For U.S. Women, Inequality Takes Many Forms

Apr 14, 2015Ariel Smilowitz

The gender wage gap is a complex problem, and we'll need to address factors like race and region to solve it.

The gender wage gap is a complex problem, and we'll need to address factors like race and region to solve it.

Although we are only a few months into 2015, it has already proven to be a watershed year for women’s rights around the world. On the heels of the International Women’s Day March for Gender Equality, the He for She and Planet 50-50 by 2030 Campaigns, and the twentieth anniversary of the Beijing Declaration and Platform for Action, international advocates and officials alike are coming together to evaluate the progress that has been made over the past several years. This raises the question: what is the current status of women in the United States?

The Institute for Women’s Policy Research (IWPR)—in partnership with a multitude of organizations including the Ford Foundation, the Roosevelt Institute Campus Network, and the Center for American Progress—just released the 2015 edition of its project on the Status of Women in the States, with newly updated data and trend analyses on women’s economic, social, and political progress in the United States. The findings? Although we have indeed experienced progress toward gender equity, it’s likely that we won’t see equal pay for American women within our lifetime. (For more on this topic, see this post by Roosevelt Fellow Andrea Flynn.)

The road to achieving gender equality in the U.S. is quite clearly checkered with significant potholes.

Over the next several weeks, IWPR will be releasing a series of reports that include data on U.S. women’s employment and earnings, poverty and opportunity, work and family, violence and safety, reproductive rights, health and well-being, and political participation. The data and trend analyses found in these reports can be explored by topic and differing demographics (women of color, older women, immigrant women, and Millennials, to name a few), as well as on a national or state level. The first two chapters on employment and earnings and poverty and opportunity have already been released, revealing a number of insights on the state of women within this country. Some highlights:

  • In just about every state in the country, Millennial women are more likely than Millennial men to have a college degree, yet Millennial women also have higher poverty rates and lower earnings than Millennial men.
  • Although more women are receiving high school diplomas and completing college than ever before, a considerable proportion of women either do not graduate high school or finish their education with only a high school diploma.
  • By the time a college-educated woman turns 59, she will have lost almost $800,000 throughout her life due to the gender wage gap.

There are incredibly large disparities throughout different regions of the United States; southern women are the worst off with regard to employment and earnings. Furthermore, the status of women differs notably by race and ethnicity, with Hispanic women having the lowest median annual earnings compared to other women.

In general, women’s economic security is directly linked to their family income, which includes earnings from jobs, but women tend to be concentrated in fields that lead to jobs with relatively low wages. Even women who do go into higher-paying fields still earn less than their male peers. This helps explain why, in 2013, about 14.5 percent of women ages 18 and older had family incomes that placed them below the federal poverty line, compared with 11 percent of men. However, even this estimate does not fully capture the extent of the hardship that women continue to face in the U.S.

What can we conclude from this data? As a recent article in The Washington Post puts it: “When it comes to equal pay, the American woman is stuck in a proverbial waiting room. But the number on her ticket, the length of her stay, largely depends on where she lives and to whom she was born.” In other words, the status of women in this country is incredibly complex, and as a result, there is no simple, one-size-fits-all solution to achieving gender equality.

Gender equality is an intricate mosaic, a picture that cannot be complete without understanding and exploring the dynamic regional, national, and demographic factors at play. As a result, we cannot approach these issues without thoroughly peeling back and exploring each layer. It is necessary for all of us to reassess how we measure, monitor, and evaluate the status of women so that we can effectively determine both the progress that has already been made toward achieving full gender equality and the challenges and obstacles that lie ahead.  

Ariel Smilowitz is a senior at Cornell University and the Northeast Regional Policy Coordinator for the Roosevelt Institute | Campus Network.

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Predatory Finance Has Hurt Our Universities, But Students Can Fight Back

Apr 13, 2015Dominic RusselRyan Thornton

Our tuition checks shouldn't be going to pay off debts from Wall Street's bad deals.

Our tuition checks shouldn't be going to pay off debts from Wall Street's bad deals.

The last few decades have not been kind to America’s local public institutions. Cities that once built state-of-the-art infrastructure are now struggling to fix potholes in the street. Public schools that were once the best in the world are lagging behind. Even our universities, which used to be gateways to a shot at a better life, are increasingly becoming too expensive for much of the population.

There’s no shortage of explanations for these problems, ranging from globalization to government waste to an aging population. These answers, however, all overlook the role that a growing Wall Street has played in changing the picture for public institutions.

In 1950, the financial sector accounted for about 3 percent of U.S. GDP; it now accounts for more than 6.5 percent. This financialization has given the big banks on Wall Street immense wealth and power, allowing them to extract greater and greater earnings from public and private borrowers. While the financial industry is reaping huge profits, it is individuals, not corporations, who pay an increasingly large share of the taxes that are supposed to support our public institutions. Since 1950, corporate tax contributions have dropped from 32 percent to only 17 percent despite corporations claiming a growing share of GDP. In contrast, individuals now pay 63 percent of taxes, up from 45 percent in 1950.

