The Texas legislature convened today as lawmakers embark on a 140-day session. The state budget: it's the only piece of legislation lawmakers must pass before they adjourn June 1st. Comptroller Susan Combs says state revenue will drop about $9 billion in the coming two-year budget cycle. The financial fallout from the Category 2 Hurricane Ike that hit Southeast Texas will take a toll on the state budget and play a large part in attempts to update the Texas Windstorm Insurance Association. Legislators also will consider whether to supply money to a disaster account they created in 2007 but never funded. Some lawmakers want to temporarily freeze tuition at state universities, but higher education leaders warn that could disrupt their budgets. Governor Rick Perry's vision of building roads to relieve traffic congestion will continue to be a leading item, as it was last session. Lawmakers are looking closely at public-private construction partnerships and whether to change the oversight of the Texas Department of Transportation. Perry says his proposed road network dubbed the Trans-Texas Corridor is dead, but some toll road projects will press on as planned.
A majority of members of a Galveston police union agreed to a three per cent pay cut as the city struggles to recover from Hurricane Ike. The voting deadline was today. But the Galveston County Daily News reports a majority of the 152 Galveston Municipal Police Association members on Friday agreed to the salary reduction. Union president and Galveston native Jimmy de los Santos says officers understand and want to do their part because they "want the city to bounce back." The $600,000 police wage cut proposal, which faced a vote by officers since their salaries are set by contract, now goes to the city council. Ike made landfall at Galveston on September 13th, causing massive damage to the island city. Revenue from property and sales taxes is down.
Sunoco is closing its polypropylene manufacturing plant in Bayport by April 30th, according to the Houston Business Journal. Sunoco's three other polypropylene facilities in La Porte, as well as in Marcus Hook, Pennsylvania and Neal, West Virginia will assume a portion of Bayport's production. The plant employs about 50. The company refines oil, sells gasoline and other fuel, makes petrochemicals and coke.
Neiman Marcus said today that it's cutting about 375 jobs, or nearly three per cent of its work force. A spokeswoman for the Dallas-based luxury retailer says the layoffs come as the privately held company tries to deal with the challenging economic environment. She says the group is looking for ways to ensure it is operating efficiently. She says the cuts are across all divisions and at all job levels. Neiman Marcus will be offering severance packages, but no details have been revealed. Retailers across the industry have suffered as consumers cut back spending amid an economic recession, mounting job losses and a prolonged housing slump. On Monday, Moody's Investors Service said it may lower Neiman Marcus's credit ratings due to its December same-store sales decline. Last week, the retailer said its same-store sales dropped 27.5 per cent in December as even high-end consumers pulled back sharply on holiday spending. A shift in fiscal 2009 reporting periods also dragged down monthly results, the company said. Neiman Marcus runs 40 Neiman Marcus stores, two Bergdorf Goodman stores and 21 clearance centers. The company also operates both catalog and online retail businesses.
The ConocoPhillips chief says President-elect Barack Obama's plan to create a "green energy economy" is designed to address the problems of energy security, climate change and job creation. But Jim Mulva says the plan's cost could be greater than policymakers realize. Mulva's the chairman and chief executive of the Houston-based oil company, which is the nation's third largest. He says he and Obama "agree that we must reduce the environmental footprint of energy production and consumption." But Mulva warns that the nation "must be realistic about the cost of green energy." He says realism also is needed "about its true potential and how long it will take for commercial-scale supply contributions." He says the U.S. economy needs quickly available energy, reasonably priced, to ensure prosperity. He says restricting energy development domestically exports dollars to buy oil from abroad, thereby also exporting jobs.
The Treasury Department says the federal government already has run up a record deficit of $485.2 billion in just the first three months of the current budget year. The deficit is on track to surpass $1 trillion for all of fiscal 2009 and some economists believe it could go much higher. The treasury says the deficit for December totaled $83.6 billion, a sharp deterioration from a year ago when the government managed a surplus of $48.3 billion. All the red ink is occurring because of the massive spending on the $700 billion financial rescue program and a prolonged recession which has depressed tax revenues.
