Telecom Merger Would Benefit West Virginia

by admin on June 29, 2011

Mobile TowerAT&T and T-Mobile are two reputable American companies that have been central to the success of the telecom industry in changing our daily lives. Yet a recent proposal for AT&T to merge with T-Mobile has come under some scrutiny in Washington.

We can’t let skepticism in the wake of the financial crisis hinder the very market-based solutions that are necessary to lift the country out of recession.

While oversight is certainly appropriate, too many skeptics are overlooking the tremendous opportunity that this merger represents. In the absence of any new evidence to the contrary, AT&T and T-Mobile should be allowed to proceed with their plans to combine. It is expected to benefit consumers, create jobs and enhance economic development — especially in rural areas like so much of West Virginia.

Many countries worldwide can be credited as leaders in innovation. But even though they may create many useful breakthroughs, America’s reputation continues to stand above the rest. Why?

Our ability to conceive and commit to a long-term vision is among the reasons. America is a great incubator for day-to-day entrepreneurship. But coming up with a good idea is not enough for us. We strive for advances on a dramatic scale, constantly aiming to fundamentally improve our way of life.

Take for instance, the automobile. Henry Ford didn’t invent the car, but he did recognize the prospect of mass production to make it part of our daily lives. And over the next few decades that followed, the Interstate Highway System was conceived and built. In relatively short order, America took an existing innovation, devoted remarkable amounts of private and government capital to it, and rendered the distances across our beautiful, expansive country surmountable to the average citizen.

Such grand visions typically take enterprises big enough to make the dream reality. A key outcome of its T-Mobile acquisition will be AT&T’s plans for an $8 billion investment in broadband infrastructure over seven years. This is essential because historically, whenever a new long-term vision emerged, we have devoted unprecedented resources toward building out infrastructure.

So developing the necessary infrastructure to unlock the full potential of a high-speed, wireless Internet is critical. Fortunately, President Obama made infrastructure the emphasis of his National Broadband Plan, which sets the goal of making broadband Internet available to every American by 2014.

This merger goes a long way toward meeting that goal. It will deliver a lot of bang for the buck because AT&T and T-Mobile are uniquely compatible to add value to consumers as soon as possible. Their spectrum positions and existing networks are complementary, which will make the entire process smooth and efficient.

As a result, AT&T claims that it will be able to make broadband available to an additional 55 million people, bringing its coverage alone to more than 97 percent of the U.S. population. Perhaps even more importantly, it will add one million square miles of coverage, which will make mobile broadband accessible even in the most remote areas of the country. This is especially true for West Virginia.

We have to continue to be able to see the possibilities beyond the doubts. In fact, we took a leap of faith to build the infrastructure that is behind our current telecommunications technology. Only a few decades ago, computers were essentially fancy calculators used primarily by scientists or other experts and were mostly hidden away in labs somewhere. But the prescient decision-makers in the Pentagon saw the communications potential of computers and got the backing to develop networks that became the ARPANET (the predecessor to the Internet).

The AT&T/T-Mobile merger doesn’t really even require such a leap of faith. We have a much greater degree of certitude in our efforts to encourage the development of 4G LTE networks than those early Internet pioneers could have had in ARPANET. If Washington is concerned about maintaining America’s innovative edge, it should allow the telecommunications industry to adapt in order to fulfill its vision. We must make broadband available to rural areas as well as urban areas. To West Virginia, as a relatively rural state, this is a big deal and the merger deserves our support.

- This commentary is reprinted from The Charleston Gazette.

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Ignoring OPEB Liability Would Be Costly Mistake

by Senator Brooks McCabe on March 7, 2011

Under the SB616 Plan, the State's OPEB Liability Would Decrease (Green Line) and the Fund Liability (Red Line) Would Increase

The SB616 Plan Projects the State of West Virginia's OPEB Liability Would Decrease Over Time (Green Line) While the Fund's Balance (Red Line) Would Increase

The West Virginia Education Association has indicated to its members that the state Senate is trying to shift the future cost of retiree health care benefits onto the backs of retirees. Nothing could be further from the truth.

For a more balanced review of the Senate’s plan to address Other Post Employment Benefits (OPEB), see the West Virginia School Board Association’s recent report.

Senate Bill 616 sets the pay go amount at $160 million and converts it to a per member, per month amount of $230. The current pay go is $145,177,000. This represents an increase of $14.8 million.

In the next 5 years the number of retirees and dependents is expected to increase on average 2.3% per year. The pay go is set to increase an additional 1.2% per year. This means the state’s contribution will increase approximately 3.5% per year because of the increase in retirees and their dependents.

This rate of growth is comparable to the anticipated natural budget growth of general fund revenues on a per year basis.  So the state is increasing the pay go now by approximately 10% and then keeping pace with its revenue growth for the next five years.

In addition, SB616 identifies the minimum need for another $50 million a year to be applied toward retiree premium subsidies and the OPEB trust fund. The cash flow analysis (PDF) prepared by the Public Employees Insurance Agency’s actuary shows the need to use $45 million of the $50 million for premium subsidy after the first few years.  It also shows the need to keep this funding in place for 20 years. That means the state must come up with $1 billion dollars of funding support for retiree health care premiums in that period of time.

