CBO Finds Butch Lewis Act Costs Much Less than Expected

Two US senators said the US Congressional Budget Office (CBO) has estimated that the pension reform legislation known as the Butch Lewis Act would cost $34 billion over the next 10 years, nearly one-third of the $100-billion figure cited in its preliminary analysis earlier this year.

Sens. Richard Neal (D-MA) and Sherrod Brown (D-OH) said the $34 billion estimate is also less than half the expected cost of propping up pension lifeboat program the Pension Benefit Guaranty Corp. (PBGC), which is expected to run out of funds by 2025.

“Passing the Butch Lewis Act would save the multiemployer pension system and prevent businesses from going bankrupt all without cutting a single dime of the benefits workers earned,” said Brown’s office in a release. “And it would do so for less than half the cost of allowing the plans to fail, allowing businesses to go under and allowing workers’ benefits to be slashed.”

The act would establish the Pension Rehabilitation Administration (PRA) to provide loans and financial assistance to certain multiemployer defined-benefit pension plans. Earlier this year, the CBO provided a preliminary cost estimate of the act saying that “the bill would probably increase deficits by more than $100 billion over t2019-2028 period.”

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However, it added that under some interpretations of the bill’s language, few plans would qualify for loans and assistance, “resulting in federal costs that would be substantially less than $100 billion.”

Brown’s office cited previous congressional testimony from PBGC Director Thomas Reeder, who said the organization’s multiemployer program is projected to fail with a deficit of more than $67 billion, and that if this happens, it would cost $78 billion just to restore the PBGC. The PBGC’s multiemployer program protects more than 10 million workers and retirees in about 1,400 multiemployer plans.

Tags: Butch Lewis Act, Congressional Budget Office, Pension

A new report accuses Harvard University’s endowment of contributing to “environmental destruction,” and the displacement and harassment of communities in its pursuit to acquire $1 billion worth of farmland worldwide over the past decade.

Barcelona, Spain-based GRAIN, and the Sao Paulo, Brazil-based Network for Social Justice and Human Rights, estimated that Harvard Management Co., which manages the university’s $37.1 billion endowment, has spent approximately $1 billion over the span of more than a decade to acquire approximately 850,000 hectares of farmland around the world.

The report said the “opaque” acquisitions “were undertaken without proper due diligence and have contributed to the displacement and harassment of traditional communities, environmental destruction, and conflicts over water.”

The groups say Harvard’s farmland acquisitions were channeled through complex company structures, making it difficult to determine its specific farmland holdings. They maintain that atop each farmland investment structure is one of Harvard’s tax-exempt subsidiaries that manage different parts of the endowment’s investments, which include Blue Marble Holdings, Phemus Corp., Demeter Holdings Corp., and Harvard Private Capital Realty.

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The report cited tax filings of the Boston-based subsidiaries that it said indicate Harvard channeled money for farmland investment through these companies to other subsidiaries registered in tax havens such as Delaware or the Cayman Islands, under “obscure” names like Guara LLC or Granary Investments.

“From these tax haven companies, the money then flowed to subsidiaries in the target countries, which are managed by various local operators active in agribusiness and land acquisitions,” said the report. “These local business groups identified the lands, made the purchases, and managed the farms. Harvard paid them millions of US dollars in fees for their services.”

The report said Harvard’s involvement in acquiring and industrializing farmlands in developing countries has resulted in cutting local villagers off from land they had farmed for generations, while also creating environmental and health problems in communities caused by pesticides that were aerially sprayed onto the farms.

While Harvard Management Co. didn’t directly address the report, it said that it is currently repositioning its natural resources portfolio as part of an investment management restructuring announced last year, and in the future will no longer be directly invested in natural resources. However, that transition will take some time due to the illiquid nature of the holdings.

“The current natural resources team at HMC has made great progress in their multi-year repositioning of the portfolio,” said Harvard Management Co. in a statement. “Their aim is to create a more focused and efficient portfolio that, in partnership with local managers, can meet or exceed our quality standards.”

The management firm also said that as a result of the repositioning, it has sold a number of assets and is considering divestment from others.

“The team has also instituted a more proactive approach to working with managers of new and remaining assets,” said the firm. “A partnership that provides more oversight and ensures that we can leave the land and community better than when we first invested.”

Tags: Endowments, Harvard Management Company, Natural Resources