June 28, 2010Similar to the prior report, last week's economic news was more sour than sweet, with just two of seven major indicators improving, two indicators declining and three decelerating. (To read all of last week's indicators, see the Latest Economic Reports section below.) In a reversal from the prior week, manufacturing indicators generally deteriorated based on last week's reports.
Several regional reports showed that manufacturing activity slowed in June while durable goods manufacturing orders fell in May, mainly due to spillover effects from the end of the homebuyer tax credit.
In addition, the Commerce Department released the third and final estimate of first-quarter GDP growth, which showed that the economy grew at a 2.7-percent annual rate in the first three months of the year. This is down from the initial estimate of 3.2-percent made at the end of April. The downward revision was caused by slower consumer spending and business investment outweighing more solid growth in exports.
Since the second quarter of last year, the economy (GDP) has grown by 2.6 percent. While this is faster than the initial three quarters of GDP growth during the past two recoveries, the upturn has been slower than the upturns following both the 1974-1975 and 1981-1982 recessions (see chart above).
While the current recession has been the deepest since the Great Depression, the upturn to date has been relatively modest. With most of the positive effects from federal stimulus now in the rear-view mirror, the possibility that the recovery will decelerate in coming quarters is high given recent economic indicators.
Dave Huether
Chief Economist
National Association of Manufacturers
CONSUMER SPENDING, INCOMES RISE SLIGHTLY IN MAY
June 28, 2010 – Today in Manufacturing.netCommerce Department said consumer spending rose 0.2 percent last month, an improvement from April's reading of no change, and incomes rose 0.4 percent... continue
HEALTHCARE REFORM UPDATE
June 28, 2010 - Aon Consulting’s Health Care Reform Weekly BriefingLast Week in Washington
Interim Final Regulations Issued to Implement Health Care Reform Requirements on Pre-Existing Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections
On June 22, the Departments of Health and Human Services (HHS), Labor, and Treasury jointly issued interim final rules implementing the Patient Protection and Affordable Care Act (PPACA) requirements relating to pre-existing condition exclusions, lifetime and annual limits, rescissions, and patient protections. The interim final rules are effective August 27, 2010. The PPACA requirements addressed in the interim final rules generally apply to plan years beginning after September 23, 2010; however, the prohibition against pre-existing condition exclusions only applies to children under age 19 until 2014, when it will apply to both children and adults. These requirements also apply to grandfathered plans, other than grandfathered plans that are individual health insurance coverage. A fact sheet is also available. Aon Consulting’s June 23 Alert provides highlights of the regulations, explanations of the provisions, and next steps for plan sponsors.
Obama warns insurance companies not to unnecessarily raise costs
According to the Washington Post, President Obama met with some of the chief executives of major insurance companies last Tuesday to caution them against using the new requirements recently enacted as an excuse to substantially raise premiums. Karen Ignagni, president of America’s Health Insurance Plans, said she and other industry representatives felt the meeting was a "very constructive" opportunity to make their case that recent increases in premium rates are due to recessionary pressures and increasing medical and drug costs, not because the industry is greedy.
HHS Launching Federal Health Care Site for Consumers July 1
According to a report by Kaiser Health News, the new health care law requires a new site, http://www.healthcare.gov/, to give consumers a list of all private and government health care plans for individuals and small businesses in their areas. The site is being launched by HHS July 1, and initially will provide basic information such as the names of companies, their health plans, and links to their websites. By October, the site will list detailed benefits and cost information. Insurers have stated that HHS is over complicating what the legislation sets out to do, and feel data – such as the percent of claims that health plans deny, the rate at which they cancel policies after customers get sick, and the number of times patients appeal coverage decisions – should not be provided as it would mislead potential customers. However, consumer groups feel the data are vital in helping consumers choose a plan. There is also a clash over what premium prices should be listed for insurance plans, as HHS intends to use base prices. Others feel average prices should be listed, while some consumer advocates believe consumers should be able to get exact prices from the site, which would require detailed medical histories.
IFEBP Survey Finds Most Employers Still Expect to Sponsor Health Plans Long Term
According to Employee Benefit News, of the 1,000 employers surveyed by the International Foundation of Employee Benefits Plans, 87% believe their organizations will continue to offer health benefits. Other findings include:
§ Only 20% are taking immediate action to change eligibility requirements for employees’ adult children up to age 26.
§ 75% of employers surveyed determined extending coverage to adult children as the major reform requirement impacting plan costs.
§ Only 4% of employers offering plans with lifetime maximum provisions are removing the maximums before they are required to do so. The same percentage plan to remove annual maximums before they are required to do so.
