Sunday, November 25, 2012

REPORTER'S NOTEBOOK: Nonprofits fear the 'fiscal cliff' | Crain's Detroit Business

REPORTER'S NOTEBOOK: Nonprofits fear the 'fiscal cliff' | Crain's Detroit Business
November 25, 2012

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Sherri Welch writes about nonprofits and services. Call (313) 446-1694 or write
The so-called "fiscal cliff" that's looming over the country will significantly impact nonprofits and the work they do if not addressed by Congress before year's end.

The cliff refers to the combination of tax increases and budget cuts hitting the country concurrently on Jan. 1.

Legislators are also talking about removing some of the benefits to charities in the tax code, said Kyle Caldwell, president of the Michigan Nonprofit Association. One example: eliminating or capping the charitable deduction, which would follow the elimination of the Michigan charitable tax credits at the end of 2011.

"In a nutshell, the fiscal cliff for the budget means a leap over the edge," Caldwell said. "But for many nonprofits, these spending cuts and less disposable income really means we're standing at the edge of a gravesite."

Much of what nonprofits do is providing the social safety net, Caldwell said: "People live or die by some of the services we provide."

Tuesday, November 20, 2012

Manufacturing and metros are recipe for success, says guru on cities | Bridge Michigan

Manufacturing and metros are recipe for success, says guru on cities | Bridge Michigan

  20 November 2012
Manufacturing and metros are recipe for success, says guru on cities
By Derek Melot/Bridge Magazine

Bruce Katz has pushed a consistent message for Michigan: M&M&E.
That’s short for manufacturing, metros and exports. A vice president at the Brookings Institution, Katz has worked in recent years with Business Leaders for Michigan in developing ideas for improving Michigan’s economy.

Bridge Magazine spoke with Katz by phone recently to get his sense of how Michigan’s recovery is doing – and what policy decisions are still lacking to bolster the state’s economy.

Bridge: In your testimony before the House Commerce Committee in May, you noted that Detroit and Grand Rapids ranked highly for export intensity. What is export intensity and why is it important in economic policy considerations?

A: Export intensity is a measure of the share of total output in the metropolitan area that is exported. Nationally, exports are around 11 percent of total gross domestic product, but in strong manufacturing metros, it’s higher. Detroit is about 14.9 percent and in Grand Rapids, it’s 15.3 percent. So there is just greater export intensity in the manufacturing metros and what we found is that 13-14 metros in Michigan are actually more exporting intense than the U.S. economy as a whole.

You know that matters because you know global demand is raising the U.S. economy, which has been underperforming because we have such a large domestic market. So with the Great Recession, the recovery that we have had to date is still not sufficient. What we have had today has mostly been fueled by global demands, particularly in countries like China, Brazil and elsewhere. … As the century unfolds, we are going to find ourselves doing more business abroad and for cities and metropolitan areas, they are going need to understand what they trade and who they trade with.

Bridge: Is it fair to say, based on these export intensity figures, that Michigan is actually further along than the rest of the country?

A: What it shows is that you are a production powerhouse, both in the large metros and smaller metros. For a long time, we have treated manufacturing differently with the old economy; actually manufacturing is completely fueled by technology innovation. … There is a future for manufacturing in the United States for a lot of different reasons and those places that are manufacturing hubs obviously have a jump on everyone else. The question is whether they understand it and are doing what is necessary to continue to move forward.

Bridge: In 10 to 20 years, how big a share will manufacturing carry in the economy and how many jobs will it provide?

A: Well these are the numbers I think are important to start the conversation: Manufacturing in the United States is 9 percent of jobs; it’s about 11 percent of GDP and employs about 30 percent of all engineers in the country. It accounts for about 68 percent of all private research and development and it generates 90 percent of the patents in the United States.

I just came from a tech-economy conference in Detroit, which is a conference on technology innovation. A large portion of the conference was about manufacturing and, again, I think we had almost a cartoon conversation about manufacturing where we talked about the old economy is manufacturing and the new economy is Facebook. This is a completely absurd conversation.
Manufacturing is still very productive in the United States. We are the third largest exporter in the world behind China and Germany and that is without any policy at the national scale that frankly is even remotely coherent.

 Bruce J. Katz is a vice president at the Brookings Institution and founding director of the Brookings Metropolitan Policy Program which aims to provide decision makers in the public, corporate and civic sectors with policy ideas for improving the health and prosperity of cities and metropolitan areas.

