Room for Debate: The Public Pension Problem
Bring Financial Managers in House The New York Times - December 5, 2013, by Connie Razza - This past year, investment...
The New York Times - December 5, 2013, by Connie Razza - This past year, investment management fees on New York City pensions increased 28 percent. Over the past seven years, they have more than doubled to $472.5 million annually. The city pays very high fees even in years when the funds lose value.
Internal control of pension fund assets for public workers will help rebalance a city's relationship with Wall Street.
These fees unduly burden the funds and add to the uncertainty with which our city's retired and current employees face the future. The rapid rise in pension fund fees is just one of many symptoms of our badly broken financial system, which fails to serve the broader economy and promote general prosperity. Instead, it promotes and exacerbates inequality. As part of the New Day New York Coalition, the Center for Popular Democracy has proposed a sweeping solution. New York should create a highly skilled in-house financial management team for pension fund assets. Even with salaries high enough to attract top quality managers, the city would not pay the typical "2 percent of assets under management, plus 20 percent of profits" that hedge funds, private-equity firms and real-estate firms typically charge. The profit motive of in-house managers will be fully aligned with city employees and they will be better situated to ensure that investments are financially responsible, contributing to our broader economy and to the funds' bottom line. The creation of the in-house financial team would save the pension funds hundreds of millions of dollars a year. As significant a change as this would be, it is an idea that the city's former chief investment officer has advocated, and that incoming city comptroller Scott Stringer has expressed interest in. Also, pension funds in Alaska, California, Wisconsin and Ontario, Canada, already do this, to varying degrees. All of these funds also rely on outside managers for some of their investments, but insourcing much of the pension investment management would give the city funds meaningful leverage when working with outside management firms. Building an internal capacity to manage the pension fund assets of city workers is an important step toward rebalancing the city's relationship with Wall Street.
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U.S. Cities Issue IDs to Protect Undocumented Immigrants
To help combat such unintended outcomes, the Center for Popular Democracy has consulted with policymakers and advocates...
To help combat such unintended outcomes, the Center for Popular Democracy has consulted with policymakers and advocates—including those from Poughkeepsie—who seek to start municipal ID programs. In 2015, the organization published a municipal ID toolkit listing a series of best practices for local governments to follow.
Read the full article here.
Activists Protest at Phila. Fed, Seeking a Say in Plosser's Replacement
Philly.com - December 17, 2014, by James M. Von Bergen - Seeking a voice in the process to select a new president for...
Philly.com - December 17, 2014, by James M. Von Bergen -
Seeking a voice in the process to select a new president for the Federal Reserve Bank of Philadelphia, two dozen activists protested outside the bank in Center City on Monday.
"The Fed is such a mystery. We just want transparency," marchers chanted as they walked along Sixth Street, many wearing green T-shirts with the slogans "Fed Up" and "What Recovery?"
The march came amid speculation whether the Federal Open Market Committee, meeting Tuesday, would increase the discount rate - the rate charged banks for short-term loans they receive from the regional Federal Reserve Banks - in light of the improving economy.
In a statement Monday, the Philadelphia Fed said it had engaged an executive search company to find a replacement for president Charles Plosser, whose term expires March 1.
"Senior executives have met with representatives of groups who have expressed interest in the process," the statement said.
"The search committee has said it will look at a broad, diverse group of candidates from inside and outside the Federal Reserve System," the statement said.
The Fed's record low interest rates "should make us nervous," Plosser said in an interview with CNBC in November.
He has been among the central bank's most outspoken members on raising rates. Recent economic data indicate that "we should raise rates now or in the near future," he told reporters after a speech in Charlotte, N.C., the Wall Street Journal reported.
During Monday's protest, which lasted about an hour, various people told their stories, about how they had been unable to find jobs or were working below their educational levels even as they struggled to save their homes from foreclosure and pay their bills.
Kia Philpot-Hinton, 38, of Southwest Philadelphia, said she has not been able to find an accounting job. "It's crushing when you are struggling to make ends meet. We're not in a recovery in my neighborhood," she said.
"We deserve to make an ample amount of money to support our family," said Chris Campbell, 23, of Philadelphia, adding that he had been unable to find steady employment in construction.