The trade deficit plunged to the lowest level in five years in November as a deepening recession slashed demand for oil by a record amount. Imports from China also fell by the largest amount on record. The Commerce Department says the trade deficit narrowed to $40.4 billion in November, a 28.7 per cent decline from October's deficit of $56.7 billion. The bigger-than-expected decrease left the deficit at its lowest level since November 2003. The trade deficit through November is running at an annual rate of $688.2 billion — down from the 2007 imbalance of $700.3 billion. The 2007 deficit had represented the first decline after five years of record highs. Economists expect the trade deficit will fall even more sharply this year as the recession further cuts demand for imported products. The Treasury Department official managing the $700 billion financial rescue program says the agency is developing tools to measure whether banks that receive funds are increasing lending. Neel Kashkari says the department will compare lending by banks that have received government money with similar banks that haven't gotten assistance. The Bush administration has been strongly criticized by lawmakers from both parties for not doing more to track the $189 billion invested so far in more than 250 banks in an effort to spur more lending.
Federal Reserve Chairman Ben Bernanke is offering some encouraging words about the stimulus package being crafted by President-elect Barack Obama and Congress. In a speech to the London School of Economics, Bernanke says the package could provide a "significant boost" to the sinking U.S. economy. But he also warns that such a recovery won't last unless other steps are taken to stabilize the shaky financial system. This marks the first time the Fed chief has spoken about the roughly $800 billion recovery plan now being worked on by Obama, who takes office next week. Obama envisions a blend of tax cuts and increased government spending, including spending on big public works projects, to make up the stimulus plan. Bernanke didn't weigh in on the details of the evolving package. He made clear that such a recovery plan is needed as part of a broader, multi-pronged government response to combat the worst financial crisis to hit the U.S. and the global economy since the 1930s.
Democratic lawmakers say they hope to have an economic stimulus ready for the next president's signature by mid-February. But they say numerous provisions remain unsettled. A plan put forth by President-elect Obama calls for an increase in supplemental security income for seven million poor people who are elderly, blind or disabled. Aides say the idea of an extra SSI payment is gaining traction in negotiations. The plan is also said to provide at least $70 billion over the next two years to help states meet the demand for Medicaid, and another $25 billion more to help individuals who cannot afford to pay for private, post-employment health benefits. An estimated $35 billion is tentatively ticketed for additional unemployment benefits. The tax provisions remain undecided. But some Democratic officials say Obama's call for a tax break for companies that create new jobs is all but dead.
Citigroup> is confirming it is talking with Morgan Stanley about combining their brokerages. The banks said in a statement that no definitive agreement has been reached. It also says "no assurance can be given that any such agreement will be reached." A person close to the negotiations has said Citigroup plans to sell a 51 per cent stake in Smith Barney, its retail brokerage, to Morgan Stanley for about $2 billion to $3 billion in cash. The person spoke on condition of anonymity because he was not authorized to discuss the ongoing talks.
Mexico's central bank expects migrants to send home even less money this year, forecasting a second straight year of declining remittances. The bank estimates remittances will drop by 2.5 per cent this year. The report also estimates that 2008 remittances dropped 2.0 per cent to $23.5 billion--the first annual decline since the bank starting tracking the money 13 years ago. Formal figures will be released January 28th. The bank attributes the drop to the U.S. recession in which thousands of Mexican construction workers have lost their jobs, and a drop in the number of Mexicans attempting to illegally cross the heavily patrolled U.S. border. Remittances are Mexico's second largest source of foreign income after oil.
A leading auto industry analyst says the auto industry needs to brace itself for an extended period of weak demand from consumers because of tough economic conditions. Deutsche Bank's Rod Lache told the Society of Automotive Analysts conference that there are few encouraging signs that would indicate a quick turnaround in the auto sector. He says sales in the U.S. will be hurt by high unemployment, low consumer confidence and high consumer debt. Lache says the U.S. auto industry will need to undergo massive restructuring and there's no guarantee that all of the U.S. automakers will survive. He says over time, there will likely be consolidation in the industry, which could swallow some of the smaller companies like Chrysler.
Michigan Governor Jennifer Granholm says the federal government needs to invest more in research and development for auto-related alternative energy technologies such as the batteries for electric cars. The Democrat discussed the need from East Lansing on CNBC's Squawk Box and MSNBC's Morning Joe as the third day of press previews began at the North American International Auto Show in Detroit. Granholm says it will help the industry "compete in a global economy." She says tax credits for people who buy electric cars also would help. South Korea's LG Chem Ltd. was named as the lithium-ion battery supplier for General Motors's Chevrolet Volt. Granholm says LG has benefited from its government's commitment to research.
