Key details of decision over Ill. pension crisis

SPRINGFIELD, Ill. — After years of inaction, Illinois lawmakers have approved a historic plan to finally close the gap on the state's $100 billion public pension shortfall, which is considered the nation's worst.

The House voted 62-53 in favor, minutes after the more union-friendly Senate approved the measure 30-24. The plan now will be sent to Gov. Pat Quinn, who has championed pension reform and has promised to sign it. The plan was unveiled last week by Democratic and Republican leaders in both the House and Senate, who said it will save the state $160 billion over 30 years, largely by cutting retirement benefits for state employees.

Union officials are expected to quickly challenge the plan's constitutionality, saying it unfairly hurts retirees who were promised a certain pension and worked hard to earn it.

Here are key details:

THE PREDICAMENT

Illinois' five public-employee retirement systems are a combined $100 billion short of what's needed to pay benefits as promised to workers and retirees. The accounts contain about 40 percent of what they need to be considered fully funded. The shortfall is due largely to decades of legislators skipping or shorting the state's pension payments — a practice that allowed them to spend that money elsewhere. Other causes include economic downturns, lower-than-projected market performance and beneficiaries living longer.

THE IMPACT

The massive unfunded pension liability — along with the state's other financial woes — has led credit rating agencies to repeatedly downgrade Illinois' rating to the lowest of any state. That means when the state borrows money, taxpayers pay more in interest than people in other states. Illinois' annual payments to the funds have grown, taking up about one-fifth of the state's general funds budget — about $6 billion — this year. That's money that could be going to schools, roads or other areas.

THE PROPOSED SOLUTION

Legislative leaders say the approved plan will reduce the unfunded liability by about $21 billion and fully fund the retirement systems by 2044. Among other provisions, it will:

— Raise the retirement age for people 45 and younger, on a sliding scale basis.

— Guarantee the state will make its full annual contribution to the funds and allow the systems to sue if the payments aren't made.

— Change the cost-of-living increase from the current rate of 3 percent, compounded annually, on the full annuity benefit. Retirees would receive increases at that rate only up to a certain amount of annuity benefit. Legislative leaders say the new structure would benefit lower-income workers who held their jobs longer. Employees also would miss some annual cost-of-living adjustments, depending on their age.

— Cap the amount of salary on which a pension benefit is based. In 2013, that amount would be about $110,000.

— Decrease the employees' own contribution to their retirement funds by 1 percent.

— Provide workers the option of participating in a 401(k)-style defined contribution plan.

THE NEXT STEP

Unions say they will sue. They argue the proposal would violate a provision of the state Constitution that prohibits diminishing pension benefits. Legislative leaders believe the plan will survive a challenge because of the funding guarantee and the decrease in employee contributions.

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Herald execs talk up future of news

Rumors of the death of newspapers have been greatly exaggerated, if Herald Publisher Patrick J. Purcell and Editor in Chief Joe Sciacca have anything to say about it — and they certainly did yesterday at a panel discussion on how news organizations can survive in a tech-addicted world of information overload and short attention spans.

"The challenges facing newspapers are not being faced by newspapers alone," Sciacca told an audience at Boston law firm Mintz Levin, which hosted the panel. "We know CNN has lost half its audience in the past year. AM radio is going away. A quarter of teenagers, the only way they interact with the Web is on their smartphone. We know that people don't want to be lectured anymore by legacy media ... they want to interact. We need to look for a (business) model that adjusts to that."

Stephen Mindich, publisher and CEO of Phoenix Media, who had to close the Boston Phoenix this year, predicted more newspapers will fail due to financial problems. But Purcell said, "Somehow or other we have been able to stay profitable. All I keep saying is, 'Let's keep our heads above water and see what happens.'"

The panel discussion, which also featured former Miami Herald Executive Editor turned Boston University dean Thomas Fiedler, was moderated by Mintz lawyer Jeffrey Robbins.

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Odds on Revere casino improve

Gaming Commission Chairman Stephen P. Crosby signaled yesterday he's ready to greenlight a proposed Mohegan Sun casino at Suffolk Downs in Revere, where the Planning Board last night unanimously voted in favor of a zoning amendment to allow gambling facilities.

The proposed change now goes to the City Council's subcommittee on zoning and the full council Monday night.

"This is just another example of our great partnership with the city of Revere and its affirmation of gaming development on our property with our new partners from Mohegan Sun," said Chip Tuttle, Suffolk Downs' chief operating officer.

The Planning Board's decision came just hours after the Gaming Commission delayed until next week a vote on whether the racetrack and Mohegan Sun can shift their proposed casino from East Boston, where voters rejected a Suffolk Downs casino last month, to the Revere portion of the track's property, where voters approved it.

The commission also will decide next week whether Revere's host community agreement and Nov. 5 referendum sufficiently address the possibility of a Revere-only option.

But Crosby said it would be "unfair" to prevent Mohegan Sun from going forward with the project.

"The referendum people voted on in Revere is clearly not what's on the table today," Crosby said. But he said, "To not permit Revere to go forward, when all reasonable deduction suggests had this been on the table it would have been enthusiastically endorsed, would be unfair."

Commissioner James F. McHugh countered that he is "troubled" by it, saying, "Voters have not had the opportunity to vote on Mohegan Sun."