During that same time, the pay go goes from $145,177,000/year to $217,553,000/year. That equates to a little over $3.9 billion of which the state pays 80% and the active employees pay 20%.  All totaled, there is almost $5 billion paid into retiree subsidies over the next 20 years per the actuaries estimates.

The problem is that medical and prescription drug inflation is increasing at almost twice the rate of the state’s projected revenue growth.  If you keep all assumptions the same as they are presently, there is just not enough money to sustain the current retiree health care benefit plans over the long term.

The WVEA does not take into account the need to both redesign the system and to simultaneously implement cost-containment measures.  All the while, with the state making a substantial commitment to increase its funding.  The main purpose of SB616 is to put in place a major funding source that can substantially mitigate drastic increases in retiree premiums over the next five years.

The second piece of legislation from the Senate is a resolution to be presented in the next several days which will address the cost containment side of the equation.

It is being presented as a resolution rather than a bill because most of the cost containment initiatives need to come from the PEIA Finance Board.  Given that health care reform is a work in progress, it is hard to tell what will be the menu of tools available to the PEIA Finance Board. The board needs maximum flexibility, rather than have their hands tied by the Legislature in one snap shot of time.

OPEB is complicated and multifaceted.  To summarize the Senate’s position, retire health care is not like pensions, in that it is a benefit that can be altered or eliminated over time.  There is a very strong belief in the Senate that we must do everything we can to protect this retiree benefit.

SB616 puts forth the framework for a massive infusion of funding to protect many of those benefits.  However, there is not enough money to continue, unchanged, the current plans going forward.

SB 616 is designed to provide five years of solid funding with an affordable long term state commitment for putting in place the dollars necessary to eliminate the $7.5 billion unfunded OPEB liability over 30 years.

During the next five years there will be a lot of heavy lifting by all involved.  It is hoped that cost-containment, plan redesign and increased state funding can all work together to provide for a future where the state of West Virginia’s retirees can have health insurance that meets their needs with reasonable and affordable premiums.

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West Virginia Needs a School of Public Health

February 7, 2011

The general health of our citizens is a real and expensive problem. West Virginia is being brought to its knees by the high cost of health care for its aging population, which is generally in poor health. The statistics speak for themselves with our high incidence of obesity, heart disease, diabetes, prescription drug abuse, and [...]

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Maintaining Stability in the West Virginia Senate

January 18, 2011

Fortunately, those who framed the United States Constitution had significant wisdom, recognizing that a separation and balance of powers was necessary to effectively govern. Hence, the model for executive, judiciary, and legislative branches of government was formed, allowing each division to perform specific roles, independent of each other.
When Joe Manchin vacated his position as West [...]

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Assessing Potential Impacts and Accessing New Energy Opportunities

December 20, 2010

As West Virginia further cultivates its energy resources, we must evaluate and minimize potential impacts to our natural environments, while benefiting from the opportunities associated with future development.
We must foster our role in helping the nation move closer to energy independence, while strengthening our economy. At the same time, we should work to become a [...]

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OPEB Still a Work in Progress

December 6, 2010

During these challenging economic times, the state of West Virginia, like individual households, is being forced to get its finances in order.
A significant factor within this equation relates to Other Post Employment Benefits (OPEB), the burgeoning portion of the state’s budget that funds retired public employees’ health care benefits.
It’s been estimated that OPEB is an [...]

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Post-Election Thoughts

November 3, 2010

This election cycle has been particularly loud and even shrill. I’m pleased to say that my campaign remained focused on policies, and not personalities.
The birth of our great country was a raucous and calamitous affair, and that noisiness remains part of American politics even today. My hope is that it does [...]

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Fairmont Provides Model for Community Development in West Virginia

September 14, 2010

Commercial district revitalization is an important piece for solving West Virginia’s economic development puzzle. Fairmont was recently awarded the 2010 Great American Main Street distinction by the National Trust for Historic Preservation.
Main Street Fairmont and the Fairmont Community Development Partnership have done an amazing job of stimulating downtown growth.
Veteran’s Square, a project that McCabe Land [...]

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West Virginia Must Participate to Influence National Energy Discussion

September 3, 2010

As debate expands regarding the future of energy, it’s very important that West Virginia asserts itself within this national conversation. Doing so will help ensure we are perceived as part of the solution, not part of the problem.
My thoughts  on the matter appear in a series of commentaries published by  The State Journal (links below), [...]

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OPEB: Legislative Subcommittee Offers Possible Solutions to Manage Retiree Health Care Costs

August 20, 2010

Other Post Employment Benefits (OPEB) remains an $8 billion problem for West Virginia. Other states are also dealing with the growing costs of retirement health care benefits for public employees, but our current system is one of the most costly on a per capita basis.
The Legislature’s Joint Finance Subcommittee C has been exploring solutions to [...]

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