- Associated Press - Wednesday, October 1, 2014

Editorials from around Pennsylvania



The hedge fund business is a great deal for those who run hedge funds. Typically, the managers charge a fee of “2 and 20” - 2 percent of the value of the assets they’re managing, plus 20 percent of the profits they produce.

The New York Times reports that one hedge fund baron, Barry Rosenstein, spent $147 million on an estate in the Hamptons, while another, Daniel Loeb, dropped $46 million on a painting by Mark Rothko.

Whether hedge funds are a great deal for big institutional investors, like Pennsylvania’s two big public pension funds, is another question.

These investments supposedly offer a ‘hedge’ against downtimes, with the understanding that they won’t make as much money in the good times.

In California, the state’s huge public employee pension fund decided earlier this month that hedge funds aren’t worth the huge fees they charge. California will switch some $4.5 billion to more conventional investments.

One investment racked up $17 million of short-term losses, despite charging fees of $11 million.

That move prompted Pennsylvania Auditor General Eugene DePasquale to call for a closer look at what investment fees Pennsylvania pension funds are paying and whether the results are worth the money.

The Pennsylvania State Employees’ Retirement System paid about $149 million in fees to hedge funds in fiscal year 2013, according to WITF, the public broadcasting station.

The Philadelphia Inquirer has noted that “It’s hard to know how much Pennsylvania SERS paid, since some SERS hedge fund fees aren’t included in the agency’s annual report.”

WITF also noted that it’s not clear what the pension fund got after paying all that money, which is the point raised by Auditor General DePasquale.

There’s good reason to wonder what the payoff is for those big fees. The Inquirer has reported the sorry story of the state’s investment with Tiger Management Advisors.

At one point, that fund had $17 million of short-term losses for the Pennsylvania State Employees Retirement System, despite charging fees of $11 million.

That investment, now terminated, was supposedly a low-risk way to “hedge” against bad outcomes, but the fund lost money, the Inquirer reported, “after a manager bet big on gold.”

Pennsylvania has been one of the most aggressive states investing in “alternative” vehicles like hedge funds. In 2012, The New York Times reported that Pennsylvania’s state employees pension fund had “more than 46 percent of its assets in riskier alternatives, including nearly 400 private equity, venture capital and real estate funds.”

Those investments cost Pennsylvania $1.35 billion in management fees in the previous five years, according to the Times report.

During that time, it appears Pennsylvania’s state employees retirement system paid more and got less than other states did.

Over the five-year period, Pennsylvania’s annual returns were 3.6 percent. During that time, the New York Times report said the typical public pension fund earned 4.9 percent a year. And Georgia, which was barred by law from investing in high-fee alternative funds, earned 5.3 percent a year.

Georgia’s fees were a lot lower, too. For a pension fund about half the size of Pennsylvania’s state employees fund, it paid just $54 million in fees over the five years. Pennsylvania paid 25 times as much for results that were significantly worse.

Pennsylvania’s two big pension funds are tens of billions of dollars short of being able to pay all the money they’ll owe to retirees.

One has to wonder whether one reason is that the funds are spending too much money on supposedly sophisticated investments that aren’t worth the cost.

It’s a question the Legislature needs to answer.

- PennLive.com



It is time to bring heroin from out of the shadows and treat it as the public health crisis that it is.

Every day, Lancaster EMS, the county’s largest emergency medical service, receives an average of two heroin overdose calls.

Lancaster General Hospital is on pace to deal with as many as 162 overdoses this fiscal year.

That would mean the number has tripled in just two years.

Drug overdoses now are killing more people ages 20 to 44 than motor vehicle accidents in the state, according to a report released last week by the Center for Rural Pennsylvania.

Nationwide, the most recent government numbers show that the number of heroin users nearly doubled between 2007 and 2012.

We have treated heroin addiction as either a moral failing or a failure of will - a weakness of the undisciplined and the unwanted.

Addiction is a disease.

