Quoted from Smoking Bananas

Perhaps the best statement ever came from a resident who screamed at the board because they were busting through the tax cap. Was he right? Is the board a bunch of scum bags?

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The New York State Senate today announced enactment of an historic property tax relief law that caps the growth of local property taxes.



The Governor signed the law passed by the Senate on June 24, 2011, and sponsored by Senate Majority Leader Dean G. Skelos. The law caps school and local government taxes to less than two percent or the Consumer Price Index (CPI), whichever is lower. The new law also includes $127 million in mandate relief savings to local governments, in addition to the creation of a Mandate Relief Council to identify and repeal unsound, unduly burdensome laws and regulations.



Senate Majority Leader Dean G. Skelos said, “Enacting a property tax cap was the single biggest accomplishment of this session for millions of homeowners and businesses that are sick and tired of paying the highest taxes in the nation. Senate Republicans heard their concerns, we promised to do everything we could to help and today we are keeping that promise. I applaud Governor Cuomo for joining us in making the property tax cap a priority and for his leadership in getting it done.”



This tax levy cap would shift the focus from total spending to the actual property taxes levied to support school district and local government expenses. The law includes the following provisions:


•This law limits tax levy growth to the lesser of two percent or the annual increase in the CPI, other than the “Big 5” school districts of Buffalo, Rochester, Syracuse, Yonkers and New York City. Those are funded through city budgets.


•The exceptions for a tax levy above two percent or CPI are funds needed to support voter-approved capital expenditures, pensions, torts over five percent of the prior year’s levy, and an override of the cap.


•This law also allows the growth in the levy due to physical and quantitative change.


•A school district would be required to submit a tax levy proposition for approval by voters at the district's annual meeting on the 3rd Tuesday in May. If the proposed tax levy is within the district's tax levy limit, then a majority vote would be required for approval. If the proposed tax levy seeks to override the cap and exceeds the district's tax levy cap, the threshold required for approval would be 60 percent of the vote.


•A school district that does not levy an amount up to the cap in any one year would be allowed to carry over unused tax levy capacity into future years. However, this carryover levy capacity cannot be used to increase its tax levy by more than an additional 1.5 percent above the cap in any single year.


•In the event a district's actual tax levy exceeds its authorized levy due to clerical or technical errors, the erroneous excess levy must be placed in reserve to offset the levy for the next school year.



The law also provides for the same cap to apply to taxes levied by municipal governments. Local governments that do not levy an amount up to the cap in one year can rollover that amount up to 1.5 percent in the following year. Local boards can exceed the cap with a 60 percent vote of the governing body. Exceptions include the pension and tort judgments in excess of five percent from the prior year’s levy. When enacted, the law would take effect for the 2012-13 fiscal year.



In addition, the mandate relief component would provide real cost savings in the form of $127 million in savings to local budgets. This includes:


•$70 million for all local governments and school districts through piggy-backing and centralized contracts;


•$34.6 million in savings for school districts;


•$13 million for transportation/housing/contracting/procurement/administration for all localities;


•$7.9 million in social services savings for counties; and


•$1.5 million in criminal justice savings.



The law establishes a Mandate Relief Council which will:


•Determine if a statute or regulation is unsound, unduly burdensome, or costly;


•Establish procedures for repealing unfunded mandates in both statute and regulation;


•Provide a mechanism for direct appeals from the State Administrative Procedures Act petition;


•Require the state Comptroller to issue a detailed report on the cost and effect of unfunded mandates;


•Require that all bills that require a local government or a school or special district to take any action contain a fiscal note; and


•Be comprised of 11 members nominated by the Governor and Legislature: two nominations for each of the legislative leaders, and seven nominations for the Governor, including the Secretary to the Governor (who would serve as chair), the Governor’s Counsel, Secretary of State, Director of the Division of Budget, and three additional members from the Governor’s executive chamber staff.

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Meet the PayPal mafia
An inside look at the hyperintelligent, superconnected pack of serial entrepreneurs who left the payment service and are turning Silicon Valley upside down. Fortune's Jeffrey O'Brien reports.
By Jeffrey M. O'Brien, Fortune senior editor



Max Levchin (left) and Peter Thiel hatched the idea for PayPal over breakfast.
Photos
  
Profiting from the PayPal connection
PayPal founders Max Levchin and Peter Thiel estimate that their ex-PayPal colleagues run $30 billion worth of businesses. Here's a snapshot of what these guys are up to now. View photos
Despite his ouster from PayPal, Elon Musk has made up with the mutineers -- and even invests in their ventures.
More from Fortune
Next-gen female entrepreneurs

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(Fortune Magazine) -- A door opens, and a blond man appears in a white jacket with large buttons. "Good morning," he says. "Peter's in back. Make yourself comfortable in the dining room. I'll be serving breakfast shortly."