§ 52% who currently offer medical benefits to retirees are anxious to take advantage of the federal reinsurance program. 35% are still deciding if they’re going to apply and 13% have decided not to apply.
HHS Announces CO-OP (Nonprofit Health Insurer) Advisory Board
According to a notice published June 23 in the Federal Register, HHS has established the Consumer Operated and Oriented Plan Advisory Board, as required by the new Health Care Reform Law. The board will make recommendations on grants and loans, establishing nonprofit, member-run health insurers to serve the individual and small group markets. The acting comptroller general and head of the U.S. Government Accountability Office, Gene Dodaro, also announced the appointment of the board's 15 members on June 23. The members include physicians, a hospital administrator, medical professors, health policy experts, a regulator, health care group and health care cooperative leaders, and an actuary. The CO-OP program is charged with awarding all grants and loans by July 1, 2013; however, the Advisory Board may continue its work until December 2015. Management and oversight for support services to the board will be the responsibility of the HHS Office of Consumer Information and Insurance Oversight.
HHS Announces Grants of $250 Million For Public Health, Prevention Programs
On June 18, HHS Secretary Kathleen Sebelius announced the second $250 million allocation for fiscal year 2010 from the Prevention and Public Health Fund created by the Patient Protection and Affordable Care Act to support prevention efforts and bolster public health infrastructure. Of the funding, $126 million is slated for community and clinical prevention activities at the federal, state, and local levels, including obesity prevention and fitness programs, tobacco cessation efforts, and integrating primary care and community-based behavioral health care. In addition, $70 million will be provided to support the public health infrastructure, including the capacity to respond to infectious diseases; $31 million will go to data collection and analysis and to strengthen existing task forces; and $23 million will be used to expand the public health workforce and training centers run by the Centers for Disease Control and Prevention. A fact sheet on the new investments is also available.
In Case You Missed It:
Are State Challenges to the Legality of the Patient Protection and Affordable Care Act Likely to Succeed?, Randall R. Bovbjergan, Urban Institute, 06/22/2010
What Is the Evidence on Health Reform in Massachusetts and How Might the Lessons from Massachusetts Apply to National Health Reform?, Sharon K. Long, Urban Institute, 06/21/2010
Health Care Reform and Cost Control, The New England Journal of Medicine, Peter Orszag and Ezekiel Emanuel (opinion), 06/16/2010
For Denied Claims, a Bit of Help in the Health Law, New York Times, Michelle Andrews, 06/21/2010
NAM RELEASES STRATEGY FOR JOBS
June 28, 2010 – National Association of ManufacturersToday, the National Association of Manufacturers (NAM) released a Manufacturing Strategy for Jobs and a Competitive America, a new document that lays out manufacturers’ priorities in the face of unprecedented global competition.
This new strategy document can prove especially helpful explaining the competitive realities faced by manufacturers and states in today’s challenging economy.
As the title suggests, a Manufacturing Strategy for Jobs and a Competitive America calls on Congress to think and act strategically when working on economic policies. Specifically, the Strategy sets out the following goals:
· The United States will be the best country in the world to headquarter a company.
· The United States will be the best country in the world to innovate, performing the bulk of a company’s global research and development.
· The United States will be a great place to manufacture, both to meet the needs of the American market and serve as an export platform for the world.
NAM is sending a Manufacturing Strategy for Jobs and a Competitive America to every member of Congress and all governors.
UMA intends to use it as a resource in meeting with elected representatives and candidates as we continue our efforts to support manufacturing in Utah.
OPEC SAYS U.S. SHOULD RECONSIDER DRILLING BAN
June 28, 2010 – Today in Manufacturing.netDespite safety concerns in the wake of the massive Gulf of Mexico oil spill, OPEC called on U.S. to reconsider a ban on new deep-water drilling that could hold back oil supplies... continue
PROPOSED REINSTATEMENT OF SUPERFUND TAX
June 28, 2010 - NAMThe Administration last week sent the attached letter to Congressional leaders urging reinstatement beginning in 2011 of the Superfund Tax, which expired in 1995. The letter, which includes draft statutory language, is signed by EPA head Lisa Jackson. In light of the pay-go rules, spending initiatives and increasing concern about the deficit, Congress in recent months has stepped up efforts to identify potential revenue sources. The Administration included a provision in its FY 2011 Budget plan to reinstate the Superfund Tax that is estimated to raise $19 billion over ten years with $7.6 billion (40 percent) coming from the Corporate
Environmental Income Tax (CEIT). In addition to the CEIT, which applies to most companies, the Superfund tax also includes excise taxes on the oil and gas and chemical industries.
