[dropcap type=”2″]E[/dropcap]very year, the Trustees of the Social Security and Medicare trust funds release reports to Congress on the current financial condition and projected financial outlook of these programs. The 2015 reports, released on July 22, show that, despite some encouraging signs, both programs continue to face financial challenges that should be addressed as soon as possible, with the Disability Insurance Trust Fund needing the most urgent attention.

 

What are the Social Security trust funds?

The Social Security program consists of two parts. Retired workers, their families, and survivors of workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program; disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program. The combined programs are referred to as OASDI. Each program has a financial account (a trust fund) that holds the Social Security payroll taxes that are collected to pay Social Security benefits. Other income (reimbursements from the General Fund of the Treasury and income tax revenue from benefit taxation) is also deposited in these accounts. Money that is not needed in the current year to pay benefits and administrative costs is invested (by law) in special Treasury bonds that are guaranteed by the U.S. government and earn interest. As a result, the Social Security trust funds have built up reserves that can be used to cover benefit obligations if payroll tax income is insufficient to pay full benefits.

(Note that the Trustees provide certain projections based on the combined OASI and DI (OASDI) trust funds. However, these projections are theoretical, because the trusts are separate, and one program’s taxes and reserves cannot be used to fund the other program.)

Trustees report highlights: Social Security

• The combined trust fund reserves (OASDI) are still increasing and will continue to do so through 2019 (asset reserves increased by $25 billion in 2014, with year-end reserves totaling $2.8 trillion). Not until 2020, when annual program costs are projected to exceed total income, will the U.S. Treasury need to start withdrawing from reserves to help pay benefits. Absent congressional action, the combined trust fund reserves will be depleted in 2034, one year later than projected in last year’s report.

• Once the combined trust fund reserves are depleted, payroll tax revenue alone should still be sufficient to pay about 79% of scheduled benefits in 2034, with the percentage falling gradually to 73% by 2089. This means that 20 years from now, if no changes are made, beneficiaries could receive a benefit that is about 21% less than expected.

• The OASI Trust Fund, when considered separately, is projected to be depleted in 2035 (one year later than projected in last year’s report). At that time, payroll tax revenue alone would be sufficient to pay 77% of scheduled OASI benefits.

• The DI Trust Fund is in worse shape and will be depleted in late 2016 (the same as projected last year). The Trustees noted that the DI Trust Fund “now faces an urgent threat of reserve depletion, requiring prompt corrective action by lawmakers if sudden reductions or interruptions in benefit payments are to be avoided.” Once the DI Trust Fund is depleted, payroll tax revenue alone would be sufficient to pay just 81% of scheduled benefits.

• Based on the “intermediate” assumptions in this year’s Trustees report, the Social Security Administration is projecting that there will be no cost-of-living adjustment (COLA) for calendar year 2016.

What are the Medicare trust funds?

There are two Medicare trust funds. The Hospital Insurance (HI) Trust Fund pays for inpatient and hospital care (Medicare Part A costs). The Supplementary Medical Insurance (SMI) Trust Fund comprises two separate accounts, one covering Medicare Part B (which helps pay for physician and outpatient costs) and one covering Medicare Part D (which helps cover the prescription drug benefit).

Trustees report highlights: Medicare

• Annual costs for the Medicare program have exceeded tax income annually since 2008, and will continue to do so this year and next, before turning positive for four years (2017-2020) and then turning negative again in 2021.

• The HI Trust Fund is projected to be depleted in 2030 (unchanged from last year, but with an improved long-term outlook from last year’s report). Once the HI Trust Fund is depleted, tax and premium income would still cover 86% of program costs under current law. The Centers for Medicare & Medicaid Services (CMS) has noted that, under this year’s projection, the HI Trust Fund will remain solvent 13 years longer than the Trustees predicted in 2009, before passage of the Affordable Care Act.

• Due to increasing costs, a Part B premium increase is likely in 2016. However, about 70% of Medicare beneficiaries will escape the increase because of a so-called “hold harmless” provision in the law that prohibits a premium increase for certain beneficiaries if there is no corresponding cost-of-living increase in Social Security benefits. If there is no COLA for 2016, the increased costs may be passed along only to the remaining 30% not eligible for this hold-harmless provision–generally, new enrollees, wealthier beneficiaries, and those who choose not to have their premiums deducted from their Social Security benefit. If so, these individuals could see the base premium rise to $159.30 in 2016, up sharply from $104.90 in 2015.