The protest was mounted by Action United, a nationally organized group of activists that coalesces around economic issues.
One leader of Monday's protest was Kendra Brooks, who said she has a master's degree in business administration and was laid off from Easter Seals of Southeastern Pennsylvania in 2012. As an Action United organizer, she said, she now earns half of what she previously earned.
She was part of a group that visited Federal Reserve Chair Janet Yellen in November.
"They were engaged and interested in what we had to say," Brooks said, adding that Yellen wanted to know whether foreclosure-prevention programs and other efforts to help the poor were effective.
Brooks said raising interest rates would prompt businesses to cut back hiring, tightening the job market, and forcing people to accept lower wages.
Among those marching was Lance Haver, director of the Mayor's Office of Consumer Affairs. Haver said that even if the Fed is not the usual focus of protests by activists, they can be effective.
In 1998, he said, First Union Corp., which became Wachovia and is now Wells Fargo & Co., acquired CoreStates Bank in Philadelphia. Activists' protests, he said, prompted the Federal Reserve to prevent First Union from closing CoreStates branches in some poorer neighborhoods.
"Instead of shuttering them," Haver said, some branches became credit unions and led to First Union's being required to provide community-development funds.
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Report Shows Unemployment Rate in Twin Cities 4x Higher for Blacks than Whites
InsightNews - March 18, 2015 - At a press conference and rally last week, NOC released a report as part of a national...
InsightNews - March 18, 2015 - At a press conference and rally last week, NOC released a report as part of a national day of action, showing that the unemployment rate for Blacks in the Twin Cities is four times higher than for whites, calling on the Federal Reserve to prioritize full employment in all communities. "Minnesota is a great place to live, if you're white," said NOC executive director Anthony Newby. "The unemployment rate is 2.8%. But for black folks, unemployment is over ten percent--crisis levels. The Federal Reserve is considering raising interest rates because Wall Street thinks the economy has recovered. But that would only increase unemployment, especially in communities of color."
"Historically, the African-American community has been cut out of opportunities the government was supposedly providing to everyone--for example, homeownership programs that African-Americans could not participate in, public education programs that African-Americans were either cut out of or cut short, livable wage jobs that African-Americans would not be considered for," said Pastor Paul Slack, pastor of New Creation Church in Minneapolis and President of ISAIAH. "It's time for the Federal Reserve to act specifically in the interest of the African-American community and other low-income communities, by keeping interest rates low so that we can rebuild the wealth that was stolen from us through this recent economic crisis."Joe Elliott worked at the Target Center for five years until he was unexpectedly laid off. "I liked the job--I met a lot of great people, and went to concerts and games. But I didn't like the money. I deserve more than $8.40/hour. It wasn't supporting my daily living--bills, kids, transportation. But it's hard looking for a job as an African-American male.""The Minneapolis Fed President, Narayana Kocherlakota, has expressed support for keeping interest rates low," said Anthony Newby. "That's great. But he's also retiring in a year. We need an open and transparent process for community input on the next Minneapolis Fed president."The Federal Reserve has a key policymaking meeting coming up in mid-March.
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JPMorgan Chase Is Funding and Profiting From Private Immigration Prisons
JPMorgan Chase Is Funding and Profiting From Private Immigration Prisons
One of America's largest banks, JPMorgan Chase, is quietly financing the immigration detention centers that have...
One of America's largest banks, JPMorgan Chase, is quietly financing the immigration detention centers that have detained an average of 26,240 people per day through July 2017, according to a new report by the Center for Popular Democracy and Make the Road New York. Through over $100 million loans, lines of credit and bonds, Wall Street has been financially propping up CoreCivic and GeoCorp, America's two largest private immigration detention centers.
Read the full article here.
Markets to Fed: See you next year
MARKETS TO FED: SEE YOU NEXT YEAR! — Asia followed Wall Street higher on hopes the Fed might take weak jobs data into...
