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Job Creation, Pension Reform, Marketplace Fairness Focus of Metro Economies Committee Meeting

By Larry Jones
January 30, 2012


Louisville Mayor Greg Fischer and Racine Mayor John Dickert welcomed over 100 mayors and delegates to the January 19 meeting of the Metro Economies Standing Committee. As chairman of the Committee, Fischer told mayors his focus would be on helping mayors find solutions to critical economic and financial problems facing cities. He said after a meeting with Conference of Mayors staff last fall, he asked that key leaders be invited to discuss several critical issues: efforts underway to help create jobs, pension reform, and a proposal to help state and local governments collect taxes due on Internet and mail-order sales. He also said the committee would begin pay closer attention to important cases pending before the Supreme Court that affect state and local governments. Lisa Soronen, Executive Director of the State and Local Legal Center, was introduced and given an opportunity to provide a brief overview of the Center and some of the important cases.

a brief overview of the Center and some of the important cases.

Regional Collaboration to Create Economic Growth, Jobs

John Fernandez, Assistant Secretary of Commerce for Economic Development Administration, told mayors a top agenda item for the Obama Administration is to look for different ways to collaborate to create economic growth and jobs for the American people. He explained that the economy is a composite of many regional economies. "Some are striving, some are struggling and in every instance they have a set of strengths, and a set of assets that can be leveraged; and there are some opportunities there if we can be catalytic in our role of bringing together partners to build right strategies for sustainable growth," he said. He pointed out that the key is to bring together business leaders, university leaders, civic leaders, economic development officials, entrepreneurs, venture capitalists and others to determine what the community is good at and its competitive advantage.

As an example of collaboration, he cited RCA's announcement to close a plant in Blooming while he served as mayor. This was one of the city's largest private sector employers and would mean the loss of 1200 jobs. He said the community came together university leadership, private sector leadership, city and county government leadership and thought about what's next for Bloomington. What emerged from that collaboration was the Blooming Life Sciences partnership, which was able to leverage a tremendous amount of research, attract new investments, and create 4,000 jobs. "One thing about that experience, was that as we put together that strategy and saw the results, the community did not care whether it was a Democrat or Republican effort, they only cared about the fact that local leaders came together, developed a strategy, got results and created job opportunities." He also mentioned several good examples including: "what Mayor Fischer is doing with the Bluegrass Economic Advancement Movement, an extraordinary partnership between Lexington, Louisville and many private sector partners."

Pension Reform

Center on Government Excellence President and CEO Elizabeth Kellar spoke about the challenges facing local government pension systems. She said in the late 1970's, many cities paid pension funds on a pay-as'you-go basis, which was a very bad practice. After the Government Accounting Standards Board started asking for disclosure on accounting and other funding practices, many of these pension systems got on track to be fully funded by the by the end of the last century. However, the economic downturns in 2001 and 2008 reduced funding levels of all public and private retirement plans. And on top of that, some pension plans made changes that exacerbated their funding problems by lowering the retirement age and authorizing, but not funding, retroactive benefits enhancements.

By 2008, she said most state and local pension plans were over 80 percent funded. But after the last economic downturn, only 33 percent of 126 pension plans examined remained over 80 percent funded. In 2010 most pension plans were in the 60 percent to 79 percent funding range. Kellar told mayors, "If your pensions are in the 40 percent to 59 percent range, that is not where you want to be if your taxpayers' interests are going to be protected." To address these problems local and state governments are taking action. She said in Houston, voters approved changes requiring a five percent increase in employee contributions, a reduction in the cost of living allowance to 3 percent for new hires in 2005, and an increase in the retirement age to 62. Also, she pointed out that over 40 states enacted pension legislation between January 2010 and September 2011. Of that total, 27 increased employee contributions, 20 increased the age and length of service requirements for normal retirement, and 14 lengthen the period used to calculate final average salary.

Marketplace Fairness Act

The Marketplace Fairness Act, S.1832, is bipartisan legislation introduced last November by five Republicans and five Democrats to help state and local governments collect taxes on Internet and mail-order sales. Senate staff from two of the bills key sponsors provided an update on the status of the bill. Allison Martin, Legislative Counsel to Senator Lamar Alexander (TN) told mayors the legislation was carefully drafted to attract strong bipartisan support in the Senate, from state and local government groups and from the private sector. She explained the bill does not call for an increase in taxes. It merely gives states the authority to collect or not collect sales and use taxes already due. States have been unable to enforce these tax laws on out-of'state merchants like Internet and mail-order sales companies due to the Supreme Court's decision in Quill Corp. v. North Dakota. But she said the bill addresses concerns raised by the court and would grant all states a way of collecting these taxes. Corey Tellez, Legislative Assistant to Senator Richard Durbin (IL) told mayors that Senator Durbin is committed to working with mayors and other state and local leaders to pass the bill. She emphasized the importance of building more bipartisan support and urged mayors, particularly those with Republican Senators to urge them to sign on as cosponsors of the bill and work to ensure its immediate passage.