Why are Social Security and Medicare facing financial challenges?

Social Security and Medicare accounted for 42% of federal program expenditures in fiscal year 2014. These programs are funded primarily through the collection of payroll taxes. Partly because of demographics and partly because of economic factors, fewer workers are paying into Social Security and Medicare than in the past, resulting in decreasing income from the payroll tax. The strain on the trust funds is also worsening as large numbers of baby boomers reach retirement age, Americans live longer, and health-care costs rise.

What is being done to address these challenges?

Both reports urge Congress to address the financial challenges facing these programs in the near future, so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public. As the Social Security Board of Trustees report states, “Social Security’s and Medicare’s projected long-range costs are not sustainable with currently scheduled financing and will require legislative action to avoid disruptive consequences for beneficiaries and taxpayers.”

Some long-term Social Security reform proposals on the table are:

• Raising the current Social Security payroll tax rate (according to this year’s report, an immediate and permanent payroll tax increase of 2.62 percentage points would be necessary to address the revenue shortfall)

• Raising the ceiling on wages currently subject to Social Security payroll taxes ($118,500 in 2015)

• Raising the full retirement age beyond the currently scheduled age of 67 (for anyone born in 1960 or later)

• Reducing future benefits, especially for wealthier beneficiaries

• Changing the benefit formula that is used to calculate benefits

• Changing how the annual cost-of-living adjustment for benefits is calculated

Regardless of the long-term solutions, Congress needs to act quickly to address the DI program’s imminent reserve depletion. According to this year’s report, in the short term, lawmakers may reallocate the payroll tax rate between OASI and DI (as they did in 1994). However, this may only serve to delay DI and OASI reforms.

You can view a combined summary of the 2015 Social Security and Medicare Trustees reports at www.socialsecurity.gov/OACT/TRSUM/. You can also access a full copy of the Social Security report from that page. You can find the full Medicare report at www.cms.gov.

 

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Dear Loveland Magazine Readers,

by Megan Graff

For years, the Loveland Community has supported the Loveland Initiative via donating supplies and backpacks for low-income kids going back to school, toys and gift cards during the holidays and snacks for the Cool-School tutoring program.

But, I learned recently that The Loveland Initiative was unable to secure enough grant funding to stay at their location on Loveland-Madiera Road and have started a GoFundMe site.  In addition to the great things that many of us are aware of, this organization needs the resource center for several reasons:

• Every week, families stop in to receive information on how to further their education or receive job information.
• Kids that have outgrown their clothes and shoes are given some gently used ones that were donated by the community.
• Self-esteem camps are held in the summer – something so important for kids – and topped off with a first-ever trip to Kings Island.
• There are plans to start activities like Movie Nights with popcorn to keep kids off the street, out of trouble and in a place that they feel at home.

Please consider a donation to the Loveland Initiative by following the link below and by spreading the word via e-mails and Facebook.

http://www.gofundme.com/lovelandinitiative

Sincerely,

Megan Graff

 

 

 

Dear Loveland Magazine Readers,

First and foremost, I want to be clear that neither I nor Loveland City Council have had any discussions or taken any actions that would force Loveland Kayak and Canoe [sic] to leave Loveland.  In fact if you look at the history of their business and the land designated for the parking lot, the City helped facilitate Mr. Bersani’s purchase of his business by purchasing and leasing back to him land adjacent to what they required for their operation.  With the City’s purchase of the McCoy property and the award of a matching grant recently, City Manager Dave Kennedy and City engineers have been communicating with Mr. Bersani to work out terms that will allow Loveland Kayak and Canoe [sic] to operate safely and effectively, both now and in the future.  For example, as you can see on the attached parking lot layout (printed below), spaces that could have been used for cars has been designated for eight trailer parking spaces to accommodate the canoe livery’s trailers.  Furthermore, those spaces will allow Mr. Bersani’s vans to access his property so their customers can safely load and unload.  The City’s design engineer also revised the parking lot layout to ensure the turning radius is sufficient so that Mr. Bersani’s vehicles can safely navigate both his property and the parking lot.  Just last week Mr. Kennedy worked with Mr. Bersani to seek the Board of Zoning Appeals’ approval to relocate his buildings from their current site onto his property.  This is necessary so that construction can begin before asphalt plants close for the winter in late November or early December, rather than waiting for construction to begin in the spring.

