“Prioritizing” Federal Payments?

by John W Rodat on October 16, 2013

During the depth of the recent Great Recession, senior Budget and Finance staff would gather in my office once a week to decide which vendors our county would pay that week and which would not. We knew our cash position and which checks had been printed and held. While we had some idea of expected cash receipts, some of that, including reimbursement from the State and Federal governments (which were having their own problems) was far less certain as to timing. Ultimately, we had to do some short-term (within the fiscal year) borrowing to smooth out our cash flow. That has continued every year since.

Our little personalized process will not scale up to offer a way out for the Federal government from its current mess. Not even remotely.

Tomorrow, the Federal government’s ability to borrow will have been exhausted. That does not mean that the US will default on an obligation tomorrow, but absent an expansion of borrowing authority (raising the debt ceiling) it makes it near inevitable that the US will default on some obligation, most likely by the end of the month. It might not be debt service on previous debts, but it would be on something such as payroll, vendor payments or Social Security.

This process was hard enough and time-consuming enough for a county with an annual budget of about a half billion dollars. For the Federal government, which makes about 80 million payments per month, it is simply inconceivable. Some spending is fairly regular, e.g., payroll, but not all of it. Receiving actual revenue is far less regular. It’s downright lumpy. People who suggest that Treasury Secretary Jack Lew could effectively prioritize are delusional. Even beyond from the mechanical and legal challenges, the economic backlash would be severe.

Due to increased interest costs, even threatening to not raise the ceiling has costs and will cost even more.

There are some who believe that there will be some form of default and that is a good thing. Sort of like nuclear war is a good thing in my book. Failing to increase the Federal debt ceiling would be legally questionable, dangerous, and foolish. It would be a shameful act, not worthy of this country.

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Note: This post has been edited to clarify the number of payments per month made by the Federal government.

Tagged as: Cash, Default, Treasury

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DC Hostage Negotiating per The Daily Show

by John W Rodat on October 16, 2013

Perhaps I should just turn over all my commentary to Jon Stewart. Here The Daily Show brings in a former FBI hostage negotiator to help resolve the Washington fight tying the ACA to raising the debt ceiling and re-opening the Federal government. Laughing is better than crying.

Tagged as: ACA, Daily Show, Obamacare

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Teach Your Children

by John W Rodat on October 16, 2013

As we wait for Congress to continue creating an entirely artificial crisis, Crosby, Stills and Nash in concert seems appropriate tonight.

Tagged as: Congress, Music

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Facts? We Don’t Need No Steekin’ Facts

by John W Rodat on October 16, 2013

The current craziness in Washington would be bad enough if it were based on actual facts. It isn’t.

Nevermind that “austerity” as a policy emphasis is counterproductive while the economy is still sluggish, unemployment remains high, and the economy could be more robust without inflation … despite the political rhetoric and the conventional wisdom from too much of the press and punditry, the budget deficit has been declining. Debt has continued to increase, but at slowing rates.

From the Federal Reserves data repository (FRED), the first graph shows Federal revenues and expenditures. You’ll note that the difference – the deficit, is pretty steady from 1980 until the mid-90s, when it slows and then becomes a surplus under President Clinton. Then revenues begin to decline and expenditures increase under President George W. Bush and accelerate rapidly with the onset of the Great Recession in 2007.

But with the election of President Obama, revenues began to rebound, expenditure growth slowed and then flattened.

In the second graph, you’ll see the net effect, the deficit, showing improvement beginning around 2008.

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Tagged as: Default, Deficit, Federal, Use the Damn Data

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Tweets by @johnrodat ">

by John Rodat on October 15, 2013

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Jon Stewart Gets it Right

by John W Rodat on October 11, 2013

I hardly wish ill to my fellow citizens, even those who live in states that receive more in Federal revenue and other benefits than they pay for in Federal taxes. But I’m rapidly approaching the point when I will revel in the reversing of the financial flows from the self-punishing, mostly Southern states to the more generous, mostly Northern states.

The late Senator Daniel Patrick Moynihan used to do an annual report showing the net financial flows from states like New York to states like Alabama. This was the result of lower Federal tax receipts from residents of states like Alabama and higher Federal spending in those same states than their northern counterparts like New York. The lower tax receipts had mostly to do with lower income and thus lower income taxes. The higher spending had to do with higher proportions of defense spending and more generous aid formulas under programs like Medicaid.

Now, with blessing of the Supreme Court, Republican controlled states, like Texas are rejecting the Medicaid expansion in the Affordable Care Act. They’re doing this though Federal reimbursement is 100 percent for the first three years and 90 percent thereafter. Other states, like New York and California are embracing the Medicaid expansion.

