard after adopting it.
A bill introduced late last month in the Georgia House would ban most abortions once a fetal heartbeat was detected by a doctor, which usually occurs at about the six-week point of a pregnancy. But HB 481 would also allow parents to claim a fetus with a detected heartbeat as a dependent on their taxes.
Some were baffled by the bill.
“That just blew me away,” said state Sen. Valencia Seay (D). “From my perspective, I look at seen and unseen, born and unborn. I just don’t get the whole connection.”
But veteran state Rep. Ed Setzler (R), the bill’s sponsor, said he believes that life begins at conception and that, therefore, a fetus should be treated the same as a child that has been born.
“All we’re saying is if the child is in the womb, we should recognize the humanity of the child,” he said.
Setzler said he didn’t know of any other states that have passed such a tax. But HB 481 is moving quickly in Georgia, already having been passed by the House, according to LexisNexis State Net’s legislative information system. State Net’s Legislative Outlook tool also forecasts the bill has a 95 percent chance of passing the Senate, given Setzler’s 15 years in office and his party’s 35-21 majority in the chamber, among other things. (ATLANTA JOURNAL-CONSTITUTION, LEXISNEXIS STATE NET)
Between 2007 and 2017, the number of renters in the United States over the age of 60 increased by 43 percent, according to a report this month from RentCafé, a nationwide apartment search service. That surge in older renters, in turn, helped raise the nation’s overall rental rate to 36.6 percent, its highest level since 1965, Pew Research reported in 2017.
Larger cities are attracting many of the older renters. In New York, San Francisco and Washington, D.C., their numbers have increased by at least 20 percent over the last decade. In Austin, Texas, the population of older renters has more than doubled.
“As people get older, their needs change,” said Mark Trekson, research associate for the Urban Institute’s Metropolitan Housing and Communities Policy Center. “If you are in a split-level home or a multi-level house, you might want to move to a place with an elevator and amenities in walking distance.”
The trend could pose challenges for cities, such as by increasing demand for health-care services and improved building accessibility. But the trend also offers potential economic benefits for cities. Research by Morgan Stanley indicates that baby boomers - those born between 1946 and 1964 - control 70 percent of America’s disposable income, and spending by those over the age of 50 will increase by 58 percent in the next two decades. (GOVERNING, RENTCAFE, PEW RESEARCH CENTER, MORGAN STANLEY)
NEW YORK state lawmakers, including Assembly speaker Carl Heastie (D), have been meeting with representatives from major gambling companies about the possibility of opening two to three full-fledged casinos in New York City. That idea, opposed by liberal Democratic lawmakers in the state who consider gambling a regressive tax, has been given new impetus by Amazon’s decision not to build a headquarters in Queens. (NEW YORK TIMES)
The five-member governing body of Arlington County, VIRGINIA unanimously approved a $23 million incentive package for Amazon, which is building a new headquarters there, expected to provide at least 25,000 jobs over the next 12 years. The state government of Virginia has already approved a $750 million package of incentives for the company. (ASSOCIATED PRESS)
ALABAMA lawmakers are considering a bill (SB 22) that would add a line to state income tax forms allowing taxpayers to donate a portion of their refunds to a private organization supporting President Trump’s proposed border wall with Mexico. The bill, authored by Senate President Pro Tem Del Marsh (R), was approved by the Senate Committee on Governmental Affairs last week. (BIRMINGHAM NEWS, LEXISNEXIS STATE NET)
The U.S. Supreme Court upheld a lower court’s ruling that the state of WASHINGTON can’t assess state fuel taxes on a wholesale fuel importer owned by a member of the Yakama Nation that transports fuel by public highway from Oregon to the Yakama Reservation to sell to retailers there. The justices ruled 5-4 that the state’s fuel taxes were preempted by the Yakama Treaty of 1855, which grants tribal members the “right, in common with citizens of the United States, to travel upon all public highways.” (YAKIMA HERALD)
A U.S. District Court judge has dismissed a lawsuit over the truck tolls RHODE ISLAND began imposing in June as part of a plan to repair its roads and bridges, ruling that the case belongs in the state court system. There was no immediate word from the American Trucking Associations, which filed the lawsuit, whether it would refile in state court. (ASSOCIATED PRESS)
RHODE ISLAND Gov. Gina Raimondo (D) has proposed imposing on the state’s largest employers a 10 percent tax on the wages of each of their workers who receives Medicaid. Nearly 200 companies that currently employ 50 or more Medicaid enrollees and at least 10 with more than 300 such employees would be subject to the tax of as much as $1,500 per worker. (PROVIDENCE JOURNAL, LEXISNEXIS STATE NET)
Last year the North Carolina General Assembly declared that the state’s Department of Motor Vehicles and its 400 employees would have to vacate their aging headquarters building in downtown Raleigh by October 2020, due to leaks, asbestos and inadequate fire safety.
Some saw that as an opportunity to do something about the state’s growing rural-urban divide. Eighty of the state’s 100 counties are rural and just six urban, but, as in other parts of the country, the latter has enjoyed most of the economic growth since the Great Recession. Between 2007 and 2017 the state’s urban centers have experienced employment growth of 11 percent, while rural counties have seen a 6 percent decline.
The divide has also contributed to recent “red state, blue city” battles over issues like fracking, sanctuary cities and the state’s so-called “bathroom bill,” requiring LGBT individuals to use public restrooms corresponding to their gender at birth.
So the state opened up its search for a new DMV office space to areas outside Raleigh proper, and after much debate, settled on Rocky Mount - the cheapest of the available options, as well as the birthplace of North Carolina Gov. Roy Cooper (D) - about 50 miles from Raleigh.
For David Farris, president and CEO of the Rocky Mountain Chamber of Commerce, the decision was a win-win.
“We thought it met the mission — spoken and unspoken — by our General Assembly,” he said. “Which was to put [the DMV] in a less expensive area that could also help an economically challenged region, and still be close in proximity to the capital.”
Farris also said the decision “signals to the rest of the Eastern part of the state, which has struggled over the last 20 years, that our leadership in Raleigh is very sensitive to the needs of Eastern North Carolina.”
But Rob Broome, executive director of the State Employees Association of North Carolina, said the move would increase the commute times and otherwise complicate the lives of current employees.
“It’s not an economic development victory when you simultaneously create economic distress for 400 state employees,” said Broome.
How things ultimately go in North Carolina could have a bearing on whether a similar idea takes root in the nation’s capital, with some GOP lawmakers pushing for the repeal of a federal law requiring government offices to be located there.
“There’s no reason why the Department of Agriculture has to be in the District of Columbia when it could be located in Indiana or another heartland state,” said U.S. Rep. Luke Messer (R-Indiana). (CITYLAB, ATLANTIC)