Our cities and schools—and all public institutions that rely on taxes to provide essential services—have felt the impact of this change. Facing slashed budgets, they have been forced to turn to the financial industry for loans. Undoubtedly, borrowing is necessary for financing extensive long-term capital projects; however, public institutions are increasingly compelled to secure loans for their short-term spending as well. Big banks are more than happy to accept the business of cities and universities desperate for funding, especially when the banks get to write the terms of the deal.

Wall Street’s profits are no longer solely built on interest from traditional “vanilla” loans. Instead, its banks have turned to high-risk, high-cost, and unnecessarily complex deals to further inflate their profits. Take interest rate swaps, for example. Swaps are a financial instrument devised by banks that allows cities and universities—those issuing bonds to finance long-term projects—to “swap” a variable interest rate for an agreed-upon fixed interest rate.

These interest rate swaps were deceptive from the very start. They were sold as protection from changing interest rates, but because exorbitant termination fees made refinancing extremely costly, they were essentially dangerous bets that would have only worked out if interest rates rose. And the deck was stacked against the cities and universities making these bets.

Banks illegally manipulated the London Interbank Offered Rate (LIBOR), which was tied to many deals, and helped precipitate a financial crisis that led to near-zero interest rates that continue today. Because banks had negotiated the swaps contracts so that they would be paying the variable market rates, cities and universities ultimately ended up locked into deals in which they were paying as much as 50 times what the banks were paying—all of which went to Wall Street as profit.

Both of the schools we attend—the University of Michigan and George Mason University—entered into swap deals that have costs them millions. One swap at Michigan even protected banks by allowing them to terminate the deal if variable rates hit just 7 percent, while offering no protection for the university when rates actually sank near zero.

The current imbalance in power need not be the case. Increased transparency surrounding the fees and terms of public finance deals would allow students and taxpayers to oversee the officials and banks who use their money and hold them accountable. When university regents, trustees, or other executives receive or have received compensation from the financial institutions their school does business with (as was the case in a series of University of California swaps), they should immediately recuse themselves from financial decision making to avoid conflicts of interest. Cities, states, and universities can work together to bargain with banks or create public options for bond underwriting and borrowing.

In situations in which our public entities have been targeted by banks, we can organize and pressure our public leaders to regain the money we lost. The city of Detroit was able to reduce its bank payments from $230 million to $85 million by exposing the invalidity of a swap.

Because swaps were often marketed to public institutions as a safe protection from variable interest rates—not as risky bets—it may be possible to pursue legal action to reclaim some of the losses. One avenue to reclaim public funds is the regulatory framework of the Municipal Securities Rulemaking Board, which mandates that municipalities be made fully aware of the risks and possible costs of entering into financial deals.

As students, we feel the impact of Wall Street every time we pay tuition. We put ourselves in thousands of dollars of debt to pay for school, but because most university borrowing is backed by student tuition, this personal debt simply begets institutional debt. All this borrowing means huge profits for the banks that finance debt, much of it coming from hidden fees and inflated payments on long-term deals with our schools.

However, as students we also have the unique opportunity to band together and make our collective voice heard. For a few years our well-being is the primary focus of a massive anchor institution, and our dollars are often the main source of its funding. We can demand better than the status quo by pressuring our schools to reclaim that money from wealthy bankers and put it back into our institutions.

If borrowing from the big banks was on fair terms and intended for long-term capital projects, it wouldn’t be a problem. Unfortunately, instead of using our nation’s wealth to pay for education, increase our human and physical capital, and build our long-run potential for growth, we are using it to increase incomes for the wealthiest bankers.

We've reached a worst-case scenario, but it doesn't have to stay that way. By holding Wall Street accountable for how it plays with tuition and tax dollars, we can bring things back around so that public investment means improving society, not improving Wall Street's balances.

Dominic Russell is a sophomore at the University of Michigan and the Roosevelt Institute | Campus Network's Policy Impact Coordinator for the Midwest. Ryan Thornton is a junior and Campus Network chapter head at George Mason University.

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Why Is Lehman Brothers Suing Georgetown from Beyond the Grave?

Apr 9, 2015Alan SmithAditya Pande

The ghost of Lehman Brothers is still haunting colleges and universities around the country, continuing to extract money from institutions even though the financial firm itself is long dead.

The ghost of Lehman Brothers is still haunting colleges and universities around the country, continuing to extract money from institutions even though the financial firm itself is long dead.

When Lehman Brothers Holdings declared bankruptcy in 2008, it was the fourth largest investment bank in the United States. The giant’s collapse was felt in all corners of the global economy, but at least that collapse was thought to be a thing of the past. Now, it turns out that Lehman Brothers lingers on as a bankruptcy group trying to collect debts from the schools it already fleeced in 2008.

In St. Louis, the haunting is public: Lehman is suing St. Louis University because it doesn’t feel the school paid a fair market value (equivalent to the termination fee at a given time) on some interest rate swap derivatives in 2008.

