Tuesday, May 28, 2013

Renowned philosopher, Ima Thinkin, Phd, recently lectured at a prestigious investment forum. She limited her remarks to the application of sensus communis to investment and economic activity. Since her lecture was given at a prestigious CT University she began by applying sensus communis and cipherin’ to recent CT state economic policy. Particular attention was paid to the state’s program of paying companies to remain seated. $115 MM was granted by CT to the hedge fund, Bridgewater, to move its 1,000 employees fifteen miles from Westport, CT to Stamford, CT. The Bridgewater senior management members are CT tax residents as are the bulk of its employees. The only alternate state to which they could move is NY which would increase the personal tax burden of each senior manager, so the probability of their choosing to move their business to NY approached zero. In their financial version of rearranging the deck chairs, CT has donated $115 MM to preserve jobs already glued to the state. Similar wonder was expressed over the states grant of $291 MM to fund construction of a laboratory in Farmington, CT for a not for profit research center that will create 600 jobs. At a price of $485,000 per job created, if each job earned $75,000 per year and paid the CT income tax of 6.5% or $4,875 annually in taxes, the break-even on this transaction will be 99.5 years if CT borrows for free. Companies do not need to be very savvy to notice this new honeypot, to play corporate coquette and get rewarded.

Ms. Thinkin then turned the spotlight on the Chicago Teachers Pension Fund. The Pension Fund has $10 billion in assets, but is only 50% funded per actuarial estimate, a level that was 80% funded in 2002. How has Chicago dealt with this growing deficit? Since 1995 the City of Chicago has taken "funding holidays" and never contributed the required annual amount. The school district has been making 75% of the contribution that is supposed to be made by the teachers, which removes $130 million per year from the budget to be spent on children. Annual benefits continue to increase at 3%. A quick tap on the sensus communis ap on Ms. Thinkin’s iphone tells us either the city of Chicago or the state of Illinois, which constitutionally guarantees in-state pensions, are going to become Federal protectorates or revenue and spending, at the Fund require significant changes.

I’m Rob Morris and I approved this blog.

Renowned Philosopher, Ima Thinkin, PhD