Must-Know News - Jan. 28

• 1) California Teachers Pension Fund $42.6 Billion Short

“The California State Teachers Retirement System, the second biggest U.S. public pension, will need to ask taxpayers for more money after investment losses left it underfunded by $42.6 billion.

The pension’s unfunded liability, the difference between assets and anticipated future costs, almost doubled from $22.5 billion in June 2008, according to a report Chief Executive Officer Jack Ehnes will deliver to the board Feb. 5. The fund will ask lawmakers next year for an increase of as much as 14 percent to what the state and school districts already pay toward employee retirement benefits, said the report, which was posted on the fund’s Web site today.”

• 2) CBO: Medicare Spending to Reach $528 Billion in 2010

“Gross spending on the Medicare program is expected to total $528 billion in 2010, $735 billion in 2015, and $1,038 billion in 2020, according to the Congressional Budget Office. The CBO also expects for Medicare spending to rise (as a percentage of gross domestic product (GDP) from 3.5 percent in 2009 to 4.6 percent in 2020.

CBO estimates Social Security, Medicare and Medicaid will account for about 70 percent of mandatory spending (excluding offsetting receipts) in 2010. However, by 2020, this percentage is expected to climb to 80 percent of mandatory spending under current law. Under current law, the CBO also reports that Medicare and Medicaid spending (combined) is expected to grow faster than the economy, reaching 6.6 percent of GDP by 2020 and potentially reaching 10 percent by 2035.”

………………2A) Medicare/Medicaid spending a national ‘threat,’ says CBO

“The Congressional Budget Office (CBO) cites federal healthcare spending as “the single greatest threat” to the United States’ budget stability in its new report, The Budget and Economic Outlook: Fiscal Years 2010 to 2020. Under current law, Medicare spending will reach $1,038 billion in 2020, with Medicaid spending coming in at $458 billion.

In 2009, higher unemployment drove up Medicaid spending by 9 percent ($18 billion). For the previous 10 years, the program’s average annual growth rate had held at 7 percent. Medicare outlays also rose faster than average, jumping by 10 percent ($39 billion).

Medicare and Medicaid spending, exclusive of stimulus spending, should continue to grow at a combined average rate of about 7 percent a year between 2011 and 2020.”

• 3) New York City Building Sales Drop 75% in 2009, Reports Massey Knakal Realty Services

“Massey Knakal Realty Services released this week their year-end Property Sales Report for 2009 that shows the total volume of commercial real estate sales in the New York City marketplace was $6.3 billion, which was down 75% from the $25.3 billion in 2008 and 90% below the 2007’s record of $62.2 billion.”

• 4) US banks face risks, could spark downgrades -S&P

“If the economy performs worse than expected, banks could be hit with another wave of significant write-downs, “resulting in a potentially serious threat to weaker banks’ capital positions,” the rating agency said.

The falling value of assets ranging from prime mortgages to commercial real estate loans “could, once again, test confidence in the banking system,” S&P said.

Banks are already facing weakening credit performance of first-lien mortgage loans and home equity lines of credit and may have to write down more residential mortgage-backed securities, S&P said.

Commercial real estate credit quality also continues to deteriorate, the rating agency said.”

• 5) Enron Revisited: City Pension Fund in No Better Shape (Blog..San Diego)

“Here are some numbers from the SDCERS board meeting Jan. 22, 2010: As of mid-2009, the funded ratio was a meager 66.5% and unfunded actuarial liability $2.11 billion.”

• 6)  New York Mayor Bloomberg to Call for Cut of 4,286 City Jobs

“New York Mayor Michael Bloomberg plans to present a preliminary budget tomorrow that will cut 4,286 employees from city payrolls for the 2011 fiscal year beginning July 1, administration officials said.”

• 7) Greece, Portugal Debt Concerns Start to Infect Companies, Banks

“Investor concern about the ability of Greece and Portugal to lower their budget deficits is starting to hurt the debt of national utility companies and banks.

The cost to insure Greek sovereign debt against default surged to a record today, spurring a rise in credit-default swaps on Hellenic Telecommunications Organization SA and National Bank of Greece SA. Swaps on Portugal Telecom SA and Energias de Portugal SA jumped as the perceived risk of holding their government debt rose.

“If you fear a Greek crisis then you should not only avoid government bonds but corporates as well,” said Philip Gisdakis, head of credit strategy at UniCredit SpA in Munich. “And if you fear Greece you should also fear Portugal and Spain.” ”

• 8) ICN Informed Citizen News 01/24/10 (Video)

News links under “more info”

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