Let’s look at that transaction: the school paid about $25 million in early termination fees on its interest rate swaps.* SLU didn’t necessarily want to bail out of these swaps, even though they were costing the school millions; it had to terminate them because Lehman Brothers, the counterparty to the deals, was going belly up. But in a lawsuit filed in December 2014, Lehman alleges that SLU’s termination payments were short of market value and that Lehman is in fact owed another $17.5 million on these swaps. 

Let's say that again: These swaps triggered in 2008 because of the Lehman bankruptcy. The school had to pay a termination fee because the firm that owned the swaps had effectively ceased to exist. And now that firm is suing the school because it wasn’t adequately compensated for its own failure.

Here’s where the story (and related research by the Roosevelt Institute | Campus Network) gets really interesting: The ghost of Lehman isn’t just in St. Louis. Looking at the financial records of Georgetown University, there appears to be a similar story playing out in private but with even larger stakes.

Georgetown’s financials from 1998 onward are rife with big bond projects, but for now let’s focus specifically on auction rate security (ARS) bonds. These are economic devices where the interest rate paid on the bond is regularly reset through a public auction. The theory was that these auctions would allow the market to drive the interest rates to the lowest possible bidder each period; some even reset every week. These bonds were being marketed (sometimes by Lehman Brothers) as a highly liquid way to get some safe cash.

We’ve since learned that nothing could be further from the truth, as the rate markets for ARS bonds locked up in 2008 and borrowers like Georgetown were stuck paying double-digit interest rates. These bonds were more than simply investments that didn’t pan out; banks that sold the ARS bonds were also propping up the market by bidding on the rates in their own auctions, which created a false impression for buyers that the market was stable. These were bad deals made worse by illegal activity, and universities and municipalities across the country were suckered into them. When the banks eventually stopped keeping the market afloat, most such auctions failed, and the ARS market has been largely frozen since.

Although Georgetown is now almost entirely out of the ARS market and has brought down its variable-rate debt, getting rid of these increasingly expensive ARS bonds appears to have cost the schools millions in fees and even more in borrowing to pay off that debt.  Some of those bonds were underwritten by Lehman; some by other investment banks.

None of this even begins to capture the costs of the swaps, which is where this story started. The ARS bonds were cheap but had highly volatile interest rates. To mitigate these risky fluctuations, Georgetown bought interest rate swaps with Lehman Brothers. But like SLU, Georgetown did not realize it had made a deal with a potentially catastrophic downside. As the economy went into a tailspin in 2008, the Federal Reserve cut interest rates to the bone and has kept them low since; money became available for next to nothing in an attempt to keep banks from freezing up completely. This also served to drive the fair value of interest rate swaps through the roof. The worse the economy got, the more the fair market value of Georgetown’s debt hedges grew. A final insult: As the ARS rates locked up ever higher, the floating index rates that the swaps were indexed to went down, so Georgetown was losing money on every part of every deal.

And finally, finally, Lehman Brothers, which had sold swaps to so many different colleges and universities around the country, went out of business, which resulted in Georgetown having to pay Lehman more than $53 million to terminate the seven swaps it had on May 12, 2009—again, swaps that were meant to hedge against the risky ARS bonds that were also, in some cases, sold by Lehman.

Fast forward to 2012, and a lawsuit from Lehman Brothers appears on Georgetown’s financial documents. This lawsuit is only mentioned in the financial statements and has not yet gone public, so we cannot say with certainty that the story is the same as in St. Louis. However, it appears as if the disparity between the “fair market value” calculation of what the swaps were worth in 2008 and the eventual payment Georgetown made to Lehman is about the same as in the SLU case.

For those keeping score at home, this means that Georgetown was hemorrhaging money to Lehman Brothers in at least four different ways:

  1. ARS bonds marketed by Lehman cost the university $6 million in interest rates and $8.34 million in debt restructuring costs.
  2. Approximately $77.8 million in payments on the seven interest rate swaps terminated in May 2009.
  3. More than $53.4 million in swap termination fees.
  4. Though still unconfirmed, all signs point to a lawsuit from Lehman to recoup what it claims are underpayments on the “market rate” of its swaps.

The full cost is probably even higher, as these calculations do not account for the fees Georgetown paid each time it got into a bond deal, nor for other deals that Lehman did not underwrite. Still, the bill is already north of $140 million, and we’ve only been looking at publicly available records.

It certainly seems as though Georgetown was hard done by in this case, and we plan to continue our research until we can present a full tally of how much Georgetown has lost and is continuing to lose to Wall Street.

Why does this matter? After all, Georgetown is a stable institution—not like Sweet Briar or liberal arts schools, where losses in the hundreds of millions could mean the difference between solvency and closing their doors. Neither is this a public institution, where public tax dollars are being funneled into Lehman’s grave. But even a storied private institution like Georgetown is feeling the pinch of millions of dollars being extracted, and that pinch is being passed on to students.