Many people scoff at this, but as Dr. Nora Volkow, director of the National Institute on Drug Abuse has written, “more than three decades of research … has proven that addiction is a complex brain disease characterized by compulsive, at times uncontrollable, drug craving, seeking, and use that persist despite potentially devastating consequences.”

Some addicts are “mean, bad people,” says Rick Kastner, executive director of the Lancaster County Drug & Alcohol Commission, but “most are decent people who just got caught up in a disease that’s out of control.”

And they’re dying too soon, in part because the heroin they’re injecting into their veins often is laced with toxic additives.

If they’re not overdosing, many are getting infected with Hepatitis C, a serious liver disease that is costly to treat.

Many heroin addicts started out taking painkillers such as Oxycontin.

Heroin is a much cheaper option, and it’s plentiful - which is why the state Department of Health estimates that a record 34,000 young people ages 12-17 in Pennsylvania will try heroin for the first time this year.

That is terrifying.

It’s not enough to tell teenagers to just say no. We need to teach kids about the specific dangers of heroin and prescription drug use, and the education has to start early.

Likewise, it’s unhelpful to simply tell those already in the throes of heroin addiction that they shouldn’t have become addicted in the first place.

Last week, the Pennsylvania Senate approved a bill that will enable emergency responders, heroin addicts and their family members to obtain naloxone, or Narcan, a drug that can reverse an overdose.

This is a sensible step in the battle to stem heroin deaths, but it’s only one step.

Kastner says the people in his field know how to combat heroin addiction - they simply don’t have the resources to do it. …

So some addicts’ parents are emptying out their savings in a desperate scramble to save their kids because they know, Kastner says, that “the next hit may be the last.”

Drug and alcohol agencies don’t get the funding, Kastner says, because there are so many other priorities and “the stigma is too great.”

People are dying from the disease of addiction. If it were any other disease, we’d be trying to save them.

Stigma shouldn’t be part of the equation.

- Lancaster Newspapers.



The right of public school students to wear “I (heart) boobies” bracelets was resolved a year ago, when the U.S. Supreme Court refused to hear the Easton Area School District’s appeal. The U.S. Court of Appeals for the Third Circuit ruled in favor of two middle school students in this much-publicized case, saying their First Amendment rights outweigh the school district’s claim that the phrase is inappropriate for a learning environment.

That was a victory for the plaintiffs, Kayla Martinez and Brianna Hawk, who were middle-schoolers when they enlisted the help of the American Civil Liberties Union in 2010 to sue the district.

We believe, as do many parents and school officials, that the court’s finding was simply wrong. The principal involved was on solid ground in asking the girls to remove the bracelets while in school. We don’t question the worthiness of enlisting kids in the campaign to raise awareness of breast cancer. The question is whether school districts should be allowed to enforce dress codes and prohibit expression on clothing or jewelry that can be disruptive - in this case, with sexual innuendo. By upholding the constitutionality of one particular phrase, the court created a new set of headaches for school administrators trying to keep the peace in middle schools.

That’s not the end of the controversy, however. The school district’s bill for the plaintiffs’ lawyer fees is a shock. While the district’s insurance carrier is paying 90 percent of the district’s defense bill of $110,000, the two parties will be splitting the ACLU’s bill of $385,000 - a figure the district negotiated down from the original claim of $499,000.

Some bargain. Because the case was heard in Philadelphia, the ACLU was able to charge attorney fees typical for Philadelphia - compared, say, to a trial in the federal courts in the Lehigh Valley. Easton Superintendent John Reinhart said the ACLU billed 1,100 hours at $695 an hour, about six times the going attorney rate in the Lehigh Valley. Some insurance companies won’t cover the opposition’s fees because they’re considered inflated by the court’s location.

That’s one part of the court system that should be examined and changed. The negotiated fee of $385,000 isn’t going to break a school budget the size of Easton’s, but it’s a taxpayer expense nonetheless - and the taxpayers didn’t start the fight.