MARKETS TO FED: SEE YOU NEXT YEAR! — Asia followed Wall Street higher on hopes the Fed might take weak jobs data into account and wait until next year to hike rates. … Reuters: “Fading expectations that the U.S. Federal Reserve will raise interest rates this year and a bounce in oil and commodity prices helped lift Asian stocks to two-week highs on Tuesday …
“‘One of the two big persistent concerns has faded, so investors are taking risks,’ said Masashi Oda, senior investment officer at Sumitomo Mitsui Trust Bank, referring to expectations of a near-term Fed hike. … Japanese shares garnered further momentum from speculation that the Bank of Japan might expand its massive stimulus program to support the flagging economy”http://www.reuters.com/article/2015/10/06/us-global-markets-idUSKCN0S001I20151006
M.M. SIDEBAR — Seems like wishful thinking. The FOMC is almost certain to hit the liftoff button by December unless jobs growth really falls off a cliff, which appears unlikely based on other data. It remains possible that both August and September jobs figures will get revised higher. And even a slightly sub-200K pace is enough to keep unemployment dropping to what the Fed generally considers full employment (though nobody actually knows exacly what full employment is). Of course a messy debt limit fight actually could push the Fed off into 2016 but it would likely take markets down with it.
“FED UP” PROTESTERS TO HIT PHILLY — POLITICO's Zachary Warmbrodt: “Activists lobbying against a Federal Reserve interest rate increase as part of the so-called ‘Fed Up’ campaign are planning to hold a protest targeting new Federal Reserve Bank of Philadelphia president Patrick Harker on Tuesday afternoon. Around 15-20 people including workers, small business owners and clergy are expected to participate in the protest, which is aimed at pressuring Harker to meet with the coalition and take a tour of low-income neighborhoods …
“Kendra Brooks, who leads the local Fed Up coalition and is an organizer for Action United, is attending Harker's event but says she has been urging him to meet with more members of the community beyond the heads of non-profits and corporations … Brooks tried to get a commitment from Harker at the Fed's symposium in Jackson Hole, and their chat is on YouTube:https://www.youtube.com/watch?v=2h-GN7cHDAc
WILL HILLARY FLIP FLOP ON TPP? — POLITICO's Victoria Guida: “Hillary Clinton has presented herself as a skeptic of the biggest trade deal in history, saying this summer that ‘we should prepared to walk away’ from the 12-nation Trans-Pacific Partnership unless it boosts Americans' wages and national security. But with a deal announced Monday after months of backstage wrangling, Clinton will be under intense pressure to take a stance.
“The deal is one of the most ambitious items left on President Barack Obama's White House bucket list. But his former secretary of state owns it too, even though she has expressed increasing ambivalence about its details and could soon disown it outright, as some in her circle have suggested. … [R]eacting to the polarizing TPP deal is one of the most excruciating policy decisions of her campaign thus far - and far more politically perilous with Democratic primary voters than her backing of Obama's Iran deal.” http://www.politico.com/story/2015/10/hillary-clinton-trade-dilemma-214456
BIGGEST TPP WINNER: JAPANESE AUTO MAKERS — Per Bloomberg’s list of winners under the trade deal: “Japanese car and auto-parts makers may be the biggest winners, as they get cheaper access to the U.S., the industry’s biggest export market” https://www.bloomberg.com/news/articles/2015-10-06/tpp-trade-deal-who-stands-to-benefit-suffer-in-asia-pacific
FIRST LOOK: “TAX HAVEN SEX MANSION” — Can't resist a headline like that, eh? Bloomberg Businessweek piece up at 7:00 a.m. by Zeke Faux “investigates how Abe Zeines and Muir Hurwitz, two sons of an ultra-religious Jewish neighborhood in Brooklyn piloted a shady new kind of finance — ‘merchant cash advance’ — made a fortune, and then saw it all come to an end.” The two now live in a "tax-haven sex mansion in Puerto Rico.” As one does. https://www.bloomberg.com/authors/AP5w7epl1Xo/zeke-faux
LITAN RESPONDS — Bob Litan writes in FORTUNE: “Sen. Warren clearly disagrees with our study, but rather than address its reasoning and facts, she claimed my disclosure was vague (which it was not) and that I was misusing my non-resident perch at Brookings by identifying that position in a footnote (a newly established Brookings rule of which I was unaware but promised Brookings I would not run afoul of again), though I never mentioned my Brookings affiliation at the hearing. …
“I can only speculate why Sen. Warren has been so interested in our research, but I suspect it is because, even with its disclosed sponsor, the study exposed two major weaknesses in Labor’s proposal — which the Department may correct when it issues its final rule. But if it does not, these two points, at least in my view, make the rule susceptible to being overturned by a court as being arbitrary and capricious (or failing a benefit-cost test) if it is legally challenged” http://fortune.com/2015/10/05/elizabeth-warren-robert-litan-u-s-department-of-labor/
Litan’s pithy email response to M.M. on the whole affair: “Life in the big city.”
