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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2009 > July > 28
Tuesday, July 28, 2009
Editorial: Grads can’t be bought for so little
Call it a small — emphasis on small — graduation present.
To entice college grads to stay in the state, Ohio will help them make a down payment on a house and ensure that they get a competitive interest rate on a conventional loan.
The catch: You have to live in Ohio for five years — or pay back the money on a prorated basis.
It’s a nice gesture, but the offer isn’t a solution to the “brain drain,” wherein especially young, educated people are leaving Ohio. That will take initiatives bigger than this.
Here’s the deal, passed as part of the new state budget: Graduates — of a community college, a 4-year program or a graduate program — can get help with their down payment, provided they are a first-time buyer and act within 18 months of graduation.
The Ohio Housing Finance Agency hasn’t worked out how much the down-payment help will be, but rules will be out within 90 days. The subsidy will be a percentage of the home’s cost, and it’s likely to be 2 or 3 percent.
(There will be some income limits to ensure the aid goes to young people who aren’t rolling in dough.)
How will the program work?
The assistance would show up on a borrower’s paperwork as a second mortgage. After five years, the “loan” would be totally forgiven; if a borrow leaves the state early, the subsidy would be taken from the sale price.
Borrowers also would have to get their loan through one of the 140 banks that are partners with the housing finance agency.
States across the country target populations — mostly low-income families — that they want to help get a piece of the American Dream. Housing agencies sell bonds and then use that capital to finance discounted loans and provide upfront assistance for people who can afford a mortgage, but struggle to save enough for a down payment.
The Thomas B. Fordham Foundation recently surveyed Ohio college students and learned that some might be interested in staying in Ohio if they received a housing subsidy. But 3 percent of $50,000, or even $100,000, won’t cause many people to rethink their post-college plans.
Moreover, as much as young people might say they’d like to own a house, they also know that doing so ties them down in ways many just aren’t ready for.
The housing agency says it’s not aware of another state that has targeted college grads in exactly this way, and it can only guess how many people might be interested.
The original “Grants for Grads” plan by Sen. Steve Buehrer, R-Delta, didn’t spell out where the money for this help would come from. Advocates for the poor were worried that housing subsidies for the poor would be siphoned off.
That isn’t a threat anymore, what with the funds coming from the housing authority’s bond proceeds.
Young people are not indifferent about where they live. They’re voting with their feet by favoring cities, walkable neighborhoods and places that have a sense of community and energy.
A lot of streets in Ohio that have these attributes would benefit if young grads put down roots here. But this cash won’t be what seals the deal.
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Editorial: U.S. pension insurance crucial to Delphi retirees
As recently as the 1970s, horror stories abounded about pension plans. Some pensions were offered on an all-or-nothing basis, rather than graduated according to the number of years an employee worked. That made employees vulnerable to be being fired or laid off just before becoming eligible, which did, in fact, happen.
There was also the matter of companies going bankrupt and not fulfilling their promises to pensioners.
In the mid-70s, Congress reformed pension rules, passing what’s known as ERISA, for the Employee Retirement Income Security Act. ERISA required, for example, that pension programs were reasonably well funded, in an attempt to make sure employees weren’t left high and dry.
One of ERISA’s arms has long been in play for 67,000 retirees from Delphi, many of whom are in the Dayton area.
The Pension Benefit Guaranty Corporation (PBGC) — having pressed Delphi and General Motors (from which Delphi was spun off) to keep assets to pay for pensions — is now taking responsibility for paying Delphi pensions.
When Delphi went bankrupt, the PBGC got GM to take some responsibility for the pensions and to promise to eventually take all responsibility. That plan died with GM’s bankruptcy. The PBGC backed off from a fight, deferring to President Barack Obama’s desire to get GM through bankruptcy quickly.
The PBGC already has responsibility for more than 3,800 pension plans that have been terminated for one reason or another.
It isn’t promising Delphi retirees the moon. It won’t pay out more than $54,000 a year per person; and to get that much, you have to retire at 65. It doesn’t necessarily cover special incentives that companies have offered to encourage early retirement or survivor benefits. It doesn’t cover health care.
Over the years, though, says a PBGC spokesman, about 85 percent of retirees have received from PBGC the pension benefits they had been promised by their companies. The percentage has been lower in highly paid businesses, such as airlines and steel. In a useful FAQ (frequently asked questions) feature about Delphi, the agency offers fairly plain language about what people in particular circumstances can expect and not expect. (Go to www.pbgc.gov/ and look for the reference to Delphi.)
If you’re wondering where the money comes from, it’s not taxpayers. The company imposes a fee on companies with the 29,000 pension programs it insures. It also takes in money from the plans it takes over.
In Delphi’s case, the plans — for union and salaried workers — already have about half the money the agency will need.
You might also be wondering if the PBGC has its own money problems these days. Of course. It took over 91 pension plans in the six months before May. It’s running a short-term deficit.
But the agency says it has $63 billion, plenty to handle its needs for a long a time.
What the PBGC does now will not satisfy everybody. There are always disputes. And the absence of health coverage is a huge gap that needs filling.
But the existence of the agency itself is one of the good efforts of “big government.”
The PBGC deals with “defined benefit” pensions, wherein employees are promised something specific. That type is widely seen as going out of style as more companies look to 401(k)s in an effort to avoid long-term obligations. But 44 million people are now in defined benefit plans.
One downside of such plans is that they do need government insurance. The 44 million employees — nearly all of whom must be feeling some degree of uncertainty about the future prosperity of their companies — should take some comfort that they came along in these times and not 35 years ago.
Permalink | Comments (1) | Post your comment | Categories: Auto industry, Editorials, Martin Gottlieb