- The (Easton) Express-Times



Even in Eric Barron’s early days as the 18th president of Penn State University, the former College of Earth and Mineral Sciences dean recognized the need for more vibrant economic development in Centre County.

As early as June - just a month after taking office - Barron emphasized to local business leaders the need for more entrepreneurship - the kind born of town-and-gown partnerships, linked to regional, national and international business organizations, of capital investment from angel investors to state coffers.

The lack of a robust economic-development initiative in Centre County contrasts sharply against the millions of dollars that funnel into - and right out of - Penn State’s research and technology programs, each year.

On Wednesday, GE announced it would invest up to $10 million in a new campus innovation center to drive “cutting-edge advancements” in the natural gas industry.

While the hope to locally recoup, and perhaps even realize a return on, that investment seems plausible - the shale industry in Pennsylvania, although not an enormous presence in Centre County, is still in a healthy ascent - the harsh reality is that there really are no guarantees. In fact, there’s a poor history of any robust local return on these investments.

The paradox is simply this: Pennsylvania imports and grows tomorrow’s economic leaders at the university but exports them to more entrepreneur-friendly pastures upon graduation. That’s because the commonwealth doesn’t rigorously incubate startups and can’t offer tech - a high-growth, high-paying industry and sustainable sector - grads much in the way of large-scale employment or pay. Not surprisingly, education lopsidedly ranks supreme as the most common local industry, while hospitality, retail, health, construction and professional service jobs check in far lower.

In 2012, the most recent data available, nearly double the number of out-of-state students came to the commonwealth for higher education versus those who went out of state, according to the Washington Post and National Center for Educational Statistics. That earned Pennsylvania the No. 1 spot in the country for imports. Great. We’re getting them here.

But the bad news is we can’t keep them. The commonwealth has exported far more people ages 20-29 than it has kept in the past decade, according to the U.S. Census Bureau.

To capture the return on investment in the Centre Region is going to take more than a village; it will take a vision.

And that’s where the president of one of the nation’s top research and technology universities comes into play.

Last week, speaking before the university’s board of trustees - many of whom are successful business men and women, and many of whom operate far outside of Centre County or even Pennsylvania - Barron again raised the torch for entrepreneurship.

His plan was manifold and includes: adding entrepreneurship minors and business courses in all majors; creating partnerships between innovators and marketers; establishing a better process to foster students’ business ideas and help see them to fruition; encouraging angel investors and venture capitalists; fostering interaction between the university and organizations such as the Chamber of Business and Industry of Centre County; and seeking an additional $17.3 million 2015-16 state allocation to fund those items, as well as spending $1.8 million for eight entrepreneurs-in-residence. …

That’s not to say Penn State doesn’t provide an enormous economic jolt; it does. Research alone has created more than 18,000 jobs in the commonwealth, which created nearly $2 billion in economic impact and $61 million in additional revenue for the commonwealth annually, according to the university. And, also according to the university, more than 17,000 alumni own business in the commonwealth, pumping more than $4.1 billion into the economy.

But Barron has a bead on what it will take to stimulate the Centre Region’s economic development and retain locally at least a portion of the entrepreneurs who earn their sheepskins from Penn State.

Unfortunately, the state appropriations component rises and falls with the whims of the legislature as well as what very well may be a new governor in January.

However, even without additional state funding, the university must form meaningful partnerships with the chamber, the Ben Franklin [email protected] College and grass-roots groups such as New Leaf Initiative if meaningful economic development is to occur. It also should create meaningful dialogues with successful local and regional businesses to see what they need in a skilled workforce.

Barron can champion economic growth in Centre County, but it’s no one-man job.

- Centre Daily Times



Progress is being made on the yearslong effort to reduce teen pregnancies in Erie County, but more work remains.