GOOD TUESDAY MORNING — Crazy Monday Night Football game. The Lions had a surprising road victory over the Seahawks in their grasp only to have Kam Chancellor poke the ball out of Calvin Johnson’s hands at the goal line. The Seahawks then illegally batted the ball out of the end zone for the touchback but the refs missed it. Should have been Lions ball at the goal line. Crushing blow. Massive officiating mistake. Email me at bwhite@politico.com and follow me on Twitter (like Kam Chancellor does!) @morningmoneyben.
THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Adam Behsudi on the TPP currency side deal that Congress might not like – [https://www.politicopro.com/financial-services/story/2015/10/pro-trade-tppcurrency-behsudi-056469] and to get Morning Money every day before 6 a.m.-- please contact Pro Services at (703) 341-4600or info@politicopro.com
** A message from Grant Thornton LLP: The tax code puts U.S. companies at a disadvantage. Congress can’t address the problem if it excludes pass-throughs from an innovation box or tax reform. Congress should lower the effective business tax rates equitably for all U.S. businesses. https://www.grantthornton.com/issues/library/articles/public-policy/2015/policy-issues/support-the-BER.aspx?utm_medium=ad-partnership&utm_campaign=public-policy-issues&utm_term=Public-policy&utm_content=article **
BLOOMBERG EVENT TODAY — The Bloomberg Markets Most Influential Summit takes place in New York, London and Hong Kong featuring Tom Steyer, Mike Bloomberg, Bill Ackman, Cliff Asness, Barry Diller, Blythe Masters and more https://www.bloomberglive.com/markets-most-influential/new-york/agenda/
SOFTBALL REPORT: FERC TAKES THINK TANK CROWN — Per AEI’s Michael Pratt: “FERC defeated the defending champs AEI 13-7 in the Think Tank Softball League Championships in a game under the lights in a field by Pentagon City. Congrats to the winning team - over 40 teams are part of the league.”
POSTCARD FROM THE NEW YORKER FESTIVAL — POLITICO’s Daniel Lippman reports: “Homeland” actor Damian Lewis told the New Yorker festival on Saturday that he's met with hedge fund managers like Bill Ackman and Dan Loeb to prepare for his upcoming new show about Wall Street called "Billions" (on which Andrew Ross Sorkin is an executive producer).
He asked the hedgies: "Give me your intellectual defense of being a hedge fund guy, of shorting companies and the one thing they could never really persuade me of, was that playing to a moral code that we might all conventionally understand, it wasn't possible for them to justify what they do. But if they just ever so slightly shifted the goal posts and created a new moral reality for themselves, which is essentially that as long as I don't break the law and as long as the game exists, I'm here to play the game and everything is fine."
BETTER MARKETS’ FUNDING QUESTIONED — National Review’s Brendan Bordelon goes long on hedge fund manager Michael Masters’ funding of pro-financial reform group Better Markets.” http://www.nationalreview.com/article/425063/elizabeth-warrens-wall-street-double-standard-brendan-bordelon
Better Markets’ Dennis Kelleher emails: “Wall Street has been trying to shut down, shut up or smear Better Markets since it was founded five years ago. Wall Street has little tolerance for anyone willing to stand up to them or who can’t be bought.
“Better Markets’ independence and effectiveness on the public’s behalf is what gets under Wall Street’s skin and why it has been shopping a fabricated story for months to anyone in the media who would listen. … [T]he story is so factually wrong it is laughable, as detailed here https://www.bettermarkets.com/blog/fact-sheet-better-markets%E2%80%99-response-wall-street%E2%80%99s-latest-attack”.
