Business, Finance, & Economics: May 2009 Archives

JournalSentinelOnline reports:

A relieved Milwaukee County Board approved a $45 million settlement in the county's pension lawsuit against Mercer Inc. Tuesday, with some claiming vindication and others expressing disappointment.

The county will net about $30 million, which will go into the pension fund. The rest goes to lawyers and other costs of the litigation that began in 2006 and went to trial May 4.

While the money won't fix the county's ongoing financial problems, it should help lower the county's annual contribution to the pension fund, said County Board Chairman Lee Holloway.

County Executive Scott Walker called the settlement "a victory for the taxpayers." He said Mercer made its settlement offer on Friday.

Kim Nicholl, an expert witness for the county, testified last week that the cost of past and future backdrop pension payouts - and of county-paid health care payments for people who have or will retire early because of the pension deal - could be about $325 million.

Financial experts have warned Riverside County supervisors that early retirement offers for more employees will be costly later.  702 employees have accepted a sweetened retirement offer and supervisors are debating whether to extend the offer to probation officers, district attorney investigators and others in law enforcement. The county now employs about 19,000 workers.  NorthCountyTimes reports:

But some financial experts say offering the early retirements merely defers a financial problem that will grow and come due in coming years.  Early retirements have been a very appealing and seemingly painless way to cut expenses, an imperative for the county, which must wrest $130 million from its budget for the coming fiscal year. Supervisors this fiscal year directly control $727 million.

Giving away service years as an early retirement incentive is common, says Jack Dean, editor and publisher of PensionSunamic.com which tracks developments in public employee's pension plans.  "It's a sleight of hand to say that is saving money," he said. "Elected officials don't seem to realize they are paying (increased) pension costs later."

Although GM executives would prefer to restructure out of court, investments experts say all GM is doing now is lining up majorities of stakeholders to make its reorganization move quickly.  To remake itself outside of court, GM must persuade bondholders to swap $27 billion in debt for 10 percent of its risky stock. On top of that, the automaker must work out deals with its union, announce factory closures, cut or sell brands and force hundreds of dealers out of business.

"I just don't see how it's possible, given all of the pieces," said bankruptcy expert Stephen J. Lubben, a professor at Seton Hall University School of Law.  GM, which has received $15.4 billion in federal aid, faces a June 1 government deadline to complete its restructuring plan. If it can't finish in time, the company will follow Detroit competitor Chrysler LLC into bankruptcy protection.

Excerpted from NorthCountyTimes.