Issues
Conservative age-based funds in college savings plans serve up surprise losses
- Brent Hunsberger, itsonlymoneyblog@gmail.com
January 14, 2014
Eric Hutchinson has been saving for his daughter’s college education for a dozen years. But in April, the Tigard resident decided to take advantage of the Oregon College Savings Plan‘s tax break.
He put $5,000 in the plan’s Age-Band 16 portfolio for 16-year-olds, which will automatically adjust his investment into more conservative holdings as his daughter Noelle gets older.
So, he was a bit surprised when he looked at the account balance just after New Year’s and found it held $4,980. Hadn’t it gained anything from the year’s run-up in stocks?
Our Response & Your Comments
How could your lose money in a year when virtually every stock market index shot through the stratosphere?
It’s simple – Trust it to the government.
To be fair, government college savings programs lost money because they are understandably conservative and become more so as students approach college age, so they skew towards bonds.
But there are a few simple truths here.
First, when you trust your money to the government you lose control over it, so you can’t start out conservative in Jan. and in March say “Stocks are the place to be, so I’m switching to them.”
Second, government programs are top down, rigid, one-size-fits all programs. And if they don’t fit you, it’s just too darn bad. Think ObamaCare, Cover Oregon, etc.
The final lesson: Nobody watches your money like you watch your money. Carve this into your dining room table and never forget it. Especially when dealing with the government.
Want a Highrise Next to Your Home? No? How About a Pig Farm?
Do you think it is a good idea to give the Department of Housing and Urban Development unchecked power to put an apartment building in your neighborhood? HUD has proposed a new rule that could do just that.
In July, HUD published its long-awaited proposal on “Affirmatively Furthering Fair Housing” in the Federal Register. It is a sweeping set of land-use regulations that has attracted little national attention. The agency wants the power to dismantle local zoning so communities have what it considers the right mix of economic, racial and ethnic diversity. A finding of discriminatory behavior, or allegations of discrimination, would no longer be necessary. HUD will supply “nationally uniform data” of what it thinks 1,200 communities should look like…
HUD and Westchester are battling over local zoning that arose from a 2009 settlement (signed by my predecessor) to build 750 affordable-housing units in 31 mostly white communities. Westchester is well ahead of schedule in meeting these obligations. Almost 400 units have financing and 124 are already occupied. But HUD isn’t satisfied because it wants to control local zoning and remake communities.
– Robert F. Astorino, The Wall Street Journal
Lane Solutions Replies
So – HUD knows exactly what 1,200 communities should like. And Westchester County, NY, should look just like the other 1,199. And if it doesn’t, HUD, in its bureaucratic wisdom, will withhold $17 million that it had promised to the County to build new sidewalks, playgrounds, and other good stuff in poor communities.
What’s that you say? Westchester is already the fourth most diverse county in New York in terms of Blacks and Hispanics? HUD’s federal monitor found no evidence of exclusionary zoning based on race or ethnicity? HUD doesn’t know what its new rule will cost or if it will work? Why does it matter to Lane County what happens in New York?
It matters because if the Feds can “…dismantle local zoning rules” in Westchester they can do it (and more) in Eugene. Or Creswell.
It matters because if you take money from Washington it can tell you what to do with it. And it can take money from you.
It matters because the Feds think they’re smarter than you. This is rule #1 of Liberalism (oops, we meant “Progressivism”). So they can tell you who should be able to build what next to your house.
Oh, and did we mention that complying with HUD’s new rules will cost Westchester between $3 and $9 million? What could it cost in Eugene?
We’re Shocked! Shocked!
Accounting Error Causes 16.2 Million Shortfall to Implement Oregon Healthcare Exchange…Before it Even Starts—Expect Millions More in Shortfall Before it is Done
State officials organizing a new health insurance exchange are planning to ask for more federal grant funding to plug a projected $16.2 million shortfall.
The shortfall stemmed from an accounting error that caused state budget and fiscal analysts to misproject when the state would use up funding from a grant to partially launch a computer system for the exchange.
Oregon’s exchange, called Cover Oregon, is an online marketplace where individuals and small business owners can comparison shop for health insurance and apply for financial assistance.
qwong@StatesmanJournal .com
Lane Solutions Responds…
We’re shocked! We just don’t believe it…a government program short $16 Million because of an “accounting error”? Has this ever happened before? Surely not for the Affordable Care Act (AKA “Obamacare”), of which Cover Oregon is a part!
What’s that, Dear Readers? You say that it has? That the Pre-Existing Condition Insurance Plan for “uninsurables” – people with serious illnesses like cancer – has nearly run through a cool $5 Billion and needs big bucks from the states?