M.M. SIDEBAR — Anyone who knows Kelleher (agree or disagree with him on issues) knows he wouldn't be shilling for some hedge fund guy looking to tilt stock prices. But in an era when Bob Litan can get dumped from Bookings over a fully-disclosed source of research funding, everything seems to be fair game.
TOUGH ROAD FOR TPP IN CONGERSS — WP’s David Nakamura: “President Obama hailed the historic 12-nation Pacific Rim trade deal … as an accord that ‘reflects America’s values,’ but within hours the administration had turned from the negotiating table to selling the agreement on Capitol Hill, a reflection of the harsh political climate the controversial pact is expected to face in Congress. Obama pledged that [TPP] … would open new markets for U.S. goods and services and establish rules of international commerce that give ‘our workers the fair shot at success they deserve.’
“But almost immediately there were signs of the tough fight ahead to win final ratification from Congress next year. Lawmakers from both parties criticized the pact as falling short in crucial areas, raising the prospect that the White House could lose the support of allies who had backed the president’s trade push earlier this year" http://www.washingtonpost.com/business/economy/deal-reached-on-pacific-rim-trade-pact/2015/10/05/7c567f00-6b56-11e5-b31c-d80d62b53e28_story.html
SHARP PRICE INCREASES DRIVE DRUG COMPANY REVENUES — WSJ’s Joseph Walker: “Demand for a drug called Avonex has declined every year for the past 10. Not a problem for its manufacturer. U.S. revenue from the drug has more than doubled in that time, to $2 billion last year. The key: repeated price increases. The multiple sclerosis drug’s maker, Biogen Inc., raised its price an average of 16 percent a year throughout the decade — 21 times in all.
“It is an example of drug companies’ unusual ability to boost prices beyond the inflation rate to drive their revenue, even when demand for the drugs doesn’t cooperate. A result of this pricing power is that across 30 top-selling drugs sold by pharmacies, U.S. revenue growth has far outpaced demand in the past five years … Revenue growth averaged 61 percent, three times the increase in prescriptions” http://www.wsj.com/articles/for-prescription-drug-makers-price-increases-drive-revenue-1444096750
BERNANKE ADMITS MISLEADING ON LEHMAN — NYT’s Andrew Ross Sorkin: “It is astonishing to hear a former Federal Reserve chairman acknowledge that he may have misled the public as part of an agreement with another senior government official about one of the most crucial moments in recent financial history — and that he now questions whether he should have “been more forthcoming.” But that is what Ben S. Bernanke says in his new memoir …
“That crucial moment? The bankruptcy of Lehman Brothers. Mr. Bernanke, in perhaps the most candid explanation of Lehman’s 2008 collapse, writes that he and Henry M. Paulson, then the treasury secretary, purposely obfuscated when asked about Lehman’s demise early on, allowing a narrative to develop that the government had purposely let the firm fail
“In congressional testimony immediately after Lehman’s collapse, Paulson and I were deliberately quite vague when discussing whether we could have saved Lehman,’ Mr. Bernanke writes. ‘But we had agreed in advance to be vague because we were intensely concerned that acknowledging our inability to save Lehman would hurt market confidence and increase pressure on other vulnerable firms.’” https://www.nytimes.com/2015/10/06/business/dealbook/in-ben-bernankes-memoir-a-candid-look-at-lehman-brothers-collapse.html?_r=0
GOOGLE BUYS INTO SYMPHONY — FT’s Joe Rennison and Richard Waters: “Alphabet, Google’s renamed parent company, is set to become the latest investor to back Symphony, joining a host of big banks in their attempt to dislodge Bloomberg’s dominant position in Wall Street messaging. Born out of the 2013 snooping scandal, where it came to light that Bloomberg News reporters had spied on bankers using its ubiquitous terminals, Symphony claims to offer a more secure way for people to communicate with each other.