Separately, several members of Congress have introduced bills that would revive the Superfund, including HR 564, introduced by House Ways and Means Committee member Earl Blumenauer (D-OR-3 ), S. 3125, introduced by Senate Finance Committee member Sen. Bill Nelson (D-FL) and S. 3164, introduced by Sen. Frank Lautenberg (D-NJ). Note that S. 3125 would only reinstate the excise tax component of the Superfund tax and increase the rates. In addition, the Senate Environment & Public Works Subcommittee on Superfund, Toxics and Environmental Health today is holding a hearing on "Oversight of the Environmental Protection Agency’s Superfund Program."
UTAH UNEMPLOYMENT TRUST FUND BEING DEPLETED
June 28, 2010 – UMA
UMA president Tom Bingham serves as an employer representative on the Utah Employment Advisory Council, a panel that reviews the functions of the Department of Workforce Services, Division of Unemployment and oversees the UI Trust Fund. Several years ago, at the insistence of the UI Advisory Council, the Legislature put in place automatic triggers to maintain the UI Trust Fund in a balance between a pre-determined “maximum adequate” and a “minimum adequate”. That trigger mechanism has been very effective in keeping the fund solvent. However, with the sharp increase in unemployment during this prolonged recession, the fund has dipped below the minimum adequate and is headed toward insolvency. The triggers, delayed because of timing of adjustments have not been sufficient to keep the fund in the adequate range.
In a recent meeting of the UI Advisory Council, suggestions were made as to how to avoid insolvency. Those proposals, which follow, have been reviewed by the Utah Legislature’s Workforce Services Interim Committee last week and will be addressed again by the council on July 21 to consider how to avoid insolvency of the fund. A preliminary meeting of a select group of employer representatives will meet this week to begin formulating a proposal for the full council to consider in July.
The following are the materials presented for consideration and will be used to make recommendations to the Legislature for statutory adjustments necessary to maintain a solvent UI Trust fund.
Utah Unemployment Insurance (UI) Trust Fund
(Workforce Services Legislative Interim Report)
June 23, 2010
CURRENT STATUS OF UTAH'S UNEMPLOYMENT TRUST FUND
- Utah has $375 million remaining in their UI Trust Fund, currently the fifth highest amount in the country, however down almost $500 million from two years ago.
- Utah's Trust Fund may go insolvent as early as fall of 2011 if benefit cost remain relatively high for the next 2 years.
- Utah's UI Trust last went insolvent in 1982 and 1983, to which Utah borrowed money from the federal government and repaid the loan in less than one year.
- Currently 35 states UI Trust Funds have gone less insolvent resulting in $40 billion dollars interest-free loans from the federal government.
WHY UTAH'S UI TRUST FUND MAY GO INSOLVENT
- The current recession will likely be the longest post World War II recession.
- Utah's average annual UI benefit payout was about $100 million per year for 2005, 2006, and 2007; we will pay out about $415 million per year in 2009, 2010, and 2011.
- Declines in taxable payrolls are resulting in decreased UI tax revenues.
OPTIONS FOR HELPING THE SOLVENCY OF THE UTAH UI TRUST FUND
- Modifications to the UI tax statutes that define the funding levels of the Trust Fund
- The current statute defines and adequate reserve as the between 18 to 24 months of benefits at the average of the five highest benefit cost rates in the last 25 years. Consider expansion of the "look back" to 40 to 50 years to capture the severe recessions of the early 1980s, currently only 1985 and 2010 are considered. This will result in a higher minimum and maximum reserve levels, which could impact reserve factors. However, without a change to the reserve factor statute we do not anticipate this would have any fiscal impact in the next few years.
- The current reserve factor is set between 0.5 and 1.0 if the actual reserve fund is greater than the "adequate" reserve level and is set at 1.0 and 1.5 if it is less than adequate and is set at 2.0 if the fund is insolvent. Consider expansion of the table to .05 to 1.0if the actual reserve fund is greater than the "adequate" reserve level and is set at 1.0 to 1.95 if it is less than adequate. This would make further adjustments to the reserve factor when the fund is under or over funded and not have the current "cliff affect" (See handout for current and proposed table).