Tuesday, November 13, 2012

State and municipal bankruptcies are the financial crisis around the corner -

State and municipal bankruptcies are the financial crisis around the corner -

Tuesday, November 13, 2012 - 12:01 am
"Worse still, beginning in 2014 state and local governments will be required to report their pension obligations like businesses currently must. This means that sometime in the next fiscal year the debt that is several times greater than that which is currently on the books will magically appear on balance sheets. Among the worst examples will be Illinois, where reported government liabilities will rise from a few thousand dollars per resident to as much as $100,000 per citizen. No government without the ability to print money can pay this amount, and this will generate a crisis that will test the republic.
On its face, the problems should be easy to fix. Government employees in many places have been made promises that cannot be kept. These are mostly about pension benefits such as compensation, retirement age and health care costs. In the most solvent places, such as Indiana, this will mean modest benefit cuts to teachers and public employees. It will also mean higher tax rates than we would otherwise have enjoyed. In Chicago, New York and Los Angeles it will mean fiscal chaos that is outside of modern memory. This will lead to calls for federal interventions, which must be largely resisted."

Monday, November 12, 2012

Pension Liability: How Did It Get So Big? -

Pension Liability: How Did It Get So Big? -

Michael Moran talks about how companies got into this mess—and how they might get out of it
The growing weight of pension obligations is forcing more corporations to take dramatic steps to lighten the load.
WSJ: What are some strategies companies are using to shrink these pension deficits?
MR. MORAN: We've seen a number of strategies undertaken by plan sponsors. Some have shifted asset allocation to more of a dynamic framework, where asset allocation changes as funded status changes. Simplistically, this involves increasing allocations to fixed income as funded levels rise as a way to lock in that funded status.
More recently, we have seen plans instituting lump-sum options to their participants as a way to shrink their gross pension obligations. We've also seen some plans enter into annuity contracts with some insurance providers as another way of moving the liability off their books.
Finally, we've also seen a number of plan sponsors making voluntary contributions, taking advantage of the record amount of cash that's on corporate balance sheets, as a way to help improve funded levels.

Wednesday, November 7, 2012

Small management risks that make a big difference | SmartBlogs SmartBlogs

Small management risks that make a big difference | SmartBlogs SmartBlogs
By Mary Jo Asmus on November 7th, 2012

A few other small personal risks come to mind that make a big difference to your leadership:
Including others. You are creating a vision, mission or strategy for moving your organization forward. Or maybe you have some decisions to make about the customers you need to focus on. Perhaps you want to decide on organizational values or change the culture. Don’t do it in a vacuum! Invite your team into the conversation so that they have a say and feel ownership for the end product. The perceived risk here is that you might not get exactly what you want. The benefit is a sense of community and team ownership for outcomes.

Admitting your mistakes. Everyone makes mistakes. Admitting yours and apologizing when appropriate shows that you are human. People want to see your humanity; it helps them to know that you are more like them than different, thus creating a relationship bridge. The perceived risk is that you may believe they will think less of you. The benefit to admitting your mistakes includes creating an open, safe environment for others to make mistakes and admit them, too.

Asking for feedback. If you aren’t in an organization with a culture of feedback — or even if you are — it can feel uncomfortable to ask for it. However, all leaders have blind spots, and getting feedback is one of the best ways to conquer those. Ask for specifics (not just “How am I doing?”) in order to get specifics (“Was the information I gave about X in our meeting today enough so that you can do Y?”). The perceived risk is that you may feel you are showing weakness by asking for feedback. The benefit is that what you hear provides a roadmap for your improvement.

Listening when you want to talk. Something happens sometimes when individuals become leaders; they talk and talk trying to prove that they know everything. Try more listening instead. Deep listening (mouth shut, ears wide open, attention on the speaker) is rare, and you’ll stand out. The perceived risk is that you might think that listening to others signifies agreement with what they say or that you have nothing to add to the discussion. The benefit to listening is that you learn more and develop deeper relationships with others.

Leaders are supposed to take risks, but sometimes the personal ones are the hardest. However, they can also be the most effective.

What risks have you taken that made a difference in your leadership?

Thursday, November 1, 2012

Mini Debate Between Fred Leeb and the Attorney for the Opposition

Debate Over Proposal #1 
The Emergency Manager Law  
Spotlight on the News-Channel 7 WXYZ

MiniDebateonProp1(EM Law) and5 on 10-28-12
Please Click on the Picture Above to See the Debate Video

Proposal #1, the Michigan Emergency Manager Referendum, is on the ballot in Michigan for the November 6th election.  If the referendum passes (by voting "Yes", Public Act 4 (which was passed by the Michigan legislature in 2011 as the Local Government and School District Fiscal Accountability Act) will be adopted but if the proposal is defeated (by voting "No"), the law will not take effect. 