“The service officially launched on September 15, unveiling tie-ups with McGraw Hill Financial, which will supply financial information from S&P Capital IQ, and News Corp’s Dow Jones unit, which will provide a live news feed to the platform. Symphony and Alphabet declined to comment. People familiar with the matter said the deal was yet to be finalised but one confirmed a WSJ.com report that the new funding round would value Symphony at about $650m.”https://www.ft.com/content/32dbcf1a-6ba1-11e5-aca9-d87542bf8673
ALSO FOR YOUR RADAR —
FIRST LOOK: MARANTIS JOINS VISA — Per release going out this morning: “Visa … day announced the appointment of former Acting U.S. Trade Representative Demetrios Marantis as Senior Vice President, Global Government Relations. Marantis joins Visa from Square, where he led global policy, government, and regulatory affairs. Marantis will report directly to William Sheedy, Executive Vice President, Corporate Strategy, M&A, and Government Relations at Visa Inc., and be responsible for all facets of Visa’s government relations activities
JOIN US — WOMEN RULE: TAKING RISKS AND TAKING CHARGE Women Rule live event series returns Wednesday morning at 8 am with “Women Rule: Taking Risks and Taking Charge,” a series of conversations with women who have braved the odds in their lives and careers. Vian Dakhil, Iraqi MP and voice of the Yazidi people being attacked by ISIS and her sister, Dr. Deelan Dakhil, the co-director of the Sinjar Foundation will headline the event. Featured speakers also include Sen. Tammy Baldwin (D-Wis.); Sarah LaFleur, Founder and CEO, MM. LaFleur, and former White House NSA and EVP of MacAndrews and Forbes, Frances Fragos Townsend. RSVP: http://www.politico.com/events/2015/10/women-rule-taking-risks-and-taking-charge-213943
NOW AVAILABLE: POLITICO PRO LEGISLATIVE COMPASS — POLITICO Pro, POLITICO’s premium subscription service, has released a first-of-its kind legislative data analytics and decision-making tool that helps policy professionals manage and act on legislation. Leveraging features such as a personalized dashboard, virtual whip count, bill text comparison and 20 years of data, users will not only save time but benefit from customizing and cross-referencing information, enabling them to make smarter and faster decisions. Schedule your demo today.
** A message from Grant Thornton LLP: When Congress fails to act, businesses suffer. More than 50 popular tax provisions expired at the end of 2014, including the R&D credit. Congress’s indecision on these provisions is impeding business planning and stifling growth. According to a Grant Thornton survey of top financial executives, more than half of companies that use the provisions do all their planning under the assumption that the extension will not occur. That’s a huge blow to the effectiveness of the provisions and a barrier to growth. The R&D credit is a major driver of entrepreneurial activity and high-paying jobs. Congress needs to act soon to reinstate these provisions and to make the R&D credit permanent. Find out what else Congress could do to strengthen the R&D credit and view survey findings at http://gt-us.co/1iOXJW5
Source: Politico
How to Help Puerto Rico, Even When the President Won't
Donald Trump's idea of humanitarian aid to Puerto Rico is throwing paper towel rolls to a crowd. His callous and...
Donald Trump's idea of humanitarian aid to Puerto Rico is throwing paper towel rolls to a crowd. His callous and grandstanding attitude following Hurricane Maria's devastation is breathtaking, even for a man who uses a golden toilet. His cheap imitation of a T-shirt cannon was enough to make America collectively throw the phones we watched it on into the sea. If you're looking for less expensive ways to channel your rage, consider donating time, money or supplies to organizations and individuals on the ground in Puerto Rico.
Read the full article here.
Support Asylum Seekers From the Migrant Caravan Vilified by Trump
Support Asylum Seekers From the Migrant Caravan Vilified by Trump
With 71 percent of people detained by ICE held in privately-operated facilities, the private prison industry is one of...
With 71 percent of people detained by ICE held in privately-operated facilities, the private prison industry is one of the largest beneficiaries of anti-immigrant policies. The Center for Popular Democracy, Make the Road New York, Enlace International, New York Communities for Change, and the Strong Economy for All Coalition recently released a report that found that Wall Street companies such as JP Morgan and Wells Fargo not only profit from the industry: they massively increased their investments after Donald Trump was elected president. Check out the report here, then write a letter to one of the companies and share some of the report’s most potent facts on social media using the hashtag #BackersofHate.
Read the full article here.
Lax Pa. Oversight of Charters Robs Taxpayers of $30M, Groups Say
Philadelphia Inquirer - October 1, 2014, by Martha Woodall - A new report from a trio of activist groups says...
Philadelphia Inquirer - October 1, 2014, by Martha Woodall - A new report from a trio of activist groups says Pennsylvania charter schools have defrauded taxpayers of more than $30 million because oversight is so lax.