- Modifications to the UI benefit statutes that determine Weekly Benefit Amount:
- Current statute established the Weekly Benefit Amount (WBA) at 1/26 of the individual's total wages for insured work paid during their highest base period quarter. The maximum is set at 62.5% of the insured average fiscal year weekly wage in the preceeding fiscal year. Utah currently pays and average WBA of $321 per week (18th nationally) and as a percentage of our average weekly wage 44.4% (10th nationally). Consider a reduction or temporary reduction in the weekly and maximum WBA. For every $1 reduction in the WBA the Trust would save about $1 million dollars for each FY 2012 and 2013.
- Do Nothing
- Some states are confident that the federal government will continue to provide interest free loans past the current 12-31-2010 termination date. However, concerns have been expressed by solvent states about the "moral hazard" associated with interest-free loans; without the accrual of interest on outstanding loans, insolvent states are encouraged to borrow more funds and delay repaying the principal.
- DWS is currently working with the DWS Employment Advisory Council to provide recommendations for potential legislative changes.
CURRENT DWS INITIATIVES TO HELP PRESERVE UTAH'S UI TRUST FUND
- Enhanced Integrity Effort: Increase our focus on the detection and collection of UI benefit overpayments. Utah has 12 data cross-matches for detecting overpayments; the department estimates this will save the trust fund $3.5 million annually.
- Utah Back To Work Pilot: DWS has developed and initiative to provide Utah employers with an opportunity to re-employ approximately 2500 Unemployment Insurance
(UI) claimants a wage subsidy of up to $2,000 per participant for each employee they hire. ARRA funds will be used to fund the temporary subsidy, the department estimates this may save the UI Trust Fund about $3.5 million. - Depoartment of Labor Grant: DWS was awarded a $1.3 million federal grant that will be focused on helping 10,000 UI claiments most likely to exhaust their UI benefits. Claiments would recieve counseling, more in-depth assessments of any barriers preventing re-employment, help developign a work plan, a referral to appropriate training or skills enahncement. The department estimates we can save the trsut fund about $4 million.
FEDERAL LOANS
- The Recovery Act waived the charging of interest on federal advances to insilvent state UI programs from February 2009 to January 2011.
- The federal government imposes a seperate federal UI payroll tax under the Federal Unemployment Tax Act (FUTA). The gross tax is levied on covered employees at a rate of 6.2 percent on wages up to $7,000 a year paid to a covered employee. However, FUTA provides a credit against the federal tax of 5.4 percent to employers in states with an approved state UI program an no overdure federal UI loans; thus the effective federal tax rate is 0.8 percent, or a maximum of $56 per covered employee, per year.
- Federal law contains an automatic payment provision -- known as the "FUTA Credit Reduction" -- for states with loans that have been outstanding for roughly two to three years. Specifically, if a statehas an outstanding loan on January 1st of two consecutive years and does not fully repay teh advances by the November 10th of the following the second January 1st, the credit employers in the state receive on the Federal undemployment tax is reduced and the revenue generated from the credit is applied to the outstanding loan until it is repaid. Each year the loans are overdue, employers can lose at least 0.3 percentage point in the first year it is overdue for a tax rate of 1.1 percent, 0.6 percent in the second year it is overdue for a tax rate of 1.4 percent, and so on until the 5.4 percent credit is reduced to zero or the loan is repaid.
- Under permanent law, states are charged interest against most outstanding loans at a rate equal to the lower of 10 percent or the rate at which interst is paid on the state reserve balance in the federal unemployment trust fund for the last quarter of the preceeding calendar year. The interest is normally due on the last day of the fiscal year in which the loans were made.
- Interest cannot be repaid, either directly or indirectly, from the repaying state's UI trust fund. Typically, a state is required to establish a "surcharge" to the UI tax to fund teh interst paid on the loan. Reed Act monies cannot be used to pay any interest on federal loans. If a state fails to pay interest for any year on which it is due, the state could lose all of its FUTA offset credit (5.4 percent) for its employers as well as all grants for costs of administration until interest due has been paid
UTAH'S ECONOMY IS RETURNING TO GROWTH MODE
June 28, 2010 – Zions BankThe Utah economy has returned to growth mode, following its most painful and most costly recession since the Great Depression, according to the Summer 2010 issue of Zions Bank's InsightEconomic News of Utah and the Nation released today.
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WESTERN GOVERNORS, EXPERTS SAY POTENTIAL WATER CRISIS LOOMS WITHOUT SMARTER WATER PLANNING, MANAGEMENT
June 28, 2010 – Western Governors AssociationWHITEFISH, MONT. - The demand for water across the West is beginning to outstrip supplies, and states have no time to waste in averting a potential crisis, said Montana Gov. Brian Schweitzer, Chairman of the Western Governors' Association, at the opening day of WGA's Annual Meeting on Sunday.