That Obamacare itself, originally set to cost $898 Billion over 10 years, is now projected to ring up $1.85 Trillion in costs?
But there’s no need to worry…because the government can always reach into your wallet to make up for its shortfalls, cost overruns or just plain ol’ “accounting errors.”
Wow! It’s Free Money! Really?
A new state program to prevent home foreclosures will launch Wednesday in Lane and 32 other Oregon counties. The Home Rescue Program will provide a year’s worth of mortgage payments, up to a total of $20,000, and up to $10,000 in back payments to bring mortgages current, according to Benjamin Pray, spokesman for Oregon Housing and Community Services, Oregon’s housing finance agency.
The program, which aims to provide assistance to about 2,500 homeowners across the state, will begin accepting applications online at noon Wednesday, Pray said. To qualify, applicants must be able to show that their income is at least 10 percent lower than it was in 2011 or 2012, and meet other eligibility requirements.
They do not have to be behind on their mortgage payments to qualify for the program, which is intended to give struggling homeowners some breathing space and allow them to stabilize their finances, he said. – The Eugene Register Guard
Lane Solutions Responds…
It sounds so good – help (to the tune of $20,000) for up to 2,500 Oregonians having trouble paying their mortgages. And it’s Free Money From the Government! What’s not to like?
Plenty. First, there’s the issue of “Moral Hazard.” Some call it “Perverse Incentives.” That means doing something that encourages people to engage in damaging behavior. In this case, taking on mortgages they can’t afford and not setting aside “rainy day” money. Rewarding people who do this simply encourages others to take the same risks.
Then there’s the issue of the “free money.” No, it’s not free – somebody has to pay it. And since the government’s overwhelming source of funds is taxes, that somebody, dear reader, is you.
If you’re like us you’re more than willing to help that neighbor who’s sick, whose house burned down or who fell off his roof. But you’re probably thinking what we’re thinking – “I didn’t buy a house I couldn’t afford or assume a mortgage I couldn’t pay and now I’m having money taken from me to give $20,000 to somebody who’s not even behind on his mortgage?”
Compassion is admirable. And each of us should show it. But we believe in showing it with our own money, not money taken from one person and given to another.
Just like there’s no such thing as a free lunch, there’s no such thing as free money – especially from the government.
Gov. Kitzhaber’s Guide to Cost Cutting
SALEM, Ore. — Gov. John Kitzhaber has signed a bill he hopes will curb the state’s prison population. Kitzhaber signed the measure during a ceremony in his office Thursday, flanked by district attorneys and sheriffs. Among other things, the measure reduces sentences for certain drug and property crimes and driving with a suspended license. It’s projected to keep the prison population flat for about five years. Kitzhaber sought to limit prison growth for a decade, but he made concessions to win support from the law-enforcement community.- Associated Press
Lane Solutions Responds…
Congrats to Guv Kitzhaber for finding the golden key to cutting costs. Want to save money on prisons? Presto – Cut the punishment for crimes. Maybe we can save money on the Oregon Highway Patrol by raising the speed limit to 95 MPH. Save hospital costs by treating all strokes and heart attacks as outpatient cases?
Here’s what we won’t do to save money on prisons: Ask why, of the 14 states with populations of 2 to 5 million, 10 spend less per inmate than Oregon and 9 of those are right-to-work states. 3 of the 4 that spend more are, like Oregon, forced-union states.
Nor will we ask why Oregon entry level correctional officials pocket 24% more annual take home pay than nearby states’ officials.
Heaven forbid that we ask why, in the Oregon Legislative Fiscal Office study of Oregon and 11 surrounding states, Oregon was the only state in the sample which paid the entire employee contributions to the retirement plan and health insurance premiums.
We conclude that it’s just easier to turn criminals loose on Oregonians than rein in unions.
Govt. Bureaucracies – The Eternal Growth Industry
The “Fighting Irish” grandstand is being demolished in preparation for the restoration of the old Waldport High School campus to open space use. This project is funded by a $3-million Pre-Disaster Mitigation Grant from the Federal Emergency Management Agency (FEMA). FEMA has purchased all the structures and development rights at the site to prevent future development in a tsunami inundation zone. In turn, the Lincoln County School District will demolish and remove the school buildings, portable classrooms, and grandstands; restore the site into open space; and maintain the property in perpetuity with no future development other than that related to the open-space use.
Newport (OR) News, July 9, 2013
Lane Solutions Responds:
Huh? “Pre-Disaster Mitigation Grant”? In case there’s a tsunami in Waldport? The last one was 49 years ago. How many hurricanes, tornadoes and floods have occurred since then in highly predictable places? What has FEMA done to “mitigate” these?
