By Steve Poftak
October 31st, 2008
The Commonwealth has once again offered free tuition to state schools for high school seniors with high MCAS scores.
But you really need to read the fine print on this one — free tuition is not all its cracked up to be. Because the state General Fund takes in all tuition dollars and state schools get to keep only their ’student fee’ money, the schools typically only raise fees not tuition. So…
tuition ranges from about $750 for community colleges to more than $1,600 at the University of Massachusetts. Students still must pay for fees, books and other expenses, which can cost up to $8,000 a year.
By Steve Poftak
October 31st, 2008
The notion of a mortgage bailout raises a series of cross-cutting issues — the moral hazard of lenders, the importance of stable neighborhoods (and the future costs of destabilization), and, painfully, the level of personal responsibility.
Today’s Globe profiles a mother of four struggling to stay in her home. The journalist profiles the woman as a entry to a discussion of mortgage bailouts, but doesn’t get too far into the numbers. By my rough calculation, the woman started out with a $207.5k mortgage on a two-family which left her with a $350/month P& I payment* after collecting $1100 in rent, which is 17% of her $25k yearly salary. (Sidebar: Anyone raising four kids on $25k has my admiration. I don’t know how you do that.)
In 2006, she made the disastrous decision to take out somewhere on the order of $160,000 to “pay bills.” This bumped her up to a $1575 monthly P&I payment or 76% of her gross income. Her current fear is the reset of the rate on the loan to 15%, which would take her monthly P&I payment to $3750 or 180% of her gross income.
This is an instructive case. What banker/lender (who was worthy of the name) would make such a loan? Why would we bail them out? And if we bail them out, what do we do about the moral hazard we’ve created for the next bubble?
The homeowner’s decision to refinance was clearly the wrong one as well. How do address their responsibility? Should that be bailed out? (In her partial defense, she claims that the reset provision was not known to her. I can’t know the truth in this matter, but I’ve done enough real estate closings to know that its not the most transparent process.)
Less obviously, what is the cost of the potential foreclosure? There’s clearly a direct and important cost to the family, in terms of dislocation. But there’s also a broader issue of neighborhood destabilization, which carries implicit costs both to households and to the public sector.
And that’s the challenge for these actual and proposed mortgage bailouts. How do you balance all three concerns and not lay a foundation for future bubbles and crashes?
*For the sake of simplicity, I’m ignoring taxes and insurance, and also assuming she pays no taxes on her salary of $25k.
By Steve Poftak
October 30th, 2008
The House and Senate passed a package of legislation that extended the pension funding schedule by two years (sorry 2024 and 2025 taxpayers!!) in order to gain an ‘extra’ $100 million in this year’s budget. This is just taking future tax dollars and spending it now, but who worries about such things these days?
And a note of caution — pension funds (like all assets exposed to the stock market) are going to take a terrible hit this year. It may prove extremely unwise to raid the pension fund now, when you might really need the help in a few months.
But, what irks me the most, is that this legislation was passed in informal session by the House (not sure about the Senate). There were ~20 - 30 reps present and any of them could have stopped it by themselves. They (both Republicans and Democrats) chose not to.
By Jim Stergios
October 30th, 2008
Massachusetts is going in one direction with the governor’s signing into law a last-minute change to allow people who have moved within the state, but have not registered in their new voting district, to go back to their old polling place and vote — and this only for the national elections.
In Florida there was a rather different move. Florida’s “electioneering communications” law asserted that groups mentioning a candidate or a ballot issue in any publication (including newsletters, websites) register with the government and report all of its spending and donors. That’s pretty heavy lifting for small business associations, etc. You don’t comply and you get fined and possible jail time for their speech.
Christina Walsh of the Institute for Justice reports some happy news:
Just in time for Election Day, community groups and educational non-profits across Florida and the nation have been set free to speak about candidates and issues on the Florida ballot thanks to a ruling today by U.S. District Judge Stephan Mickle. Noting that “no court has ever upheld such a sweeping regulation of political speech,” Judge Mickle granted a preliminary injunction request to suspend Florida’s “electioneering communications” law while a challenge to the regulation continues.
In his ruling, Judge Mickle found that the First Amendment challenge to Florida’s sweeping law is likely to succeed. He wrote, “The rights to speak and associate freely regarding issues of public concern are zealously guarded by the First Amendment. Unfettered and unregulated speech is the rule, not the exception. Just because a restriction is labeled as a restriction on campaign finance does not mean that it faces an easier path to constitutionality than a restriction outside that context.”
If you aren’t familiar with the organizations that led the fight on this, go check out IJ and the Castle Coalition. Makes you shudder at the thought of how the next Congress will define the Fairness Doctrine.
By Liam Day
October 29th, 2008
Again, props to Steve Poftak for directing me to the state GOP’s latest ad, whipped together in the wake of the breaking Diane Wilkerson scandal. The ad takes a tape of the robo call Governor Patrick recorded for Senator Wilkerson just before September’s primary and runs it over some of the released FBI photos showing the good Senator accepting the bribes she’s been accused of accepting.
The ad certainly isn’t fair, but it sure is a good political ad - except at the end when the photos of Senator Wilkerson fade to a graphic of a broken State House under the words “Beacon Hill is Broken” and above “Vote Republican”.
