The Oregon Biz Report - Business News from Oregon

Barran Liebman LLP
Electronic Alert

1. IRS Relaxes Safe Harbor 401(k) Plan Restrictions
2. Union Pension Plans May Require Increased Employer Contributions
3. New Details on Obama’s Healthcare Proposal

Three important developments require attention by employers sponsoring retirement and health plans for their employees.

Kathy Querin, PMAR Chief Executive Officer:  Portland, Ore. — If you’re thinking about purchasing your first home, have good credit, and can afford a mortgage payment, but have been sitting on the fence, wondering when to make your move, there are 8,000 reasons that may push you right off to the other side of that fence.

Oregon Small Business Association,

The push for digital medical records, fueled by $19 billion from the federal stimulus package, would completely change the way doctors prescribe and practice medicine—by digitizing the entire medical record-keeping process.  Backers say such technology will cut costs and save lives.  But a growing body of research suggests potential challenges.

By Bill Conerly, Businomics, Conerly Consulting LLC,

Today’s report on consumer confidence lends credence to economic forecasts that call for a recovery soon.

Credit Cards, Asymmetric Information and the Role of Government in Preventing Bad Choices
By Patrick Emerson
Oregon Economics Blog

The new credit card (and guns) bill is about to be signed into law and it begs the question: what is the market failure that this government intervention is suppose to correct?  After all, credit card contracts are full information – all the facts are there for credit card applicants to review – and if a private citizen in the United States wants to enter in a legal contract with another entity, why should the government prevent this?  The answer lies in whether you believe that by making extraordinarily dense and complicated contracts an asymmetric information problem exists despite this ‘full disclosure.’ 

Taxation Update:

In an effort to pay for its increased spending the Obama Administration is going after corporate overseas earnings.  This could mean diminished competitiveness for U.S. companies operating overseas. Companies like Intel and Nike would suffer under new rules proposed by the Administration.  “The bottom line is they have proposed a tax increase of $190 billion on overseas activities of U.S. multinationals,” said Kenneth J. Kiles who has represented General Electric, Microsoft and others on tax issues.

The Administration has already factored in the new tax receipts calculating them into its budget figures for 2011.  The U.S. corporate tax rate is 35 percent.  Businesses operating outside the U.S. don’t pay that on profits overseas unless they bring the money home.  The current tax-deferral system is a  attempt to deal with the fact that most other countries don’t tax their companies’ overseas profits.  The U.S. is just behind Japan in its corporate tax rate at 39.25 percent for the combined (central, regional, and local) 2008 corporate tax rate.

By Bill Conerly, Businomics, Conerly Consulting LLC,

Take 20 minutes and watch this wonderful Ted Talk by Alex Tabarrok of George Mason University.  He’s a professor but he speaks English.  Much of what he says will be familiar to those of you who have heard my presentation, Freedom and Prosperity: The Case for Optimism.  Like all Ted Talks, this one is both insightful and crisp–not a single extra word.

By Alyssa Williams,

The Portland Business Alliance (PBA) traveled to China on a trade mission last month in part to hear from Oregon companies in China, investigate sustainability practices and tour the Port of Shanghai, one of the Port of Portland’s important trade partners.Over the nine-day mission, 29 individuals from over 20 companies learned about the country’s manufacturing, port and distribution, banking and investment, green buildings and marketing and service sectors. The group’s experiences were blogged throughout the entire trip.

Wells Fargo/Gallup Small Business Index,
See Chart here:

According to the Wells Fargo/Gallup Small Business Index, surveyed April 1-14, small business owners’ optimism for the future rose for the first time since 2007. The “future expectations” (next 12 months) score rose nine points (to 10) while the “present situation” score dropped 6 points to negative eleven (-11). These metrics comprise the overall Index score, which reflects six key measures: financial situation, cash flow, revenues, capital spending, job hiring and credit availability.

Bullard Smith Jernstedt Wilson
BULLARD eAlert 2/26:

Readers of our February 16 and April 6 Bullard Alerts know that the federal stimulus bill, titled the American Recovery and Reinvestment Act of 2009 (and now known as ARRA), provides a subsidy for continuation coverage in certain cases and opened a window that would permit certain qualified beneficiaries who are not on COBRA coverage to elect such coverage.  In our April 6 Bullard Alert, we cautioned that the Oregon legislature and Insurance Division might soon require Oregon-insured health plans to extend the state continuation coverage period and open a similar window for certain qualified beneficiaries not currently on state continuation coverage.

The Department of Labor recently released an Opinion Letter regarding how much advance notice an employee must provide for FMLA leave when 30 days notice is not practicable. The Opinion Letter clarified that employers may enforce internal call-in policies so long as the procedural requirements for requesting leave are consistent with what is practicable given the particular circumstances of the employee’s need for leave

By Bill Conerly, Businomics, Conerly Consulting

An excellent Wall Street Journal article, “Clarity is Missing Link in Supply Chain,” accentuates a point made in my favorite economics book, that inventory swings are tremendously destabilizing.  Here’s a stunning macroeconomic impact:

“In March, Best Buy Co. said it could have sold more electronics equipment in the three months ended Feb. 28, but its suppliers’ deep cuts made it tough to keep shelves stocked. Suppliers “all decided to build a lot less,” says Best Buy merchandizing chief Michael Vitelli.”

By Patrick Emerson
Oregon Economics Blog

I have been asked by a couple of readers for my take on the governors plan to temporarily employ 12,000 people who are currently unemployed. The short answer is (Grinch that I am): I am not sure I get it. Presumably many/most of the people employed by this plan will be ones that are currently getting unemployment insurance and who have time to look for work, try and get training for new marketable skills, and can cut child care costs by taking care of their children themselves. When jobs become available the best matches for each opportunity will be hired and the job market will unravel itself efficiently.

By Oregon Tax News,

At a time when ticket sales and attendance at sporting venues across the country seem to be plunging, the city of Portland is relying on its own counter projections of increased attendance and ticket sales in order to finance its new baseball stadium.   As you may recall, the Portland City Council recently voted 3-2 to endorse a loosely defined agreement that facilitated the acquisition of a Major League Soccer franchise for the city while also providing a better home for the Portland Beavers Triple-A baseball team.

“Housing Starts Dropped Sharply as Multi-Family Activity Collapsed. Starts dropped to a new all-time low of just 458,000 units as multi-family activity dropped to a mere 90,000 units at an annual pace. The more volatile multi-family series has been the driver behind several large drops in recent months. Single-family activity managed a second straight gain giving some credence to a bottoming process.” Wachovia Economics Group, 5/19/09

John Marshall
Associated Oregon Industries
Oregon’s Largest Business Lobby

The bad news out of the just-released state economic and revenue forecast is that Oregon’s economy is still in recession and, as a result, state tax revenue is still dropping.  The good news is that the revenue decline is not as bad as was earlier anticipated.  The 2009-11 state general fund and lottery revenue dropped another $524 million from the March estimate.  When federal stimulus and state reserve funds are added to the equation, the 2009-11 state budget shortfall now totals $1.8 billion – well below the $4.4 billion the legislature’s budget writers were estimating earlier.