Not Quite Ready for Prime Time

This past summer Kansas Governor Kathleen Sebelius seemed to be one of the future stars of the Democrat Party. At that party’s summer convention she was mentioned numerous times as a rising star, a female governor for m a red state, from the Republican stronghold of Kansas. This week she demonstrated that she is not ready to lead, in fact she demonstrated why she really isn’t up to the task of governing Kansas.

Early in the week, just ahead of the beginning of the 2005 legislative session, Sebelius gave her state of the state address in which she conspicuously left out any mention of what she would do about education, the most important and possibly most contentious legislative issue in Kansas. Later in the week she released her budget, which did nothing, that’s right nothing to solve the “problems” education faces in Kansas. Sebelius proposed that the amount of per pupil spending stays exactly the same, not even an inflation adjustment; she proposed that the education funding formula stays the same, she proposed no tax increases, oh sorry, I mean “revenue enhancements” for education. However she did propose a budget that takes revenue that traditionally goes to fund education and spend it on the expansion of other government programs.

Sebelius has carved out a nice spot for herself over the past couple of years, decrying the under funding of education, telling us all what an important priority it is to her and the Democrats, and then doing nothing about it. You can count on hearing her attack her opponent during the 2006 Governor’s race over education funding, but you won’t see her stick her neck out to propose a change.

Sebelius did however propose a budget that would spend the increased income (approximately $14 million) the state will receive from property taxes this year on general government spending, including new programs the governor would like to fund instead of education. Traditionally property taxes have funded education. Good schools (along with other important factors) tend to support increases in property values, the increase in property values means increased property taxes for the state. It would make sense to reinvest property taxes into the supposedly under funded Kansas schools. That is not what will happen if the governor has her way. Some legislators are still calling for tax increases for schools, taxpayers are already going to pay an extra $14 million this year due to property values, money that should go to schools, but instead will be spent on things other than the “number one priority” then greedy legislators will go back to taxpayers and ask for more money in the name of the “number one priority”, education.

For years legislators have put schools last on the agenda. Education is normally the last budget the legislature deals with. Education funding has been decided at the end of the legislative session or in the wrap up session the past few years, a funny time to deal with your number one priority. The legislature funds everything else, everything except their top priority, and then they are shocked to find that there is no money left for education and claim we need tax increases.

This year the legislature is dealing with gay marriage first, the Senate has already voted and the House is expected to deal with the issue soon. Before education, before economic growth, before the priorities that really affect Kansans.

Education is the most important issue in Kansas; it is one of the things that make our state what it is and one of the keys to economic growth. It deserves to be first in line for the legislature’s time and the taxpayers’ money, and it deserves a governor who is willing to deal with it before she plans her 2006 re-election campaign.

Timothy Burger

First Out of the Gate

The fine people at Fire Dennis Moore have an online poll available that will be open until this Friday that allows readers to tell who they would support into eh 2006 KS third Congressional District primary. Since none of the six people in the poll have publicly announced they will be running for the seat we may be getting ahead of ourselves a little bit, but of political junkies the results of the poll will be interesting.

We may get a better glimpse into who is really interested in the seat later this month when the Kansas Republican Party holds its annual Kansas Days celebration. While I will be very surprised if anyone is officially running at that point with the importance of early fundraising it won't be long before a serious candidate for this seat or for Governor in '06 needs to start raising money and lining up support.

On a side note, the number one search term for this site is still Kris Kobach, based on the article I wrote explaining why I believe Kobach lost the 2004 election to Dennis Moore. Hopefully the Republican Party learns from its past mistakes and chooses a winner in 2006.

Timothy Burger

Leadership That Counts (Even if Nobody Knows)

Yesterday the Bush administration took a big step towards securing the financial future of many, if not most Americans, and very few people really noticed. Bush came out with strong support of.....Corporate pension reform.

I know, I know, not the big long term financial reform for the elderly most of you were thinking about.

I know, I know most of you don't think about big long term financial reform for the elderly (really for all of us) very often, if at all. But trust me, this is a big deal and Bush is really getting this one right ( I know, I like Bush, big surprise right?)

For those of you who don't think about corporate pensions let me give you a quick and dirty primer for why this is important. Pensions are like 401(k) plans run by companies for their employees, ideally the company decides what income they will guarantee for their employees in retirement, then chooses an appropriate asset allocation, runs the numbers to see how much they need to save each year, and takes that money out of their employees' paychecks and saves it for them. They monitor their pension every year and if it has more money than it needs in order to pay the promised benefits it is "over funded" if the plan doesn't have enough money it is "under funded."

Companies that are still in business and plan to stay in business for at least one more year are called "going concerns" (this covers most companies) so their pension calculations assume that they will continue to save money in their pension every year, for the rest of time. As long as the pension gets these payments each and every year, they can meet its obligations to pay benefits.

Unfortunately some companies go out of business or encounter serious problems that prevent them from contributing to their pension plans. This is where the trouble starts. Since the companies have been counting on payments that continue for eternity, when the payments stop, the pension quickly finds that it does not have enough money to pay benefits.

To make up for this there is a US government agency called the Pension Benefit guarantee corporation (PBGC). The PBGC pays benefits to workers whose pensions fail. For this service the PBGC requires all companies with a pension to pay a small premium for the insurance they provide to workers. Unfortunately, due to some big time pension failures (think about virtually every steel company in the US) the PBGC already runs a $2 billion plus deficit each year, and guess who gets to pick up that tab, if you guesses the American taxpayer, you guessed correctly.

During good times pension funds earn above average returns, resulting in the fund being "over funded" (think of your 401 (k) in 1999). Some enterprising executive somewhere decided that this money could be counted as extra earnings and because of that the company wouldn't have to contribute as much to the pension that year. Earnings go up, Execs. Make more money and everything looks good.

Unfortunately sometimes things go bad (think of your 401(k) since early 2001), then all of a sudden the pension is "under funded" (since we quit funding it when things were soooo good). So what to do? Well you could put extra money in to make up the difference, but that would lower earnings for the year, so nobody wants to do that. Some enterprising exec. To the rescue, deciding that the solution is to assume that the money we already have will just grow faster (even though it really won't), so they almost have enough money already, so they don't need to put in any more. Problem kind of solved, but the rest of us kind of screwed.

It is "creative accounting" at its best, and it is a danger to retirees and to taxpayers. Fortunately President Bush has decided to tackle the issue. Although not many people will ever realize it, this could be a bold move, and it could really make a difference. This is the reason it is good to have a second term. Bush is willing to take on this issue even though it will make a lot of people unhappy in the corporate world. It requires that companies must more fully meet the promises they have made to workers. It will lower earnings for some of the worst offenders.

Wise investors should seriously consider selling the stock of companies that are negatively affected if these new rules go into effect. If management will play games with employee pensions to earn a bigger bonus, I guarantee they will play other games that could eventually endanger the value and viability of the company the investors (owners) have entrusted to them.

In the long run this is good for everyone, and just another example of the kind of leadership I am glad we have in the White House.

Timothy Burger