Tuition and fees will increase 4 percent at Georgetown next year, contributing to a nearly 40 percent increase since 2006 that shows no signs of slowing down. While there are many factors in the rapid rise of education costs borne by America’s students, including the “amenities arms race” and administrative bloat, the massive debt private colleges like Georgetown have accrued and the unbelievably expensive financial engineering that has come with it deserve a lion’s share of the blame. Lehman Brothers, having already managed to scrape more than $140 million from Georgetown’s coffers, is audacious in asking for more from beyond the grave. We must be equally audacious in demanding that Wall Street pay some part of the bill it’s left students since 2008.

Is your college or nonprofit involved in an ongoing lawsuit with Lehman Brothers? Let us know!

*Interest rate swaps are a type of derivative that allows an institution to lock in a loan at a fixed rate by “swapping” its existing variable-rate loan with a bank, an idea that becomes particularly toxic when the market crashes and interest rates plummet like they did post-2008. It’s the equivalent of taking out a mortgage at 5 percent a year and then finding out the next day that mortgages are now available at 1 percent. But, unlike mortgages, swaps cannot be refinanced or even “paid off” at will. To do so, one must pay an expensive termination fee equal to the total amount the bank expects to make over the entire life of the swap. It was a lose/lose proposition for the school once its bet that interest rates would stay high didn’t work out. 

Alan Smith is the Roosevelt Institute | Campus Network's Associate Director of Networked Initiatives.

Aditya Pande is a freshman in the School of Foreign Service at Georgetown University, where he studies international economics.

Thanks to Carrie Sloan and Alexandros Taliadoros for their contributions to this post.

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What Policies Do Young People Want? Let Them Tell You.

Apr 8, 2015Joelle Gamble

As another presidential campaign season heats up, and candidates scrambled to create messaging, structures, and even gimmicks and swag in an attempt to engage young people, I can’t help but think about why we do what we do here at Roosevelt.

As another presidential campaign season heats up, and candidates scrambled to create messaging, structures, and even gimmicks and swag in an attempt to engage young people, I can’t help but think about why we do what we do here at Roosevelt.

Young people on college campuses are often asked to make phone calls, knock on doors, and campaign for existing agendas, but they’re rarely asked about their own policy ideas. Since 2004, we have been working to change that norm. At its core, the Roosevelt Institute | Campus Network seeks to defy the public’s expectations of young people in politics today.

Over the past 10 years, we have built an engaged, community-driven network of students who are committed to using policy to transform their cities and states now and build the foundation for a sustainable future. We believe that broader participation in the policy process will not only improve representation but produce more creative ideas with the potential for real impact.

In this year’s 10 ideas journals, we present some of most promising and innovative ideas from students in our network. With chapters on 120 campuses in 38 states, from Los Angeles, California, to Conway, Arkansas, to New York City, we have the potential to effect policy ideas that transcend the parameters of our current national debate. Our student authors push for practical, community-focused solutions, from using pavement to improve sanitation in Louisville, Kentucky, to creating community benefit agreements for publicly funded stadiums in Lansing, Michigan, to building workforce development programs for agricultural literacy in Athens, Georgia. 

Policy matters most when we take it beyond the page and bring it to the communities and institutions that can turn it into reality. Many of the students in this year’s publication have committed to pressing for impact. They’re connecting with decision-makers in city halls and state capitols, armed with the power of their own ideas. 

The next generation of innovative minds and passionate advocates is here, and it’s changing this country one idea at a time.

Check 'em out!

Joelle Gamble is the National Director of the Roosevelt Institute | Campus Network.

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Tobacco Settlement Funds Should Be Used to Fight Smoking in North Carolina

Mar 31, 2015Emily Cerciello

North Carolina continues to risk the health and economic wellbeing of its residents by refusing to use Master Settlement Agreement funds for tobacco prevention and control.

North Carolina continues to risk the health and economic wellbeing of its residents by refusing to use Master Settlement Agreement funds for tobacco prevention and control.

Over the last 50 years, more than 20 million Americans have died prematurely as a result of smoking or exposure to second-hand smoke. In the same time period, however, societal attitudes towards smoking have shifted from acceptance of its regularity to disapproval of the behavior as a harmful addiction. Driven largely by a growing body of research illuminating the adverse health effects of smoking and the implementation of widespread interventions that discourage tobacco use, the United States has experienced significant declines in the prevalence of smoking since the 1960s. Despite these successes, one in five adults in North Carolina continues to smoke cigarettes regularly, making North Carolina the 14th highest in smoking prevalence nationwide.

Every year, North Carolina receives $140 million in state funds from the 1998 Master Settlement Agreement, which requires tobacco companies to compensate tobacco-producing states for tobacco-related illnesses. These funds were intended to be used for youth tobacco prevention and control, but due to flexibility in the wording of the agreement, North Carolina has been able to send most of this money to a general fund. North Carolina even sent $42 million in settlement funds to tobacco farmers for marketing and equipment improvements. In 2014, North Carolina was the leading tobacco-producing state, followed by Kentucky, Georgia, and Virginia.