The researchers call for a temporary moratorium on new charter schools, contending agencies are not able to adequately monitor the 186 charters that already exist.
The study by the Center for Popular Democracy; Integrity in Education; and Action United of Philadelphia and Pittsburgh was to be released Wednesday.
The report urges the state Attorney General's Office to review all Pennsylvania charters for potential fraud. It asks the legislature to require charters to undergo regular fraud-risk assessments and fraud audits. And it suggests that until the law is changed to require such actions, charters should voluntarily undergo them and make the findings public.
Researchers said most of the $30 million in fraud that has been detected since the state's charter law was passed in 1997 was not uncovered by charter-oversight offices but by whistle-blowers and the media, including The Inquirer. They said the total amount of misspent funds was likely far larger.
"The current oversight system in Pennsylvania falls miserably short when it comes to detecting, preventing, and eliminating fraud," said Kyle Serrette, education director at the Center for Popular Democracy in Washington.
The center receives funding from foundations, including $990,000 this year from the Ford Foundation. It also receives a small amount of support from teachers' unions, and Randi Weingarten, president of the American Federation of Teachers, is on the organization's board.
Robert Fayfich, executive director of the Pennsylvania Coalition of Public Charter Schools, said that while his group supports accountability, the report makes "sweeping conclusions about the entire charter sector based on only 11 cited incidents in the course of almost 20 years."
". . . Fraud and fiscal mismanagement are wrong and cannot be tolerated, but to highlight them in one sector and ignore them in another indicates a motivation to target one type of public school for a political agenda," he said in a statement.
Pennsylvania school districts paid $1.5 million to charters that enrolled 128,712 students in 2012-13. More than 67,000 Philadelphia students attend 86 city charters.
Sabrina Stevens, executive director of Washington-based Integrity in Education, said: "With over $1 billion going to charter schools in Pennsylvania, it's time for charter schools to be held to the same standards of transparency and oversight that public schools are held to."
State Auditor General Eugene DePasquale said it's "good that they put this together," adding that Serrette's group had testified at a charter-oversight hearing his office held in March. "To me, the more voices on this, the better. I think in the next term in the legislature, there is going to be a charter-reform bill move forward."
City Controller Alan Butkovitz said the report echoed concerns he raised in 2010, when his office released its own oversight study that highlighted several problems his office found at city charters.
"We certainly agree with the need for greater oversight and auditing," Butkovitz said. "That's been one of our constant themes."
The instances of fraud cited in the new report include cases where charter officials were indicted or pleaded guilty and instances uncovered in state audits.
Examples include Nicholas Trombetta, founder and former CEO of the Pennsylvania Cyber Charter School in Midland, who is awaiting federal trial in Pittsburgh on charges that he diverted $8 million in school funds for personal use.
The tally also includes $6.3 million that federal prosecutors allege Dorothy June Brown defrauded from the four Philadelphia-area charters she founded.
But the authors give special attention to another recent case involving a city charter: New Media Technology Charter School in the city's Stenton section. The former CEO and founding board president went to federal prison in 2012 after admitting they stole $522,000 in taxpayer money to prop up a restaurant, a health-food store, and a private school they controlled, and for defrauding a bank.
From 2005 to 2009, when the crimes were occurring, third-party auditors hired by New Media failed to spot the fraudulent payments.
"Fraud detection in Pennsylvania charter schools should not be dependent upon parent complaints, media exposés, and whistle-blowers," the authors wrote. Rather, they urged, the system should be proactive and use forensic accounting methods.
According to the report, Pennsylvania's charters are vulnerable to fraud and financial mismanagement because school districts and state offices charged with overseeing them lack resources and staff.
For example, although the cash-strapped Philadelphia district has about half of the state's charters, it has only two auditors and a small office to monitor 86 schools, the report said.
"We agree in the need of greater oversight and a deeper look into the health of charter schools," district spokesman Fernando Gallard said, "and we have taken steps to do so."
Although the district's charter office at times had only two or three staffers, Gallard said, it now has six and is seeking an executive director.
Researchers also said that charters lack strong internal fiscal controls and that their boards have not adopted strict management policies.