Holy cannoli. Peter Thiel has a butler. The 40-year-old entrepreneur runs a $3 billion hedge fund. He's the founder of a new venture capital firm that's the talk of Silicon Valley. He's got an early $500,000 stake in Facebook that's now worth about $1 billion on paper. The man has bankrolled everything from restaurants to movies and is lauded by many as some kind of free-market genius. He drives a half-million-dollar McLaren supercar. And now a butler.

Just back from a morning run, Thiel emerges into the dining room of his home in the shadow of San Francisco's Palace of Fine Arts. Wearing a powder-blue T-shirt wet with sweat, he displays the relaxed self-confidence of Michael Corleone. Perhaps it comes with the butler. "I'm Peter," he says, extending his hand and smiling before thanking me for agreeing to such a late breakfast meeting. It's 7:30 A.M. "It was nice to sleep in."

The doorbell rings, and in walks a scruffy, sleepy-eyed Max Levchin, 32, who has trekked over from his new $5 million-plus home a few blocks away in Pacific Heights. Every garment on Levchin's unwashed body is a freebie - University of Illinois zip jacket, mismatching shorts, bright orange T-shirt with some Hebrew lettering.

The high-stakes fight for your friends
Levchin runs one of the hottest companies on the web, a photo-sharing site called Slide that draws 134 million users a month. Making neither eye contact nor conversation, he presses his lips together, nods to indicate that he is, as ever, ready for business, and sits.

It's been nine years since Thiel and Levchin first dined together at Hobee's, near Stanford University. Levchin had an idea for a company, and Thiel wanted to invest. In short order Thiel joined as a co-founder, and together they set out to "create the new world currency."

Their brainchild would change the course of the Internet. They'd bring on several hundred employees to what would become PayPal. They'd sign up more than 20 million users and burn $180 million in funding before breaking even and selling out to eBay (Charts, Fortune 500) for $1.5 billion.

And then things got interesting. The eBay deal, remarkable only because it happened in the bleakness of 2002, wasn't so much an exit as an explosion. Most of PayPal's key employees left eBay, but they stayed in touch. They even have a name for themselves: the PayPal mafia. And the mafiosi have been busy.

During the past five years they've been furiously building things - investment firms, philanthropies, solar-power companies, an electric-car maker, a firm that aims to colonize Mars, and of course a slew of Internet companies. It's amazing how many hot web properties can trace their ancestries to PayPal.

Besides Facebook and Slide, there's Yelp, Digg, and YouTube. Thiel and Levchin, the don and consigliere of the mafia, figure that all told, there are dozens of enterprises worth a total of roughly $30 billion - and that value is growing rapidly, as evidenced by Thiel's good fortune with Facebook.

This group of serial entrepreneurs and investors represents a new generation of wealth and power. In some ways they're classic characters of Silicon Valley, where success and easy access to capital breed ambition and further success. It's the reason people come to the area from all over the world. But even by that standard, PayPal was a petri dish for entrepreneurs. The obvious question is, Why?

Maybe it comes back to the early hires. After their first breakfast, Thiel and Levchin began recruiting everyone they knew at their alma maters. "It basically started by hiring all these people in concentric circles," Thiel remembers. "I hired friends from Stanford, and Max brought in people from the University of Illinois."

They were looking for a specific type of candidate. They wanted competitive, well-read, multilingual individuals who, above all else, had a proficiency in math. Levchin's original idea for PayPal was to beam money between PalmPilots, but Thiel has a way of seeing the bigger picture.

A staunch libertarian, Thiel figured a web-based currency would undermine government tax structures. Getting there, however, would mean taking on established industries - commercial banking, for instance - which would require financial acumen and engineering expertise.
Thiel and Levchin also wanted workaholics who were not MBAs, consultants, frat boys, or, God forbid, jocks. "This guy came in, and I asked what he liked to do for fun," Levchin recalls. "He said, 'I really enjoy playing hoops.' I said, 'We can't hire the guy. Everyone I knew in college who liked to play hoops was an idiot.'"

