ARTS & FARCES internet

MaryJo Webster, writing for the Pioneer Press reports that Minnesota legislators will examine severance payments and payments for unused sick and vacation time made to retiring and laid off state employees. The paper reported in November 2011 that US$57 million in unused sick time had been paid to retiring and laid off state workers. An additional US$32 million had been paid for unused vacation time between January 2008 and June 2011. A few Minnesota State Colleges and Universities (MNSCU) employees received six figure payouts. Those figures do not include the University of Minnesota.

Webster reports today that departing University of Minnesota employees received an average of US$4,500 for unused vacation and severance, compared with a US$12,000 average for MNSCU employees. “The Pioneer Press analysis of MNSCU’s payouts did not include the more than US$319,000 paid to outgoing chancellor James McCormick,” writes Webster. “When he retired Aug. 1, McCormick received US$180,000 in severance, plus US$92,965 for unused sick time, and US$46,896 for unused vacation.”

Mark Albert, Mike Maybay, and Erik Altmann for KSTP-TV were even more breathless in their coverage with a definite tinge of denigrating public employees. “For some, it could be a golden parachute—and you’re paying for it,” was their lede.

No, you’re not paying for it. At least not very much. Certainly not anything near what you think you are.

The great state of Minnesota sees fit to fund roughly 20 percent of the University of Minnesota’s budget. That’s a pitiful reflection of how important education is in the current culture, but that’s another argument. Getting paid for unused vacation and severance is earned income and taxed accordingly. It’s not a gift, it’s earned. It’s the institution’s binding obligation.

Make no mistake, I have very little love for the University of Minnesota. I was employed there from 2006-11 as the senior editor and ecommunications manager in the College of Design and laid off in December 2011. When I left, I received payment for unused vacation. My severance pay was initially denied (another argument for another time);  I filed a grievance and almost a year later the University finally paid it.

Work for civil servants at the University is structured such that it’s quite difficult to take vacation—especially more than a day or two at a time. As a result, the University carries a hefty unused vacation liability and long ago instituted a policy that prevented employees from accruing more than two-years’ worth of vacation, something Webster conveniently fails to note in her article. The University also has a wonderful policy allowing employees to donate accrued vacation to other employees that needed it.

Unlike other state agencies—including MNSCU—the University does not pay its employees for unused sick time. After accruing 800 hours of sick time, University employees are allowed to convert half of additional sick time to vacation time.

Severance for University civil servants is paid at the rate of one week’s salary for every complete year of service, up to a maximum of 52 weeks.

The payment I received for my unused vacation is included in the KSTP-TV spreadsheet (.xls; 1.1MB), but is inaccurate. My annual salary was US$59,821 (as evidenced by the severance payout noted below) not the US$62,161.60 reported and the severance payment I received after filing the grievance isn’t included. Here’s how it really shook out:

Gross payment for unused vacation: US$8,260.73
Gross payment for severance: US$4,601.60

So, yeah, I received US$12,862.33 (less about 30 percent tax withholding; double what millionaire presidential candidate Mitt Romney paid, but again that’s another argument for another day) when I left University employment. I also received six months of University contributions to my and my wife’s health insurance.

When Utne Reader was sold in 2006 and I was laid off after almost five years there, I was making a significantly higher salary (even though I was only working three-quarters time), received payment for unused vacation, and received three months salary as severance. As a non-full-time employee, I didn’t qualify for Utne Reader‘s health insurance program.

A former Reagan administration financial regulator and author, William Black, in a Democracy Now! interview on the ongoing financial crisis and the Occupy Wall Street movement, appears to be one of the more impartial yet knowledgeable voices I’ve heard regarding the subject—Elizabeth Warren also being one of those voices. Black stopped just short of specifically reminding us that the US Supreme Court’s actions have made “slaves” of the majority of those who work in corporate environments for a living.