In order to vote Republican, voters must first be presented with Republican choices. Next week, exactly 45 Republicans (at least as listed on the state GOP’s website) are running for the 200 available seats in the State Legislature. That means more than 75% of the state’s voters won’t have the opportunity to follow the advice the state party is so assiduously offering.
You know what’s even more effective than attack ads, no matter how well done? Actually fielding candidates. The state GOP needs to keep their eye on the ball.
By Steve Poftak
October 29th, 2008
UPDATE: Governor just signed the bill mentioned below.
Less than a week before the election, the Governor is facing a decision whether to sign H.5121. It would allow people who have moved within the state, but not re-registered to vote in their new location, to go back to their old polling place and vote (for up to 18 months after they have moved).
I’m all for increasing voter turnout but a key provision of the bill strikes me as odd: individuals exercising this privilege would only be able to vote on state-wide and national races, not local races.
So, you would be creating two classes of voters with differing ballot access. And what about folks who moved out-of-state? If I move to Salem, NH, I can’t vote but if I move to Lawrence, I can?
Something just seems wrong about that, either you can vote or you can’t. Glad to see the House and Senate passing this bill in informal session.
Tip of the pen to State House News (sub. req.) for the story.
By Steve Poftak
October 29th, 2008
Part of the public pension system’s purpose is to attract and retain a high quality workforce. So, I read with interest the announcement that Lincoln-Sudbury High’s principal is retiring because:
“It’s one of these things where you hit a certain point in the Massachusetts retirement system where you have a certain amount of years of service and are at a certain age,” he said. “You hit the point where your pension is at a max.”
Take a read of some of Bob Costrell’s work on the Massachusetts public pension system for educators to get an idea of the perverse incentives in place.
By Liam Day
October 28th, 2008
Reading the affadavit submitted by Special Agent Corr in the Diane Wilkerson case, I can glean at first glance two lessons - apart from the obvious one that taking bribes to grease the wheels for a liquor license probably doesn’t make for sound public policy.
1) I hate to beat the drum on transparency, but, if Senator Wilkerson’s description of its deliberative process as “smoke and mirrors” is anywhere near accurate, the Boston Licensing Board is in more dire need of transparency than any government organization I’m aware of.
2) When government boards and agencies are the gatekeepers of economic activity, corruption inevitably ensues. It did when Jack Abramoff was lobbying for clients with casino interests and it seems to have here.
As my colleague Steve Poftak pointed out to me, the math is pretty glaring. If the cost of purchasing a transferable liquor license on the open market is currently running between $250,000 and $300,000, but the cost of buying a non-transferable license directly from the city runs only about $2,000 per month for the term of the license, prospective buyers not only have a distinct incentive to finagle a non-transferable license out of the city, they can pay an enormous amount of money to potentially corrupt politicians in order to obtain the license and still strike a bargain. As currently structured, Boston’s process for licensing the sale of alcohol at restaurants and bars invites corruption and has for years. Should we really be surprised when it finally manifests itself.
By Steve Poftak
October 28th, 2008
The Diane Wilkerson story is breaking all over right now. I urge you to read the whole affidavit.
Her culpability must be proven in a court of law, of course. But I assume her story is wrapping up.
I think its a more interesting read for the supporting actors, which the FBI brings on-stage, then never really resolves their involvement. There are phone calls, promises, withheld raises, etc. galore. It lays bare the raw power that certain politicians (and not just Senator Wilkerson) can wield and the ends for which they will wield them. I am not alleging any criminal behavior, just the naked exercise of power for no discernible public good.
I hate to sound naive. But this affidavit raises many questions. I’m hopeful that we get some answers from the press in the coming days.
By Jim Stergios
October 27th, 2008
Over the past couple of weeks a lot of folks that I respect from the newspaper business have come into Pioneer world HQ (yes, with the plush cloakroom) to speak to us on camera. Each has offered a scenario on where the newspaper business is going.
Well, it seems that for certain newspapers, the trend line rivals that of Wall Street. See the following numbers from Editor & Publisher regarding the circulation of some of the top daily papers (”for the six-month period ending September 2008 based on a Monday through Friday average” with the percentage comparing “this period to the same period a year ago”):
USA TODAY — 2,293,310 — 0.01%
WALL STREET JOURNAL — 2,011,999 — 0.01%
NEW YORK TIMES — 1,000,665 — (-3.58%)
WASHINGTON POST — 622,714 — (-1.94%)
BOSTON GLOBE — 323,983 — (-10.18%)
The Globe’s 10-plus percent loss is staggering. Only a handful of papers has sustained similar losses. Enter Jack Connors? With the coming loss of auto advertisement revenue, one wonders if the more apt question is not, Exit Globe?
I have come to two general positions on the collapse in circulation, whether at the Globe or elsewhere.
(1) Like many other papers, the Globe seems to have lost belief in its own product — which should be must-have, timely and investigative news stories, reported without favor, and a certain style. When was the last time you thought of the Globe as having an edge, a style, a reason for reading it besides the fact that people will refer to it? On State House matters, the State House News Service is better. On the economy the WSJ and Bloomberg are the winners (I often skip the Globe biz section now that its stars are gone).
(2) “Timely” news requires a different, web-based model, and the Globe has never taken its web presence as anything but an extension of the printed paper — a large mistake whether in formatting or marketing.
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