Next page: The PayPal mafia  1 2 3
  

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Looking Twice at Pension Double-Dipping

Should full pensions be allowed if you keep working?

BY: Girard Miller | December 17, 2009





Girard Miller
Girard Miller is the Public Money columnist for GOVERNING and a senior strategist at the PFM Group.










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Commented May 31, 2011

You obviously did not enter the US military 30 years ago. They told us (I joined in 1963) we would ...

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Recent news coverage in USA Today highlighted the public-sector practice of "double dipping" -- receiving pension benefits intended for retirement purposes while drawing a salary with another employer (or in some cases, the same employer).

Pension watchdogs loathe double-dippers, and progressive reformers are now wondering whether something is indeed wrong when retirement benefits are paid to employees who are obviously capable of earning an income. Critics say the practice is akin to doling out farm subsidies for big, successful farmers who are already making good money.

Most notorious are senior management employees, police and fire chiefs, and others who draw six-figure pensions before age 60, and then work for another employer at the six-figure level. Some states are considering legislation to curb what are perceived as abuses.

There are several sides to this issue, and I'll try to provide an objective analysis and provoke a thoughtful debate to encourage suitable and sensible reforms. For starters, I'll suggest that with a few notable exceptions - such as the former California administrator who manipulated his way to a $500,000 lifetime pension - most public employees have earned a right to a decent and modest public pension that assures them a secure retirement. If they work part-time in a second career after toiling for 30 years at $50,000 or less, I have no issue with their work ethic and their right to supplemental income to pay for travel or a new car. That's not what this column is about, however. We're focused here on the highly visible double-dippers who game the system to collect big money from a system that never intended to create pension millionaires and pension aristocrats at taxpayer expense.

Replacement income vs. deferred compensation. Pensions were intended to provide retirement security, not pre-retirement wealth. To provide security, they should provide replacement income in retirement. Replacement income is not dual income. Pensions were not designed to be "deferred compensation" as some would argue. IRS codes provide plenty of arrangements for deferred compensation, including 457 plans common in the public sector which limit the annual contributions and thus the total accumulations that can be withdrawn later. That said, there are some parallels to consider when evaluating the double-dip phenomenon. We should always think about how we would feel if a corporate employee with a 401(k) plan begins to withdraw retirement plan assets while working for another employer. If the net financial result is the same for a double-dipper, then the problem is not with the pension system. Conversely, if a pension recipient receives benefits unavailable through a defined contribution plan, including tax preferences, then suspicions should arise.

A lack of self-awareness. Most public employees feel that they have earned their pensions, but many seem to be unaware of how much earlier they are able to receive substantial benefits than their counterparts in the private sector. It is their entitlement to pre-retirement income that is disputed by the watchdogs. Many of the early "retirees" who double-dip clearly view their pension as deferred compensation and pre-retirement income, not retirement security. They also tend to overlook the gamesmanship that transpires in the pubic pension arena, where workers can transfer service credits from one employer to another and parlay benefits that could never be attained in the corporate world. Portability is one thing; triple-dipping is another.

Double-dipping would be much less frequent if public employees were required to work until Medicare or Social Security age before retiring -- unless they take an actuarial reduction in their pension, just like early retirees under Social Security. Such a system would impose a financial penalty on early retirees which would also reduce the costs of funding the system properly. Then, an employee could supplement her reduced pension with outside income from a second career or a job with a new employer.

Unfortunately, it is difficult to impose such requirements on incumbent employees who view their pension benefits as property rights. Some states have laws making their benefits irreversible once they are vested. However, there are other ways for legislatures to skin this cat, including an excise tax on double-dippers, as I'll discuss below.

For retirees who have reached Medicare and Social Security age, the double-dipping issues are less prevalent. Historically, most workers quit laboring at that point. However, there are new issues that we as a society must face as Baby Boomers reject their parents' shuffleboard retirement paradigm and seek relevance in our society by working in a second career. In most cases, they will downshift to lower-compensated work that gives them personal satisfaction and a sense of involvement with lower stress. What we need to think through is whether the pension should be adjusted in such instances.