As a matter of inter-state financial relations, what does this mean? Though the state governments rejecting a Medicaid expansion won’t bear any direct cost even after three years, their residents will. Though the residents will have no opportunity to benefit themselves either directly with coverage or indirectly with financially stronger health care systems, they will be paying higher taxes to pay for the expanded coverage in participating states. This will probably be the first significant reversal of the financial flows that Moynihan complained about. And the wounds felt in anti-Obambacare states will be entirely of their own making.

Jon Stewart of the Daily Show nails it, describing the anti-Obamacare states as “moocher states.”

Tagged as: ACA, Daily Show, Medicaid, Moochers, Obamacare

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Summertime

by John W Rodat on September 21, 2013

Autumn begins today. So let’s mark the transition with Janis Joplin singing Summertime (1969).

Tagged as: Music

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Cassandra Wilson

by John W Rodat on September 21, 2013

Cassandra Wilson, Little Wing …

Tagged as: Take a Break

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Some Final Numbers on the Albany County Nursing Home

by John W Rodat on March 23, 2013

We’re in the end game regarding the Albany County Nursing Home (ACNH).

As I’ll lay out in another post shortly, when the key numbers are votes …

But in this post, we’ll dispense with some bogus, and seriously misleading, numbers that advocates of keeping the Nursing Home open have been throwing around the last month or so.

The advocates have been saying that instead of losing a lot of money, ACNH is “only” losing $2-4 million per year. The sad thing is that there are at least some Legislators who have bought into these numbers or at least paused. It’s especially sad because if they had merely taken the time to learn how the County budget works – not just for the Nursing Home – but generally, they would have immediately known something was amiss. It’s not as if a lot of them are rookies; most have been around for a long time. But these folks don’t do their homework. And their leadership probably prefers to keep the members and perhaps themselves in the dark. After all, they don’t even have their own budget staff, capable of figuring things out.

Supposedly, the $2-4 million figure is based on 2011. But why don’t they start with the current year’s budget? Here’s are the losses they budgeted for this year and how to find them in the Budget:

  • $2.69 million loss in the Nursing Home Fund (look for the line called “County Share”), but you can’t just look here.
  • $1.70 million cost embedded in the General Fund (A Fund) DSS Medicaid budget that is required to pay for the $3.40 million in IGT revenue in the Nursing Home Fund. This does not have a separate line, but is 50 percent of the revenue value shown in the NH Fund.
  • $2.40 million for Hospital Medical Undistributed for half year. Full year would be about $4.34 million. This includes retiree health benefit costs, which is not part of the current operation as well as the cost for current employees. However, there are two important points that should be taken into account. First, the cost of retirees will continue even if the NH is sold or closed, but it will decline over time. In contrast, that number will increase if the County maintains the NH. Second, to the degree that the County has to pay now for retiree health benefits, that’s because it did not set aside funds during the years when the liability was being accrued. Unlike, pension costs, for which funds are set aside currently for future costs, the actual spending on retiree health benefit costs are put off to the future – understating the true current cost.
  • $0.93 million in the CS Fund for only six months, which is where the County pays for Workers’ Compensation, Unemployment Insurance, etc. A full year’s operation would obviously cost more, perhaps not double that number, but close, or about $1.87 million.
  • $0.25 million in bond payments for the current facility.

So these numbers add up to nearly $8 million and, when fully annualized, they add to about $10.8 million.

And even the $10.8 million does not include one time costs in 2013 of $2 million to pay to USG while it takes over the operation of the NH and do not include $4.8 million in retroactive recoveries of IGT revenues.

Retroactive recoveries of IGT? Well, we discussed those before, but stop and consider that this would likely at least partly explain an artificially low loss in 2011.

So when you add it all up, excluding any payment to USG for taking over the NH, the budget that the Albany County Legislature adopted for this year, 2013 assumes a loss of about $15.64 million.

Before Legislators get deceived by understated numbers from two years ago, they should look at what they’ve already embraced for this year.

And, if they don’t understand how they got there, perhaps they should ask for some lessons about how the budget really works.

Tagged as: Albany County, Deficit, Nursing Home

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FAA Airport Tower Closings

by John W Rodat on March 23, 2013

Being a former Air Force pilot and still something of an aviation geek, I’m checking this list to see which of these airports – whose towers will be closed – I’ve landed at. All these closures are due to the Federal Budget cutbacks built into the “Sequester,” non-thinking, across-the-board cuts.

Tower closures do not equate to airport closures. However, it’s less safe and more restricted. Service out of these airports will be diminished.

I could still use these airports. The general public? Probably less so.

Tagged as: Budget, FAA, Federal Government, Sequester

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