In the past, $25 million of this $140 million went to a Health and Wellness Trust Fund that invested in tobacco prevention and cessation programming. In 2012, however, the North Carolina General Assembly (NCGA) abolished the Health and Wellness Trust Fund and spent only $17 million on tobacco prevention. By 2014, this number had dropped to $1.2 million, or just 1.1 percent of the minimum recommended for tobacco prevention programs by the Centers for Disease Control and Prevention (CDC). North Carolina ranks 47th among the states for reaching CDC-recommended funding levels.

The health and economic impacts of this decision to cut state funds are substantial. In North Carolina, tobacco use costs nearly $2.5 billion in total medical costs and $3.3 billion in lost productivity annually. North Carolinians face an annual tax burden of $564 per household for smoking-related state and federal government expenditures.

North Carolina can look to examples from other states to improve its strategy for spending settlement dollars. Oklahoma, which reaches more than 50 percent of CDC-recommended tobacco prevention funding levels annually, amended its constitution in 2000 to create the Tobacco Settlement Endowment Trust (TSET), which receives no less than 75 percent of annual settlement payments. Oklahoma ranks among the worst for smoking behaviors, but has seen significant improvements in adult smoking rates with the percentage of smoke-free households reaching over 75 percent in 2010, up from 55 percent in 2001.

We’ve seen from other states that funding for youth tobacco prevention works. In Florida, where the state is required to spend at least 15 percent of its yearly settlement award on tobacco prevention, the high school smoking rate dropped to just 7.5 percent in 2014 – one of the lowest rates ever reported by any state. North Carolina’s high school smoking rate remained at over 15 percent in 2014.

While using the money as North Carolina does is not illegal, the state should end this poor practice of using settlement money for unrelated projects. North Carolina has the enormous opportunity and responsibility to use settlement funds to reduce the prevalence of smoking and improve the health and economic wellbeing of millions of residents across the state.

Emily Cerciello is the Roosevelt Institute | Campus Network Senior Fellow for Health Care, and a senior at the University of North Carolina at Chapel Hill.

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Mental Health Care Is an Overlooked Need in North Carolina Medicaid Expansion Debates

Mar 27, 2015Emily Cerciello

Medicaid expansion could bring relief to 190,000 uninsured North Carolinians with mental health conditions.

Advocates for Medicaid expansion in North Carolina have the opportunity to add a new and urgent argument to their already robust arsenal – that Medicaid expansion will create a newly affordable option for thousands of individuals with mental health needs who currently cannot afford treatment.

Medicaid expansion could bring relief to 190,000 uninsured North Carolinians with mental health conditions.

Advocates for Medicaid expansion in North Carolina have the opportunity to add a new and urgent argument to their already robust arsenal – that Medicaid expansion will create a newly affordable option for thousands of individuals with mental health needs who currently cannot afford treatment.

The North Carolina Medicaid Expansion Coalition – a collection of progressive groups including Planned Parenthood South Atlantic, the League of Women Voters of North Carolina, and the NAACP, among others – is fervently pushing back against a North Carolina legislature that has repeatedly declined expanding Medicaid to 500,000 would-be-eligible North Carolinians. Debates have focused on the high out-of-pocket prices required of uninsured patients for physical conditions like heart disease, asthma, musculoskeletal problems, or cancer, as well as the millions in federal money being turned away every year that North Carolina decides not to expand. In this high-profile role, coalitions also have the opportunity shed light on the devastating effects of untreated mental illness and the relief that Medicaid expansion could bring to 190,000 uninsured North Carolinians with mental health conditions.

In 2009, 75 percent of individuals with mental health needs in North Carolina were left untreated. Early intervention for mental illness can improve a patient’s physical and emotional wellbeing and can prevent destructive consequences for themselves, their families, and their communities in the future. Medicaid expansion will allow individuals to be secure in their access to primary mental health care and reduce their utilization of the emergency room when they experience an acute episode or when their chronic conditions become too debilitating.

Mental illness disproportionately affects individuals with lower family incomes, the same families who are most impacted by Medicaid expansion. States that have expanded Medicaid have seen pent up demand for mental health care, indicating a high need for mental health care among newly eligible Medicaid beneficiaries.

North Carolina has the capacity to accommodate newly eligible individuals who seek treatment for mental illnesses given that only 11 of North Carolina’s 100 counties are considered to have a shortage of mental health providers. While systems will need to expand to meet the demand from new patients, North Carolina can be an example for turning the challenge of Medicaid expansion into an asset for increased access to health care among its most vulnerable residents.

Advocates for Medicaid expansion in North Carolina have already made great strides in swaying reluctant legislators to consider the issue in 2015. In the most recent election debates, Republican Senator Thom Tillis agreed that the state of North Carolina is trending in a direction that warrants discussions about Medicaid expansion. In January, Governor Pat McCrory met with President Obama and several other Republican state leaders to discuss the adaptability of Health and Human Services waivers to state-developed Medicaid expansion plans. And just last week, thousands of North Carolina residents marched at the ninth annual Historic Thousands on Jones Street (HKonJ) Moral March in Raleigh, hoping to influence legislators to consider Medicaid expansion.