"It's a combination of increasing demands for our growing population and the economy, as well as the uncertainty in supply due to drought and climate change," Schweitzer said. "As a region, we have to become more aggressive and a lot smarter in how we manage this resource."
Robert Glennon, author of "Unquenchable: America's Water Crisis and What To Do About It ," pointed out ways the crisis already is affecting communities, states and the region and how to turn it around.
"Traditional infrastructure alone cannot solve this problem," Glennon said. "We need to use a full suite of tools, including conservation, desalination, reclaimed water, and pricing incentives. We also need to facilitate reallocation of water to the highest-value uses."
Mike Connor, Commissioner of the federal Bureau of Reclamation, who also participated in the discussion, said he is committed to working with the states to find solutions to these challenges.
"Our WaterSMART Initiative, which includes basin studies (Colorado, Yakima and Milk-St. Mary Rivers) and incentives for conservation and efficiency improvements, demonstrate ways we can work with the states and other parties to find solutions for the future," he said.
WGA Vice Chairman, Gov. C.L. "Butch" Otter said he is concerned about water transfers from agriculture to municipal or industrial uses.
"Agriculture holds most of the senior water rights in the West," he said. "Although water may go to higher-value uses through market transfers, we need to make sure we protect agricultural communities and economies, the environment and food security."
Otter also pointed out the important connections between energy development and water supplies in the West and emphasized that "both traditional and renewable energy resource development requires adequate water."
The Western Governors' Association and its affiliate, the Western States Water Council, have a long history of working on Western water issues and have ongoing initiatives around drought, energy and water, infrastructure, and climate adaptation. At the end of the session, the governors approved their resolution on Negotiated Settlements of Indian Water Rights and accepted a Progress Report from the Western States Water Council on implementation of the Governors' report on "Water Needs and Strategies for a Sustainable Future."
WILL OIL SPILL HURT ECONOMIC RECOVERY?
June 28, 2010 – Today in Manufacturing.net
BP spill has hammered fishing and tourism industries along the Gulf, but it appears the economic damage to the rest of the United States will be limited... continue
WORKPLACE SAFETY AND HEALTH EMPHASIS INITIATIVE
June 28, 2010 - State of Utah Labor Commission - Utah Occupational Safety & Health DivisionIndustrial Machine Guarding and Control of Hazardous Energy (LOTO)
Machinery is used in many operations and by many employees in Utah. Amputations can and do occur when machinery is not adequately guarded when in use or locked-out during maintenance procedures. In fact, according to the Bureau of Labor Statistics, in the United States workers who operate and maintain machinery suffer over 18,000 amputations, lacerations, crushing injuries, abrasions; and over 800 deaths per year. Amputation is one of the most severe and crippling types of injuries in the occupational workplace, and often results in a permanent disability. Not only do these types of injury affect the worker, it also has a tremendous impact on the worker’s family and the community.
Utah OSHA is taking proactive steps to decrease, accidents resulting in amputations and other serious disabling injuries. Through compliance inspections and evaluation of industries where machine-related accidents are prevalent, accidents can be prevented. Commencing immediately, those establishments included in this initiative (see included industry groups below) which have experienced a total injury rate above the 2008 and 2009 Bureau of Labor Statistics state average rates for their specific industry, may be evaluated and considered for a compliance comprehensive inspection during this emphasis initiative. A comprehensive inspection is a complete and thorough inspection of all potentially hazardous areas of the establishment.
This type of inspection is also known as a "Wall to Wall" inspection. The industry groups
(North American Industrial Classification System-NAICS) included in this initiative are:
· 311xx - Food manufacturing, state average total rate 6.8
· 314xx - Textile mills, state average total rate 4.2
· 321xx - Wood products manufacturing, state average total rate 7.8
· 322xx - Paper manufacturing, state average total rate 4.0
· 326xx - Plastic and rubber manufacturing, state average total rate 6.4
· 333xx - Machine manufacturing, state average total rate 5.8
· 337xx – Furniture manufacturing, state average total rate 6.7
We remain committed to the safety and health of Utah's workers. For more information, visit the Utah OSHA website at www.uosh.utah.gov or contact Eldon Tryon, UOSH Compliance Manager at 80I.530.6901.
In addition, the Utah Labor Commission OSHA Consultation Program is a cooperative effort available at no charge to small businesses in high hazard industries. For assistance with workplace safety and health, small business owners may contact Kate McNeill, OSHA Consultation Program Manager at 801.530.6868.
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