And even though the charters are required to have annual audits performed by outside firms, researchers said, those audits rely on general accounting techniques and are not designed to detect fraud.
"The current system of oversight relies heavily on information provided by charter schools themselves and traditional audits that are designed to check accuracy rather than detect and prevent fraud," the report said.
The report said taxpayers cannot afford to lose another $30 million in misspent charter funds. "While the reforms proposed will require additional resources," the authors said, "they represent a smart investment in our communities and in our future."
Researchers said the study was the first in what would be a state-by-state investigation of oversight of charters in the 42 states that have them.
Serrette said researchers decided to begin with Pennsylvania because the timing seemed right. He pointed out that both DePasquale in Harrisburg and Butkovitz in Philadelphia have highlighted the fraud risks in charter schools. And State Rep. James R. Roebuck Jr. (D., Phila.), minority chairman of the House Education Committee, introduced a bill last year to tighten charter controls.
Said Serrette: "The stars are aligning."
Source
Pittsburgh police, community absorb news of Dallas shootings
Pittsburgh police, community absorb news of Dallas shootings
Though far from Dallas, Minnesota or Louisiana, leaders here recognized on Friday the historic nature of a chain...
Though far from Dallas, Minnesota or Louisiana, leaders here recognized on Friday the historic nature of a chain reaction of police-community tragedies and sought to minimize the risk of more violence.
A shooting such as the one in Dallas “knocks us out of our complacency,” said Howard Burton, chief of the Penn Hills police department. Although most people support officers and appreciate their protection, he said, “We know there’s a group of people out there that move in that direction, that move [aggressively] toward law enforcement.”
Such concerns led Allegheny County Executive Rich Fitzgerald and Pittsburgh Mayor Bill Peduto to call for a peace gathering next week of law enforcement, church, activist, foundation, labor, corporate and government leaders.
Fraternal Order of Police Lodge 1 president Robert Swartzwelder, who is a city officer, said he has authorized the lodge’s three-member funeral detail to go to Dallas. Normally, the lodge would be represented at funerals in Pennsylvania and adjoining states, but the extent of the tragedy in Dallas warrants a presence, he said, adding that it’s “extremely important to the law enforcement community and the family of the police officers” that they see support.
He added that the ambush will be “in the mind of very police officer that’s working” for some time.
Five law enforcement officers were fatally shot Thursday night in Dallas, with seven others injured. That was broadly interpreted as a deranged reaction to the deaths of Louisiana’s Alton Sterling and Minnesotan Philando Castile in encounters with police.
Leaders of both political parties decried all three tragedies.
“We have to ask ourselves, is this the type of country we want? I believe the answer is no,” said Gov. Tom Wolf, a Democrat. “When incidents like those in Louisiana, Minnesota and Dallas happen, it raises concerns and questions, and we must demand change and action.”
Pennsylvania Sen. Pat Toomey, a Republican, wrote in a statement that the “disgusting attack has no possible justification.”
He also cited a Dallas police spokesman’s account that the violence there “was motivated by recent police shootings. Such incidents — including the shocking and disturbing videos from Minnesota and Louisiana — must be investigated thoroughly, and if any official is found to have violated the law, he should be severely punished.”
At a police accountability protest Downtown, officers escorting the marchers seemed “nervous, and that’s understandable, but they were very helpful and cooperative,” said Ana Maria Archila, co-executive director of the Center for Popular Democracy, which organized the demonstration. “They’ve allowed us to do the march we envisioned, and we appreciate that.”
Pittsburgh police Chief Cameron McLay noted that concerns for lives of police officers and black citizens “are not mutually exclusive at all.”
Some suburban Allegheny County chiefs said they were running their departments as usual, and others declined to say whether they had made changes. None of those contacted by the Post-Gazette reported any threats to their officers.
Voices of the civil rights community said they want intensified attention to police-community problems — but not through violence.
“This is not going to happen in Allegheny County, because we’re going to be meeting with the young folks,” said Constance Parker, president of the Pittsburgh chapter of the NAACP. The message: “Before you get angry, think, because there’s costs you pay when you get very angry. If you don’t pay it with the law, you pay it with your body.”
By Rich Lord
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4 days ago
4 days ago