Legislators need to take significant steps to reform mental health care both in North Carolina and across the nation. The North Carolina Medicaid Expansion Coalition, mental health providers and advocacy groups, and others supporters can work together with the legislature to make affordable mental health care a reality for low-income individuals and families. North Carolina cannot wait until the system is perfect to implement changes that can improve the mental health of its residents and the economic wellbeing of the state.

Emily Cerciello is the Roosevelt Institute | Campus Network Senior Fellow for Health Care, and a senior at the University of North Carolina at Chapel Hill.

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While Congress Plays Politics, New York State Must Invest in Young People

Mar 26, 2015Kevin Stump

Last week, the House of Representatives and the U.S. Senate released budget proposals that include a slew of policy changes that would negatively impact young people’s ability to fully participate in the economy.  

Last week, the House of Representatives and the U.S. Senate released budget proposals that include a slew of policy changes that would negatively impact young people’s ability to fully participate in the economy.  

The proposals would, among many other bad ideas, freeze funding on Pell Grants for 10 years and eliminate mandatory funding for the program, leaving it vulnerable to the unstable political culture of Washington, D.C. Both budget proposals would charge students interest on all their loans while they’re still in school, costing the average borrower thousands of dollars more. Each budget also eliminates the Pay As You Earn student loan repayment program, which caps monthly payments based on borrower incomes to make payments more affordable for moderate- and low- income debt holders.

It’s concerning that Congress cares so little about an entire generation of young Americans — the very generation that will have to repair what today’s leaders have broken.

While Congress continues to play politics, states need to make investments so this generation isn’t subject to spiraling economic inequality and missed opportunities. As New York approaches its April 1 budget deadline, the governor and the state legislature need to prioritize policies that will help young people to fully realize their potential and participate in the economy.

As outlined in my critique of Governor Cuomo’s student loan program, New York State must: (1) inject resources into public higher education, (2) roll back tuition hikes, (3) reform the Tuition Assistance Program, and (4) require that economic develop initiatives include some type of student loan relief for employees.

But even those measures won’t be enough by themselves. In order for the state to forge ahead and truly invest in youth, it will also need to do the following:  

  1. Increase the minimum wage. With Millennials making up 71 percent of minimum wage workers, raising the wage would give young people a chance to pay down debt, invest in the economy, and start building their economic future. 
  2. Charge the governor’s 10 Regional Economic Development Councils with developing a serious comprehensive plan to integrate paid apprenticeship and internship programs into the criteria for doing business with the state. To help combat the double-digit unemployment rate for 16–24-year-olds across the country, New York State should take advantage of its economic development projects, like START UP NY and NY SUNY 2020, to (1) provide young people with income and (2) impart the skills necessary to compete in today’s economy.
  3. Pass the NY DREAM Act to give thousands of New York’s undocumented youth access to state financial aid so they too can fully participate in the economy.
  4. Expand Governor Cuomo’s proposal to double the Urban Youth Jobs Program. This will help reward businesses that hire and train inner-city youth. In addition, this will help give New Yorkers ages 16–24 the opportunity to learn professional skills while also getting paid.

Conservatives and progressives are both trying to shift the political pendulum in their direction as they gear up for the 2016 election, which will consequently shape the fabric of our political system for the next decade. But Republicans in Congress, as evidenced by their budget proposals, continue to forget about young people. It is now up to President Obama to reject these failed principles and for states to get serious about enacting the real policy changes we need to give young people a fighting chance.

As Roosevelt Institute | Campus Network National Director Joelle Gamble articulates so well, “the young people who are inheriting the effects of the decisions made at all levels of government today… want to see investments made in a more prosperous future.”

Kevin Stump is the Roosevelt Institute | Campus Network's Leadership Director.

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The Republican Budget Plan Looks to the Past, Not the Future

Mar 19, 2015Joelle Gamble

The Republican budget plans are causing quite a stir in the D.C. press and in Congress. However, the content of their proposals, if enacted, will ripple beyond the beltway and into states, cities, communities, and college campuses across the country – and the consequences should be of particular concern to young Americans.

The Republican budget plans are causing quite a stir in the D.C. press and in Congress. However, the content of their proposals, if enacted, will ripple beyond the beltway and into states, cities, communities, and college campuses across the country – and the consequences should be of particular concern to young Americans.

Rather than using their new platform in Congress to make investments in the future of this nation, Republicans have chosen to pack in a laundry list of complaints and repeals based in our past. Young organizers have already begun to push back against proposed slash in Pell grant funding.  Other backwards-looking choices, from repealing the Affordable Care Act to failing to invest in new energy technology, would also have a profound impact on young people.

The Campus Network believes in policy that is by and for people, not built at the expense of them. We’ve got a student-generated budget to prove it. As the young people who are inheriting the effects of the decisions made at all levels of government today, we want to see investments made in a more prosperous future. Investments in accessible and affordable education, critical infrastructure, green energy, and good jobs are what is going to help our generation succeed – not the renewal of old policies that have repeatedly proved ineffective.