As the above facts indicate, the City values Loveland Kayak and Canoe [sic].  Mr. Kennedy has and continues to work with Mr. Bersani to work out an agreement that is beneficial to his business, all Downtown businesses, and the City so that all have additional parking as soon as possible.  We are confident we will find an equitable solution soon.

Linda Cox, Mayor

City of Loveland

 

(BACKGROUND: VIDEO: Will Loveland Canoe and Kayak survive the progress in Historic Downtown Loveland?)

 

 

 

Dear Loveland Magazine Readers,

Recently there has been a lot of media coverage regarding the City of Loveland and Loveland Kayak and Canoe [sic] (VIDEO: Will Loveland Canoe and Kayak survive the progress in Historic Downtown Loveland?). As the Mayor of Loveland I feel it is very important to clarify the facts surrounding this issue.

Here is a brief outline of the facts:

• In 2004, the City of Loveland paid Mark Bersani, the owner of Loveland Kayak and Canoe [sic], $137,500 for two parcels totaling less than ½ acre needed for the establishment and operation of his business.
• Subsequent to that sale, Mr.Bersani determined he would in fact need access to the city -owned parcels to accommodate his continued operations and growth. Since the property was not needed by the city at that time, the city agreed to lease the parcels to Mr. Bersani for a nominal fee.
• Fast forward to today: As the city continues to grow additional parking is necessary downtown. As a result, this city- owned property is now needed for a new parking lot the city is building to benefit all downtown businesses including the Canoe Livery.
• Throughout this process, the city’s communication with Loveland Kayak and Canoe [sic], through its City Manager, has been ongoing and consistent.
• City engineers have been communicating with Mr. Bersani to address his concerns regarding the design of the new parking lot and have incorporated those ideas into the design to allow Loveland Kayak and Canoe [sic] to operate safely and effectively, both now and in the future.
• The city was instrumental in facilitating the Loveland Board of Zoning Appeals to allow Mr. Bersani to relocate buildings he currently uses that are situated on city-owned property to property he owns.
• The city is also proposing an agreement whereby the canoe livery can use a portion of the unused road, possibly as a right-of-way, to facilitate safer ingress and egress.

The City of Loveland has a long history of partnering with all of its businesses – large ones like CMC properties (developers of the new Downtown Loveland retail and residential development), and small and start-up companies such as Loveland Kayak and Canoe [sic] and The Works Restaurant. For example, in the early 2000’s, the city leased the old public works building to The Works Restaurant for $1/year to help them get started; subsequently they purchased the building from the city for fair market value and today operate a successful restaurant that draws people into Loveland. Another example of the City’s successful partnerships with businesses is the restoration of the Bronner Building, located along the Little Miami Bike Trail. The city sold this property to a developer who renovated the building; it was subsequently sold to the Little Miami Inc. to be used as a nature and information center. Because of the city’s involvement, this once dilapidated building is now a beautifully restored building along the Little Miami Bike Trail.

As Loveland continues to grow and prosper we are taking steps to plan for and accommodate its growth and development. A vital component of this plan is parking. The city acquired a matching grant to build over 100 new parking spaces on the city-owned property next to the Loveland Kayak and Canoe [sic].

All of our businesses, both existing and new, are vital to our quality of life and tax base. We work hard to balance the needs of our long time existing businesses with our future business growth.

Linda Cox, Mayor

City of Loveland

MORE BACKGROUND:

Mayor Cox responds to concerns of Loveland Canoe and Kayak

How the squeeze began for Loveland Canoe and Kayak

Comments pour in to save Loveland Canoe and Kayak

VIDEO: Will Loveland Canoe and Kayak survive the progress in Historic Downtown Loveland?