Tax the double-dippers? Financially strapped states could impose an excise tax or an income surtax on double-dip income, which would be one way to restore funds to the pension system. For example, states could collect a 15 to 25 percent surtax on income received while earning more than 50 percent of the annual pension, or a similar surtax if combined pension and earned income exceeds the employee's previous five years' average income. The latter arrangement would also address excessive pension ratios.

Low-income retirees and those older than 66 should be exempted, of course. I would prefer to see the tax revenues returned to the pension systems, especially if they are significantly underfunded. This would be an example of a tax that produces in insignificant statewide revenue, but serves as an equalizer for public policy purposes.

Federal law imposes a 15 percent surtax on early distributions before age 59 1/2 in qualified defined contribution plans. I'd say that what is good for the goose is good for the gander and that a similar tax should apply to early pension payments that are not actuarially reduced or reflective of a 30-year career. An excise tax on premature pension distributions could be triggered by excessive supplemental employment earnings prior to Social Security age (for state taxes) and age 59 1/2 for federal taxpayers.

Presently, 10 states do not tax public employee pensions, and some of them will be forced to consider pension income taxes as revenue-raising measures -- including Michigan, which offers the biggest loopholes. I won't be surprised to see legislators and pension watchdogs in several of these states take a hard look at the double-dipping issue when the general tax policy for pension income is reviewed.

Allow a benefit-bump instead. An alternative approach to mitigating the double-dipper syndrome is to reduce pensioners' benefits while they receive outside income, and then permit them to receive a bonus payment later in the form of an increased annuity. The Social Security system has figured this out, so why haven't pension funds? For example, a pensioner entitled to a $40,000 benefit while working a second job could receive $20,000 in a reduced pension while still working, and then receive a pension greater than $40,000 after leaving the workforce altogether. The increased life pension after age 66 would be approximately one-fifteenth of the reduction taken each year, so in this example, a three-year pension reduction of $20,000 annually for double-dipping before age 66 would entitle the her to a subsequent increase of $4,000 annually for life -- thus an enriched $44,000 pension thereafter.

If faced with an excise tax, double-dippers could elect this reconfiguration of their pensions, minimize taxes, and still come out equal actuarially. Some may actually prefer this arrangement because of high marginal federal tax rates on their combined income while they work the second job. In fact, there may be other ordinary pensioners who would prefer to elect a deferral arrangement, which might even include enhanced spousal survival benefits if properly designed by the actuaries. Obviously IRS codes or letter opinions may need adjustment to enable such flexibility, but that will become increasingly necessary as Baby Boomers adopt alternative lifestyles in their retirement years.

We need creative solutions, not finger-pointing. I don't purport to have all the answers here, but our lawmakers and taxing authorities need to address these thorny problems. For starters, we obviously need to raise the regular retirement ages for public pension plans to align them with Social Security, which would eliminate most of the double-dipping. Other reforms such as those suggested above would eliminate the remaining abuses by incumbent employees whose benefits formulas are untouchable. Otherwise public confidence in the public-sector retirement system will continue to erode and future employees will bear the brunt of the punishment for the sins of their predecessors.



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Criticism of Glenville budget unwarranted

    [Glenville Supervisor Chris] Koetzle’s and the Town Board’s budget is solid.
    I recently sat through the board’s hearing on breaking the tax cap, if needed, and was amazed at how uninformed some residents are.
    What upset me, though, was the behavior I witnessed — the anger and name-calling directed at board members, who are also residents and neighbors.
    They are not exempt from anything they propose, and I am sure they do not want to pay any more than they have to. We, as residents, have to understand that those services are not free. We live in a great town with great schools, neighborhoods where I have raised my children, neighborhoods that are safe and quiet because of the taxes I pay.
    The budget our supervisor and Town Board propose comes in under the state cap, cuts spending signifi cantly, protects all our core services, absorbs massive increases to state-mandated spending and reduces the town’s dependency on fund balance, all with no new fees. The supervisor’s budget presents a solid spending plan that will place the town in a stronger fi scal position for the future while managing a budget during tough economic times.
    More importantly, this budget reserves the trend of increased spending by the previous administration and helps put us on a stronger footing.
    Any tax increase in these times is diffi - cult, but the officials in Glenville were able to deliver a levy that is within the cap while absorbing huge increases in the state’s pension and other state-mandated benefi t costs at a time of falling revenues. We need to put it in perspective: It means another $15 per average household per year, with no new fees.

    DAVID RODDY
    Scotia