Joelle Gamble is the National Director of the Roosevelt Institute | Campus Network.

 

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The Sweet Briar Dilemma: Will Predatory Lending Take Down More Colleges?

Mar 16, 2015Alan Smith

After 114 years of educating young women in rural Virginia, Sweet Briar College recently announced that the 2015 academic year would be its last. It’s closing its doors, administrators say, because its model is no longer sustainable.

After 114 years of educating young women in rural Virginia, Sweet Briar College recently announced that the 2015 academic year would be its last. It’s closing its doors, administrators say, because its model is no longer sustainable.

There are plenty of people coming out of the woodwork to explain Sweet Briar's problems. Dr. James F. Jones, the school’s president, claims that there are simply not enough people who want to attend an all-women's rural liberal arts school (though application numbers and some pundits disagree); he blames the discount that the school was giving to low-income students for the institutional budget shortfall. Billionaire investor Mark Cuban says that Sweet Briar has fallen victim to the student loan bubble and that students are unwilling to commit the money to attend, which sounds a lot like the blame-the-homeowner narrative that came out of the 2008 financial crisis.  Others are wringing their hands that small colleges in general are doomed.   

These takes are varied and complex, but they are all missing an important point: that predatory banking practices and bad financial deals played an important and nearly invisible role in precipitating the school’s budget crisis.  

A quick look at Sweet Briar’s audited financial reports (easily available in public records) reveals enough confusing and obfuscating financial-speak to last a lifetime, but a few days of digging did manage to unearth a series of troubling things.  

A single swap on a bond issued in June 2008 cost Sweet Briar more then a million dollars in payments to Wachovia before the school exited the swap in September 2011. While it is unclear exactly why they chose 2011 to pay off the remainder of the bond early, they paid a $730,119 termination fee. For a school that was sorely strapped for cash, these fines and the fees that accrued around this deal (which are hard to definitively pick out from financial documents) couldn't have come at a worse time.  

Just how big a deal are these numbers? The school has a relatively small endowment even among small liberal arts colleges: currently valued at about $88 million, with less then a quarter of that total completely unrestricted and free to spend. But in 2014, the financial year that appears to have been the final straw for Sweet Briar, total operating revenues were $34.8 million and total operating expenditures were $35.4 million, which means that the deficit the school is running is actually smaller than the cost of any of the bad deals it’s gotten itself into with banks. 

All of this puts in a very stark light the fact that the early retirement of debt (in other words, the losses the school suffered on the overall value of the bonds it had taken out because it decided to pay them back early) cost the school over $9 million in 2011 and more than $13 million in 2012. Why did the school accrue these costs? We have no way of knowing if it was bad advice from bankers, negligent trustee members covering a mistake, or a well-intentioned plan that hit at the wrong time.  

What we can say, though, is that a million dollars here and a million dollars there adds up to real money that was desperately needed as Sweet Briar fought to stay afloat.  

We know that Wall Street collects higher fees on risky and complicated deals involving variable rate debt and hedging instruments, like the ones found in Sweet Briar's last few decades of financials, than from fixed rate debt deals. We know that they add on things like credit enhancements, further driving up the costs. We know that those higher fees mean that there is a clear financial incentive to sell schools, municipalities, and pension funds on these risky deals. And we know that it works in Wall Street's favor that someone like me can spend days digging into this stuff and still not be totally sure what the exact costs of these deals are.  

What we don't know is how all these things were allowed to happen at this particular school in this particular timeframe.  

Sweet Briar appears slated to close because it is a small organization without the resources to counter the huge information imbalance that has helped precipitate the financialization crisis. It is closing because it signed some terrible deals to get what must have felt like "needed" money at the time. You can see the reasons: a $14 million bond (with swaps) in 2001 for campus improvements. A $10 million bond in 2006 to pay off other bonds that had revealed their ugly side and were costing the school too much to be allowed to fully mature. But, as has so often been the case in everything from municipal finance to personal home loans, there was a problem in the small print. Like many other colleges, what appeared to be vital and even beneficial deals turned out to be nothing of the sort. Unlike many others, Sweet Briar was already close enough to the financial brink that these ongoing debts made the difference between staying open and closing its doors.  

There are, of course, other very real pressures on Sweet Briar. Lower enrollment numbers do really hurt a school, and there are real questions about how to keep small, rural liberal arts institutions competitive in a higher education economy. None of these issues, however, compare to the fees, fines, penalties, and other losses that are all over Sweet Briar’s books. 

Is Sweet Briar the canary in the coalmine? Banks are certainly making obscene profits on the backs of the swap deals in the UC system, at the University of Michigan, and at American University — and those are the places that we’ve found in our first month of looking. While those schools are solvent enough that these swaps are not pushing them to the brink of closing, they are exacerbating budget shortfalls and passing debt on to students through increased costs. These deals are also clearly making money for many school trustees whose day jobs happen to be with the giant banks. Here I find myself agreeing with Mark Cuban, at least in part: these trends are a part of a vicious cycle of borrowing that is wholly unsustainable, and will eventually lead to a crisis.  