I strongly recommend that you vote YES on Proposal #1.

A mini-debate on Proposal #1 was held and aired Sunday, October 28, 2012 on WXYZ Channel 7's Spotlight on the News program hosted by Chuck Stokes.  The participants were Herb Sanders, attorney for Stand Up for Democracy (the coalition that sought to place the referendum on the ballot) and me (the former Emergency Financial Manager of the City of Pontiac).  The video of this debate can be seen by clicking on the picture above.  [The portion related to Proposition #1 is from the beginning of the clip until 13:16, sorry about the initial advertisement.]
I believe that there are many reasons to vote yes on Proposal #1, as follows:
  • The law has been used very rarely and only when it has been absolutely necessary to try to save a local governmental unit from a financial disaster.  I do not believe the State has any desire to take over the responsibility for managing many governmental entities.  There are currently only 5 cities (Flint, Pontiac, Ecorse, Benton Harbor and Allen Park) out of about 2,900 local governmental units in Michigan and 3 school districts (Muskegon Heights, Detroit and Highland Park) out of 579 school districts that have an Emergency Financial Manager.  In addition, there are three cities working with a consent agreement (Detroit, River Rouge and Inkster).

  • If the law is defeated, it is likely to cause additional lengthy delays in the process of helping cities to get back on track financially as the parties argue about what should be done instead.  The biggest loser is likely to be the City of Detroit because it already has "hit the wall" and is only able to operate with the State providing managerial assistance and financial resources.  On December 21, 2011, Andy Dillon, the State Treasurer, said that Detroit had total liabilities estimated at more than $12 billion and that the deficits in the General Fund  have fluctuated between over $155 million and over $300 million each year from 2005 through 2011.  Total General Fund debt and other liability proceeds have been over $600 million for 2005 through 2010.

  • Under Public Act 4, the local governmental entity has many opportunities to avoid the need for an Emergency Manager, even after what may be decades of poor financial management.   There also are a number of checks and balances.  First, the State has to conduct a preliminary review of the level of financial stress.  Second, if necessary, there must be a more formal review including representatives or nominees from the State Treasurer, the State House, the State Senate, the State budget office and others appointed by the Governor.  Third, there is an opportunity for a consent agreement for continuing operations.  There also is the potential for a recovery plan in which additional powers can be granted to the local officials to help them in their efforts to correct the situation.  Fourth, if the Governor decides an Emergency Manager is necessary, the local unit can request a hearing.  Fifth and finally. the local governmental unit can appeal the decision to the Ingham County Court.

  • Public Act 4 requires communication and disclosure of the Emergency Manager's decisions to the State and to the public.  For example, the Emergency Manager must have a financial plan in 45 days and conduct a public information meeting.  The Emergency Manager also must report all details of expenditures, hiring, transactions, etc. every three months.  In addition, the Emergency Manager may retain a local inspector or auditor (from an approved list provided by the State Treasurer) to oversee and report on the local governmental unit.

  • Property tax revenues will not increase significantly and help local governments for many years even if the economy experiences an economic boom.  Michigan's Proposal A already limits increases in property taxes per year to the lesser of 5% or the rate of inflation (which has been recently at only 2-3%/year).

  • Chapter 9 municipal bankruptcy (one of the alternatives) has been used very rarely by local governmental units anywhere in the country.  Its provisions are very different from Chapter 7 or Chapter 11 bankruptcy.  Chapter 9 generally leaves the local administration in place running the local governmental unit without a trustee and without court oversight.  It is unclear to me how any major operating changes would be considered or implemented.  Even if there was a plan approved by the bankruptcy court to reduce the local government's liabilities, it is likely that new deficits would continue to be generated since the underlying operating structure and processes wouldn't necessarily change.  Chapter 9 is a debt adjustment plan without a reorganization function.  A couple of the cities in California, however, have used it primarily to reject collective bargaining agreements quickly and to significantly reduce or try to eliminate retiree healthcare.
I strongly believe it is time to get past arguing about who is in charge and get into developing and implementing good ideas for sorely needed major changes.  There are many other cities that already have had great success for years in working to improve their communities.  We should spend our time examining places like New York City (with one-eighth the murders per capita of Detroit), Colorado Springs, Turin, Italy, downtown Las Vegas, Atlantic City and many others.  Let's get on with making Detroit's turnaround a huge success.   

[Please note that, contrary to current TV ads from Stand Up for Democracy regarding Prop #1, I have never been a partner of the person who bought the Silverdome.  Two years after the sale I did begin to supply limited consulting services to him to help improve the property to try to again encourage business growth in Pontiac.]