KeNo's Housing and Economic Portal: Saturday February 26 Housing and Economic stories

Friday, February 25, 2011

Saturday February 26 Housing and Economic stories

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Chicago finances are even worse than you thought! - (www.businessinsider.com) Just when Chicago's fiscal problems looked they couldn't get much worse, a new study shows that the city now faces nearly $23 billion in unfunded pension liabilities, the Chicago Tribune reports. Chicago's unfunded pension obligation has increased 600% since 2000, according to the report, released by the city's Civic Federation. When combined with state pension debt, unfunded liabilities on public employee pensions would now cost each Chicago resident more than $11,934. Much of the blame rests with Illinois' pension code, which allows local governments to avoid paying their contributions to public employee pension plans. This problem is exacerbated, the report says, as the number of retirees exceeds the number of active public employees.

Geithner Quietly Tells Obama Debt Expense to Increase to Record - (www.bloomberg.com) Barack Obama may lose the advantage of low borrowing costs as the U.S. Treasury Department says what it pays to service the national debt is poised to triple amid record budget deficits. Interest expense will rise to 3.1 percent of gross domestic product by 2016, from 1.3 percent in 2010 with the government forecast to run cumulative deficits of more than $4 trillion through the end of 2015, according to page 23 of a 24-pagepresentation made to a 13-member committee of bond dealers and investors that meet quarterly with Treasury officials. While some of the lowest borrowing costs on record have helped the economy recover from its worst financial crisis since the Great Depression, bond yields are now rising as growth resumes. Net interest expense will triple to an all-time high of $554 billion in 2015 from $185 billion in 2010, according to the Obama administration’s adjusted 2011 budget. The amount of marketable U.S. government debt outstanding has risen to $8.96 trillion from $5.8 trillion at the end of 2008, according to the Treasury Department. Debt-service costs will climb to 82 percent of the $757 billion shortfall projected for 2016 from about 12 percent in last year’s deficit, according to the budget projections. That compares with 69 percent for Portugal, whose bonds have plummeted on speculation it may need to be bailed out by the European Union and International Monetary Fund.

States Aim Ax at Health Cost of Retirement - (www.nytimes.com) Governors and mayors facing large deficits have set their sights on a relatively new target — the soaring expense of health benefits for millions of retired state and local workers. As they contend with growing budget deficits and higher pension costs, some mayors are complaining that their outlays for retiree health benefits are rising by 20 percent a year — a result of the wave of retirements of baby boomers and longer life expectancies on top of the double-digit rate of health care inflation. The nation’s governors face a daunting $555 billion in unfunded liabilities to finance retiree health coverage. The Pew Center on the Statescalculated those long-term obligations last year, saying New Jersey had the largest amount, $68.9 billion, with California second, at $62.5 billion.

Wisconsin National Guard Preps For Worker Unrest After Governor Unveils Emergency Budget - (www.businessinsider.com) Wisconsin Gov. Scott Walker, a Republican, unveiled an emergency budget proposal Friday to deal with the state's growing budget woes. Wisconsin has a $137 million deficit this year, and faces a projected $2.9 billion budget shortfall for 2012 and 2013. Under Walker's plan, public employees would lose all of their collective bargain rights, except a limited negotiation of wages. State workers would also have to contribute more to their pension and health care benefit plans. Unions erupted in outrage as they learned about Walker's proposal. The Governor told Milwaukee Public Radio that he has briefed the Wisconsin National Guard to prepare them for any worker unrest today.

Fannie, Freddie Taxpayer Tab Soars Again - (www.bloomberg.com) Taxpayer aid to Fannie Mae and Freddie Mac will reach $224 billion by the end of 2012, of which $55 billion will be returned in dividends to the U.S. Treasury, according to President Barack Obama’s 2012 budget. By 2013, the government-owned mortgage companies will be profitable enough to “pay part, but not all” of their dividend payments from earnings, according to the budget released today. The budget’s projected cost to taxpayers for rescuing Fannie Mae and Freddie Mac -- $169 billion after subtracting the dividends -- is at the low end of a range of estimates from the Federal Housing Finance Agency, the companies’ chief regulator. The agency’s analysis, issued in October, predicted a best- case scenario of $221 billion in aid, or $142 billion after dividends, and a worst-case scenario of $363 billion, or $259 billion after dividends.