This is why the Roosevelt Institute | Campus Network is working to track the ways in which financial institutions are extracting wealth from our colleges and universities, and make a clear case for demanding our money back. I hope that the storied institution of Sweet Briar can find a way to keep its doors open in 2016, but even if it fails, that failure should wake us up to predatory practices at colleges and universities around the country.   

Questions? Concerns? Interested in my math? Drop me a line.

Alan Smith is the Roosevelt Institute | Campus Network's Associate Director of Networked Initiatives.

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The Ferguson Probe Reveals Entrenched Racial Bias in Policing

Mar 9, 2015Aman Banerji

The Justice Department’s probe of Ferguson has revealed a troubling pattern of discrimination in traffic stops, but the problem doesn’t begin or end there.

The Justice Department’s probe of Ferguson has revealed a troubling pattern of discrimination in traffic stops, but the problem doesn’t begin or end there.

The initial findings from the Justice Department’s probe of the Ferguson, Missouri police department reveal a pattern of racial discrimination that is both broader than Ferguson and deeply rooted. Among the most shocking statistics disclosed last week is that African Americans accounted for 93 percent of all arrests in Ferguson in the 2012–14 period, although they accounted for only 67 percent of the city’s population.

Vehicle or traffic stops, a routine feature of citizen-police confrontations, appear to be a prime example of racial police bias in action. The initial findings reveal that 85 percent of all people stopped and 90 percent of citations in the area were conducted against African Americans. During the 2012–14 period, Black drivers were twice as likely as white drivers to be searched during traffic stops, although they remained 26 percent less likely to be in possession of contraband.

In spite of former Missouri state representative Jeff Roorda’s statements, it’s difficult to deny the startlingly obvious racial bias such evidence suggests. However, this initial set of 2012-14 findings has focused on Ferguson from 2012-14, ignoring longer-term trends in racial policing of traffic stops across the State of Missouri. 

The Missouri Attorney General’s analysis of vehicle stop rates from 2000–13 in Missouri and in the St. Louis County area reveals this long-term pattern. The stop rate in St. Louis County increased more than 300 percent during this period across all ethnicities, with a disproportionate increase in Black communities. There was a 522 percent increase in stop rates for Blacks, while the corresponding figure for white motorists in St. Louis County was 284 percent. Similarly, the ratio of stops that led to arrests has also shown a racially disproportionate increase, moving from 1.2 percent in 2000 to 7.5 percent in 2013 for African Americans, while corresponding figures for Whites were 1.1 percent and 4 percent. Clearly, not only have the police in St. Louis County been pursuing an increased number of stops, but an ever greater portion of these have targeted the African American community.

The disparity index compares a racial group’s proportion of traffic stops to its proportion of the population aged 18 or older. A value of 1 indicates that a group is neither over- nor underrepresented in traffic stops. In other words, the higher the disparity index, the greater the racial profiling at traffic stops. An examination of the disparity index for vehicle stops in St. Louis County provides an even clearer picture.

During the entire 13-year period of examination, the disparity index for Blacks in the region has remained between 1.34 and 1.50, peaking at 1.50 in the year 2013. Meanwhile, for whites the disparity index has remained between 0.88 and 0.96 in the same period, falling from 0.94 in 2000 to 0.88 in 2013. In fact, no other single ethnicity has ever risen above the disparity index of 1 in the entire period, demonstrating that African Americans were the only ethnicity to be the victims of disproportionate traffic stops in the 2000–13 period. 

The Department of Justice’s findings and a slew of media coverage have focused on the Ferguson region and the county of St. Louis. Yet the trend of increasingly punitive and racially biased traffic stops demonstrated at the St. Louis County level is just as demonstrable for the state of Missouri as a whole.

At the state level, the Attorney General’s report reveals that stop rates have climbed 270 percent, rising 385 percent for African Americans and 252 percent for whites during the 2000–2013 period. The rate of arrest from such stops in 2013 also remains racially tinged: 7.7 percent and 4.2 percent for African Americans and whites respectively. Finally, while the statewide disparity index has remained between 0.98 and 0.95 for whites, it has steadily increased for African Americans, rising from 1.27 in 2000 to 1.59 in 2013 and reaching a peak of 1.63 in 2011. In fact, the disparity index for African Americans in Missouri was even higher than St. Louis County. Clearly, the county’s racially discriminatory vehicle stop practices are not an outlier in the state. Equally though, in a nation where both the regularity and nature of traffic stops bear marked racial disparities, the state of Missouri itself is far from an outlier in national police practices.

These findings represent the entrenched nature of racially biased police stops. The case for stronger and more regular federal oversight of St. Louis’s policing practices could not be stronger. This local effort, however, must be complemented by a broader state-level response. Strengthening police-community relations, building police departments that more closely match the ethnic demographics of their constituents, and developing a more holistic set of safety measures beyond policing are all vital steps toward charting a less punitive and biased form of policing in St. Louis, Missouri, and beyond. 

Aman Banerji is the Roosevelt Institute | Campus Network's Community Manager.

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