FEMA is the poster child for government bureaucracies. Created to relieve hardship caused by Milwaukee, WI floods, FEMA has metastasized into an ever-expanding governmental blob that looks for new “maybe-they’ll- happen” disasters to conquer.
FEMA’s website reveals that the idea for this national bureau “Began on a fall day in Washington DC while eating crepes.” Says it all, doesn’t it?
The website proudly proclaims FEMA’s mission as “Progressively mov(ing) innovation to the forefront of our thinking in emergency management.” Said mission is larded up with palaver about “stakeholders,” “think tanks,” transparent dialogue” and the like.
Are these the geniuses who mistakenly doled out $385 Million to Katrina victims? Whose “innovation” included leaving tons of bottled water and meals in Georgia when Hurricane Sandy hit New Jersey?
Bureaucracies like FEMA are conceived in missions that expand to justify more employees, and grow like kudzu on steroids – eternally nourished by ever expanding government.
Hatched in Milwaukee, FEMA lives on in Waldport to tear down a football grandstand. It’s the poster child for government bureaucracies gone berserk.
Tell Us What You Think in the Comment Box Below
Ed. Note: Do you need a federally approved disaster plan for your pet bunny? You might. Find out why in a coming issue of Lane Solutions.
Special! Rep. Richardson on Salem’s “Blame Game”
I was first elected to the legislature in 2002, yet I am still surprised by the political “blame game” that occurs at the end of most Legislative Sessions. [To see a brief YouTube on this subject, click here.]
Last week, Oregon Governor John Kitzhaber spoke to the House Republicans and requested an additional $275 million in tax increases. He promised that if Republicans joined the Democrats in voting for tax increases the additional revenue would enable the legislature to help publicly funded K-12 schools, community colleges, universities and youth mental health programs. In other words, “it’s for the kids.”
I reminded the Governor that:
- The Democrats control the spending priorities and drafted the State Budget;
- There is a $1.91 billion (12%) increase in the 2013-15 Budget over the current one; and
- If he’s only asking for less than 2% of the $16.5 billion State Budget, then surely he could find such a small amount in the State Budget “for the kids,” without raising taxes on Oregonians.
I also reminded the Governor that, notwithstanding the $1.9 billion of additional revenue, he and his party are once again holding the K-12 school budget hostage, and acting like a tax increase is required to fund it. It’s an obvious set-up. If the Republicans fail to agree to the proposed tax increases, the Democrats will, once again, play the “blame-game,” and accuse Republicans of neglecting children, hating schools and abandoning seniors. This is a transparent and unfortunate case of playing political games instead of focusing on actually helping the kids and other Oregonians. (Click here to read entire article)
– Oregon Representative Dennis Richardson
Lane Solutions Replies:
Rep. Richardson couldn’t be more correct. Like Martha and the Vandellas sang, this time for the Democrats there’s “Nowhere to Run to Nowhere to hide.” They’re in charge of the Oregon House, Senate and Governor’s office. They can spend where and when they want to. They can spend every cent “For the kids.” But they chose to spend it to subsidize health insurance for families of four making up to $94,000/year. After all – unlike kids, these moms and dads will vote.
Tell us what you think below in the Comment section
Rep. Richardson: Rethinking education funding
Author: Christiana Mayer
By Taxpayer Association of Oregon Lawmaker Profile
Right now public education in the United States is behind such countries as Ireland, Estonia and Poland. It is clear that something needs to be done. Representative Dennis Richardson believes that local control over public education is a crucial part of reforming education and making sure that our children get the education that they need.
“Reform education by returning education control to the lowest level – The level closest to the student. And ensure that funding follows the student,” said Richardson.
Taxpayers are constantly told that in order to have a good public education system more money is needed for our schools. Several bills to reform the Public Employees Retirement System (PERS) have been introduced in the current legislative session to find more money. Most school districts blame the escalating cost of PERS as one reason why they have had to trim budgets. Some of the ideas being talked about in the State Capitol are the PERS reform plan to limit the cost-of-living adjustments to the first $24,000 of a retiree’s benefits, which saves $400 million a year. Another PERS reform plan, to limit cost of living adjustments for higher end users, would save $225 million a year. Unfortunately Representative Richardson does not believe that meaningful PERS reform will pass this legislative session.
For example, there are two different state departments that are directly involved in public education. The Department of Education and the Teacher Standards and Practices Commission create a series of hoops and barriers for teachers according to Representative Richardson. It is a layer of bureaucracy that keeps dollars out of the classroom. Since Salem is always looking for ways to put money in the classroom perhaps the functions of these two departments could be combined.
