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Will Governments Finally Recognize Their Fiscal Responsibility?
- GoingConcern
- July 30, 2010
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
If you live or work in New York City you know how the subway can be both a blessing (when it runs on time) and a curse (when it doesn’t) or for reasons that on Wednesday became clear: fare hikes.
If you don’t live in New York you can appreciate why the agency responsible for public transit, the Metropolitan Transportation Authority, is having such a difficult time making ends meet. At the top of the list is compensation and benefits costs, which account for two-thirds of the MTA’s $12 billion operating budget for 2011.
The MTA says its health care costs are going up about 9 percent annually-which is actually in line with national increases. The challenge for a public agency of course is that it is locked into contracts with its heavily unionized workforce. Making changes is not easy.
The plan the MTA put forward Wednesday was to enter in what it called “net zero” contracts with its unions-contracts in which any raise would be “paid” for by givebacks in productivity, changes in work rules or increased contributions to health care benefits. The unions took exception to this proposal but no one doubts that the compensation structure of government employees needs to come in-line with their private sector counterparts. Andrew Cuomo, the Democratic nominee for governor, has made reforming this imbalance part of his platform.
Debt service aside (and the MTA’s debt service totals $1.8 billion this year, growing to $2.5 billion by 2014), the MTA, like so many government entities throughout the country, has long term health care challenges ahead. Its health care retirement obligation totals $1.4 billion growing to $1.7 billion by 2014. While the MTA continues to pay enough into its retiree health care fund to pay for its current retirees’ health care, the authority, citing this year’s cash-flow problems, will not pay $57 million this year into a fund for future obligations.
The Great Recession has helped bring the issue of government post-retirement obligations to light. As government revenues shrink and obligations grow, taxpayers sense an inherent injustice between their own grim retirement prospects and the assurances given to public sector workers. Subway service cuts and fare hikes are only meaningful if they address the long-term problems rather than enable government to deal with short term crisis.
Cuomo is banking on this public displeasure, as is the MTA. Next year the MTA’s contract with its largest union is up for renewal. The transit authority will be able to test whether it has public support for changing the way the state entity does business with unions. Bringing government into the 21st century by reducing health care and other post-retirement obligations will be good for taxpayers and for businesses, including those with heavily unionized workforces.
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Will Apple’s Accounting Encourage Others to Drop Non-GAAP Measures?
- Caleb Newquist
- January 26, 2010
A tipster pointed us to Apple’s transcript from last night’s earnings call, noting that the company has indicated that they will no longer be providing non-GAAP measures. This is a result of the solid that the FASB did for Apple back in September:
We are very pleased by the FASB’s ratification of the new accounting principles as we believe they will better enable us to reflect the underlying economics and performance of our business and therefore we will no longer be providing non-GAAP financial measures.
Our tipster noted that since using non-GAAP measures are a commonly used by companies and analysts, Apple’s declaration that they would not be “providing non-GAAP financial measures,” could potentially change things. It’s one thing if say, Koss were to say they’re not going to provide non-GAAP numbers, but this is Apple.
The company enjoys a top of the mind position, so other companies may embrace this method of engaging with analysts and other users. And since Apple isn’t shy about controlling the information they provide (e.g. Steve Jobs’ pancreas) this seems to be another way for them to dictate the information they are providing.
It’s not a stretch to say that many companies try to emulate Apple; whether or not they will emulate Apple’s financial reporting methods remains to be seen. Strange, because we figured they were just innovative on the gadget front.
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Goldman Sachs CFO: Layoffs Are About the Numbers
- Caleb Newquist
- July 19, 2011
Goldman Sachs Group Inc. […] Chief Financial Officer David Viniar said the investment bank could layoff 1,000 employees globally as part of $1.2 billion in cost cuts.
During a conference call with analysts, Viniar said the potential headcount reduction is “as we sit here now and, of course, things can change,” adding that such layoffs would “come over the course of this year.” Viniar said the cuts could be “some senior, some junior people,” but “it’s really more dollar focused than head focused.” [MW]