Russia's Gazprom state gas monopoly says Ukraine is blocking Russian gas deliveries to Europe. Gazprom Deputy Chairman Alexander Medvedev says Ukraine's pipeline system has failed to carry Russian gas westward to Europe after Russia resumed supplies shortly after 10 a.m. Moscow time Tuesday. Russia has accused Ukraine of stealing gas intended for Europe, and restarted supplies only after a EU-led monitoring mission was deployed. But the Gazprom deputy chairman says Ukraine is keeping its pipelines closed for gas transit to Europe even though Russia resumed pumping. There was no immediate comment from Ukraine's state gas company Naftogaz.
A federal watchdog says a $722 million project to restore Iraq's oil production facilities was undermined by weak management, contractor mistakes and Iraqi neglect. That's the conclusion of a report by the Special Inspector General for Iraq reconstruction. The auditors point to security concerns, postwar looting and the shoddy shape of the oil network as primary factors in the cost of the contract. That contract was awarded to Houston-based KBR in January 2004. The report further states the effort administered by the U.S. Army Corps of Engineers was hampered by a lack of direction. It says cost overruns and frequent contract changes led to work being delayed or canceled. Nearly $563 million of the contract costs were paid for by U.S. taxpayers. The rest came from the Iraqis, who need a vibrant petroleum sector to drive their economy. Yet the Special Inspector General's report says there are signs the Iraqis aren't properly maintaining the rebuilt oil facilities and equipment. For example, gas plants in southern Iraq were renewed by KBR. A final step in the process was for the Iraqis to install rotors for a turbine gas compressor. That hasn't been done.
New York state has won a round in court against Amazon.com over a new law requiring out-of-state online companies to collect sales tax from shoppers in New York. The law applies to companies that don't have offices in New York, but have at least one person in the state who works as an online agent — someone who links to a Web site and receives commissions for related sales. A State Supreme Court justice in Manhattan is dismissing the suit challenging the constitutionality of the legislation, saying Amazon had no basis for legal action. Officials at Amazon didn't immediately return calls for comment. The company sued last year and could still appeal. Officials estimate the state would gain about $50 million from the tax.
The government says China's trade slump worsened in December as exports fell at their fastest rate in a decade. The grim news aggravates a decline that has fueled a wave of layoffs and fears of unrest. December exports fell 2.8 per cent from the same month a year earlier, after a 2.2 per cent decline in November. China's global trade surplus for 2008 rose 12.7 per cent over 2007 to a record $295.5 billion, possibly worsening tensions with the government of President-elect Barack Obama. The visiting president of the U.S. Chamber of Commerce appealed to Beijing to resist pressure to respond to the downturn by protecting China's markets.
Across the United States, something of a bidding war has developed over prospective college students seeking bargain tuitions. While some schools have long tried to lure students across state lines with lower tuitions, such incentives are gaining popularity. It's in response to the damage done to families' college savings and home equity by the financial meltdown. The ability to pay tuition has been hampered. In response, southern Illinois University-Carbondale will begin offering this fall in-state tuition to first-year students from neighboring Missouri, Kentucky and Indiana. And in North Dakota, the state's board of higher education recently approved offering in-state tuition to out-of-state and international prospects. Last month, an independent report on American higher education flunks all but one state — California, which got a C — when it comes to affordability. The study by the National Center for Public Policy and Higher Education found that almost everywhere the average family's cost of education is up.
Marathon Oil estimated it will record fourth-quarter production volume near the low end of its previous projection — due to pipeline issues. Houston-based Marathon also cited impact of the 2008 hurricanes on Gulf of Mexico production and the sale of some of the company's noncore interests off shore Norway. Marathon Oil estimated that its liquid hydrocarbon and natural gas production available for sale during the fourth quarter was around 401,000 barrels of oil equivalent per day. The company also said its refined products fourth-quarter sales volumes fell to 1.4 million barrels of oil equivalent per day, compared with 1.43 million barrels in the prior-year period.