Regarding Black’s statement about the history of the corporate personhood movement, it may have accelerated after the US Civil War, but its roots are a response to the signing of the Magna Carta that declared kings were not entitled to “divine rights.” Now we just need to recognize that neither are the mega-international-respect-no-government corporations nor Wall Street banks “divine” and should not be bestowed with “personhood-in-perpetuity,” when it comes at unreasonable expense to the communities and other stakeholders with which they co-exist—and without which they could not exist at all. States really need to take a look at how they charter these corporations so that CEOs don’t have their hands tied with regard to doing the right thing by stakeholders, not just shareholders—especially when they are rarely willing to do anything beyond the legal mandate of delivering profit to shareholders at all costs.

Yesterday, just as the stock market was closing for a long holiday weekend, the US Federal Housing Finance Agency (FHFA) filed lawsuits against 17 financial institutions, alleging the banks misrepresented the quality of the mortgage securities that they sliced, diced, assembled and sold. Specifically, the lawsuits charge the country’s biggest banks sold securitized mortgages they knew were exceptionally high risk to the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to the tune of almost US$200 billion.

Before the lawsuits were even filed, Nelson D. Schwartz, writing for the New York Times, cited anonymous “bank officials” as saying that “further legal attacks on them will only delay the recovery in the housing market, which remains moribund, hurting the broader economy.” A day later Schwartz and Kevin Roose, writing for the New York Times, cited Mike Mayo, an analyst with Credit Agricole: “Banks should pay for what they did wrong, but at the same time they shouldn’t be treated as a big pinata that has the effect of delaying the housing recovery. If banks have to pay for loans they made five years ago, are they going to make new ones?”

Here’s the position the US federal government (and states attorney generals) should take with the banks: Write new loans to qualified borrowers, with proper documentation, or face nationalization. Begin legitimate underwater mortgage restructuring in earnest immediately, or face nationalization. Begin legitimate refinancing for those mortgagees not underwater at reasonable rates—under US$1,000 total—immediately, or face nationalization. Period.

While the banks have mostly paid back the US$700 billion bailout from 2008, Schwartz and Roose note that “the rescue of the mortgage giants Fannie and Freddie has already cost taxpayers US$153 billion, and the federal government estimates the effort could cost US$363 billion through 2013.”

The banks, responding within minutes to the actual lawsuit filings, maintain that Fannie Mae and Freddie Mac were sophisticated investors that knew or should have known the risk-level of the securities they purchased. A large part of the problem, and one that has yet to be addressed, is that the US ratings agencies blessed these securitized mortgages—investment vehicles that they knew were extremely risky—with their highest AAA grade.

The US Federal Reserve headed off a depression by “providing as much as US$1.2 trillion in public money to banks and other companies” between August 2007 and April 2010. In secret. That’s what Bloomberg is reporting with a shocking data visualization based on information it received as a result of Freedom of Information Act (FOIA) requests.

That makes the official US$160 billion in public bailouts of the banks look like chump change. That US$1.2 trillion? It’s about the same amount of outstanding bad mortgages in the US. A surprising amount went to European banks; the Royal Bank of Scotland scored US$84.5 billion and UBS US$77.2 billion.

Bloomberg goes on to provide guided explorations into the data: The US Fed financed Barclay’s buy of Lehman’s assets to the tune of US$40 billion; US industrial companies fed at the Fed trough as well; of course all the usual suspects cashed in; and one German bank received loans averaging US$21 million per employee.

The largest US corporations are pushing hard for a repatriation tax holiday, which would cut the income tax from 35 percent to 5.25 percent for one year. This allows these corporations to bring the money back to the US and, in theory, generate billions in tax revenues that would otherwise remain unrealized. David Kocieniewski, writing for the New York Times, reports that “Apple has US$12 billion waiting offshore, Google has US$17 billion, and Microsoft, US$29 billion.”

Former President George W. Bush tried this in 2005 and a total of US$312 billion was repatriated. The problem, Kocieniewski writes, is that “92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research.

Here’s an idea: A reverse repatriation tax holiday, raising the corporate income tax from 35 percent to 50 percent, or even 65 percent, for one year starting 1 January 2012. Want to get really creative? Put some teeth behind and close the loopholes in the laws governing what these corporations are allowed to do with the money they repatriate.