As David Bruce reported on Sept. 12, the birthrate for women 15 to 19 in Erie County dropped to 27.2 births per 1,000 females in 2012, according to figures from the U.S. Centers for Disease Control. That compares with Erie County’s teen birthrate of 52.4 in 1994.

The decline in the teen birthrate here mirrors a nationwide trend. Still, Erie County’s rate is higher than Pennsylvania’s rate of 23.4, and we know that teen parents (and single mothers who are out of their teens) are more likely to become part of a cycle of poverty entwined with a host of other social problems.

Talking about girls who get pregnant, Laura Salamonsen, program director for the Erie School District’s Student Parenting Program, said: “We are seeing more severe crisis cases, which can involve rape, mental health issues, substance abuse or homelessness. It’s almost not the norm anymore to see a pregnant student from a supportive family.”

Shortly after news about the drop in birthrates, we learned that the city of Erie’s poverty rate has jumped. According to the U.S. Census Bureau, 29.2 percent of Erie residents lived below federal poverty guidelines in 2013. That compares with 25.7 percent in 2012, 28 percent in 2011 and 30.2 percent in 2010.

The burden of poverty falls on children. According to these new figures, 45.5 percent of city of Erie children live in poverty, up from 36.5 percent in 2012. Put another way, 9,649 children in the city live in poverty.

“The rise in numbers is disappointing, and reinforces the need to come at it from every viable angle,” said Mary Bula, facilitator for Erie Together, the local anti-poverty initiative. “Poverty is a complex issue with many causes, and moving the needle in the right direction takes time, effort and long-term commitment.” …

As participants share their ideas in focus groups, we hope they will suggest ways to further reduce Erie’s teen birthrate. The city and suburban schools have programs to keep young parents in school, but it’s not easy. Veronica Bleil, 16, who takes her academic classes at Harbor Creek High School and welding classes at Erie County Technical School, talked about how hard it is to juggle school and parenting now that she’s the mother of an infant daughter.

Veronica, who lives with her father, stepmother and siblings, also takes an E.L.E.C.T. Teen Parenting Program at County Tech. “They tell you how being a parent really is. They say there will be nights where you don’t get to sleep, and you will have to go to school the next day. They don’t sugarcoat anything.”

We need frank and prudent ideas on how to prevent teen pregnancies. No sugarcoating, please.

- Erie Times-News



Colorado engineer Scott Tibbits’ creation of a texting-prevention device highlights a stark paradox: Everybody decries the dangers of texting while driving. But everybody does it anyway.

In 2008, as Tibbits’ two children were approaching driving age, a business associate died when a texting teen driver crashed into his car. As The New York Times reported on Sept. 14, Tibbits began working on a solution. He eventually came up with a small black box that plugs in underneath a car’s steering column. Unlike GPS methods that selectively block messages, Tibbits’ box blocks all incoming and outgoing texts and keeps phone calls at bay, too.

Tibbits won the financial backing of the American Family Insurance company as well as an agreement with Sprint to use its network to stop the texts. But the project stalled partly because Sprint was concerned about possible liability should the network fail, and a message got through, allowing an accident.

Tibbits’ remarkable and no doubt life-saving device ought to become standard equipment in American-made vehicles. Like seat belts, or air bags, or roll bars, the system could prevent millions of deaths caused by distracted drivers. The National Safety Council estimates that of 5.6 million car crashes in 2012, 1.48 million involved someone phoning or texting.

But it probably won’t. Though more than nine out of 10 drivers told the AAA Foundation for Traffic Safety that texting and driving is unacceptable, a third confessed to doing it. Without a critical mass of drivers willing to give up the seemingly irresistible lure of their cellphone, Tibbits’ device may never gain market attention. And laws that purport to address distracted driving remain vague when it comes to texting.

It could be that regulators and drivers alike are simply willing to accept the carnage in exchange for the surreptitious freedom to stay in constant contact even while driving.

So, until Google’s self-driving car becomes commonplace, drive defensively. Somebody might be texting. That somebody might be you.

- Pocono Record

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