Parents need to take a greater interest in the education of their children and that will help change the system. Citizens should run for school board positions and volunteer in the public schools to make sure that they understand how the system works.
Reprinted with permission from Oregon Catalyst
Dennis Richardson, of Central Point, represents District 4 in the Oregon Legislature.
Leiken: Lane County’s Crumbling Public Safety System
On Thursday, November 29, 2012, the Lane County Sheriff’s Office closed another 35 jail beds resulting in the release of more than 30 inmates from the Lane County Jail. By Friday afternoon two of the released inmates were already back – one arrested for robbing a bank and one for unlawful entry and theft.
The release of these inmates from the Lane County Jail is directly related to the significant reduction in federal funding and is indicative of the lack of active management of the federal forests that make up half our land base. I fully support Sheriff Turner and his dedicated staff during this challenging time. They are sworn to protect us, but have been confined by inadequate resources.
Many voices have called for Lane County to move beyond federal timber revenue sharing, yet we cannot ignore the economic potential of the forests amongst which we live. Lane County Commissioners, even this week, continue to debate the form and function of a property tax measure dedicated to supporting the jail. But to fully rebuild a functioning public safety system (jail, patrol, prosecution, youth services, and treatment and prevention) would take more than a doubling of Lane County’s existing property tax. Residents have never supported tax proposals of that size, and there is no reason to expect they will now even in spite of the dismantled state of our public safety system. A property tax increase at this time throws cold water on our fragile recovery and, under Measure 5, the only options available to voters are temporary solutions. What’s more, those options could actually impinge on the tax revenue of our community’s fire, school, city, and other taxing districts.
Lane County’s partnership with the federal government goes all the way back to 1906, when the first national forests were created and County Commissioners throughout the West lobbied Congress to create a mechanism that would replace tax revenue lost by creating enormous amounts of publicly owned lands. Congress has all but completely walked away from this promise. I thank Congressmen DeFazio, Walden, and Schrader, and Governor Kitzhaber for forcing a dialogue to find a way to ensure both the essential ecosystem and the crucial revenue that provides for the security of Lane County families.
What we’ve seen this week – what we’ve seen as our system has eroded over the last several years – is the result of the reduction of tens of millions of real dollars. It cannot be blamed on uncontrollable cost, bad management, or waste. No single, immediate solution will fix our system. We need a long term solution to a sustainable public safety system that lays out the incremental steps to get there. We are committed to identifying such a cohesive strategy.
Sid Leiken is Chair of the Lane County Board of Commissioners
Government Reform for Greater Transparency and New Management Strategies
In August, this community experienced the first act of a longer drama about this county budget when the Lane County Commissioners received news of a $2 million budget shortfall. This shortfall had the commissioners making decisions between the poor, sick and homeless versus the safety of our community. At the last minute, the shortfall was revised down to $800,000.
One department, Public Safety, was cut by $500,000. Public safety is the most essential service of county government. Will criminals be running loose in the streets?
There are more cuts coming. Act Two of this drama will continue to unfold if state projections fall short, federal funding and other surprises force our commissioners and the administrator to redefine essential county services.
Our county administrator made a simple recommendation: reduce the “lapse” in many of the departments, including a core service of county government public safety. Lapse is the difference between the number of budgeted employees and the actual number of active employees on the job in Lane County. Vacant positions are currently kept on the books for budget purposes.
Some vacant but budgeted positions go unfilled for months, maybe even years, because it may be difficult to find the qualified candidate, compensation packages are insufficient or other personnel issues. These funds and positions are not subtracted even when they do not actually contribute to the stated purposes when the Budget Committee approves the department’s budget.
When the gap between budgeted employees and actual active employees is accumulated, those surplus funds are absorbed into the department and can be used for whatever the department director wants. It has similar advantages to an invisible reserve account for individual departments. This practice creates bloated budgets that camouflage the actual cost for essential services for county citizens.
This is the time to change this common practice. Departments should not hold open unfilled vacancies which can become slush funds and used for other purposes. The money should be returned to the general fund not as a carry-over resource for that department, but reduced from the department’s budget as unneeded and reallocated by the administrator. It is disingenuous to taxpayers in these challenging times to use what-you-see-is-not-what-you-get budgeting. It hides the real cost of essential services from taxpayers and elected officials.
Lane County government needs to earn back taxpayers’ trust. In Act Three, commissioners, budget committee members and administration should keep boots-on-the-ground, butts-in-the-jail and rocks-on-the-road with transparent budgeting. The good news: Act One of this drama, we have started the process early of a simplified, truthful county budgeting process that is long overdue.