By law, if a gaming proposal is rejected, there can't be another vote for 180 days, which would be well past the Dec. 31 deadline for gaming applications.

Boston, Chelsea and Winthrop are designated as surrounding communities, which would entitle them to funds to address potential impacts such as traffic and public safety. Lynn and Everett also have requested surrounding community status. Winthrop Town Councilor Craig Mael submitted an anti-casino town resolution last night. He said local support has waned thanks to the Revere-only plan.

The only other contender for the sole gaming license in eastern Massachusetts is Las Vegas billionaire Steve Wynn's Everett proposal. His suitability hearing is set for Dec. 16.

Wynn worked to ingratiate himself in the Everett area, sponsoring a charitable holiday toy event yesterday at the Everett Target. He's also helping sponsor the Boston Symphony Orchestra Holiday Pops.

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In Japan, General Motors has high hopes, low sales

TOKYO — General Motors says it's in Japan for the long haul despite sales of Cadillac and Chevrolet models barely surpassing 1,000 vehicles a year.

There has never been much appetite in Japan for left-hand drive gas guzzling U.S. autos, and there are many informal barriers to foreign automakers making it here.

But GM executives see a glimmer of hope in the fact sales of its luxury nameplates have doubled in the past three years.

The automaker is trying to lure Japanese buyers with the new Cadillac CTS and Chevrolet Corvette, which it says boast better quality and mileage.

GM Japan Managing Director Sumito Ishii declined to give a sales target Wednesday, but said part of the Detroit automaker's sales strategy is to approach buyers who may not have preconceptions about GM.

General Motors Co. has also begun to offer models with the steering wheel on the right, which is standard in Japan.

"We have just begun our fight," Ishii told reporters at the Foreign Correspondents Club in Tokyo. "We offer attractive qualities that you can't find in Japanese and European cars."

Ishii and Gregg Sedewitz, director of sales and marketing, said the cars represent American luxury and are synonymous with risk taking, coolness and Hollywood celebrities.

The Cadillac CTS comes packed with the latest technology, such as a lightweight structure and a direct injection turbo engine, and sells for 5.99 million yen ($59,900) and 6.99 million yen ($69,900).

The Corvette, which ranges from 9.29 million yen ($92,900) to 11.59 million yen ($115,900) including the convertible models, is the greenest Corvette ever, delivering 12.3 kilometers per liter.

They go on sale in Japan from April and May next year.

Japanese consumers have historically favored European imports and home-made cars over American models, including luxury brands.

Annual sales of the Lexus, the luxury offering from Toyota Motor Corp., the world's top automaker, total about 40,000 vehicles in Japan. Annual sales for the BMW are about that same number.

Sedewitz acknowledged there was "no magic bullet" to boost sales volume in Japan.

"The numbers speak for themselves," he said. "We are in it for the long term."

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Follow Yuri Kageyama on Twitter at twitter.com/yurikageyama

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Krispy Kreme and Tesla are big market movers

NEW YORK — Stocks that moved substantially or traded heavily Tuesday on the New York Stock Exchange and the Nasdaq Stock Market:

NYSE

Krispy Kreme Doughnuts Inc., down $4.96 to $19.59

The doughnut chain's third-quarter net income rose 34 percent, but its guidance for the upcoming fiscal year was below expectations.

Roundy's Inc., up 57 cents to $9.06

The grocery store operator bought 11 Dominick's stores in Chicago from Safeway Inc. and will convert them to its Mariano's brand shops.

Nasdaq

Tesla Motors Inc., up $20.53 to $144.70

The electric car maker said a German investigation into fires involving its Model S sedan found no manufacturer-related defects.

Groupon Inc., up 34 cents to $9.09

The online deal service said that its billings were up 30 percent from a year ago during the four days after Thanksgiving.

Isle of Capri Casinos Inc., down 18 cents to $7.70

The casino operator returned to a profit in its fiscal second quarter, but its adjusted results and revenue missed expectations.

Medallion Financial Corp., down $1.54 to $16

The lender for taxi operators will sell 2.9 million shares in a stock offering to help it offer more loans to its customers.

Good Times Restaurants Inc., up 5 cents to $2.51

The regional hamburger chain said that sales from stores open at least a year rose 14.1 percent in November.

Unilife Corp., up 69 cents to $4.84

The medical device maker, which is based in York, Penn., said that it signed a supply deal with Swiss drugmaker Novartis.

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Cyber Monday draws $1.74B billion holiday dollars

NEW YORK — Cyber Monday is still on top.

Retailers from Wal-Mart Stores to Amazon started rolling out "Cyber" deals at the beginning of November, and kept them going on Thanksgiving and Black Friday. That led some to wonder if earlier sales would put a dent in Cyber Monday sales. The date has been the biggest online shopping day of the year since 2010.

But shoppers delivered. In fact, shoppers bought online at the heaviest rate ever Monday, according to research firm comScore Inc., which tracks online sales.

The group said Tuesday e-commerce spending rose 18 percent from last year's Cyber Monday to $1.74 billion, making Monday the top online spending day since comScore began tracking the data in 2001. The figure does not include purchases from mobile devices.

"I always wait for the deals on Cyber Monday," said Stephanie Appiah, 25, a student who picked up a Google Chromecast video streamer with free shipping on Monday. "It's better than Black Friday because you don't have to deal with other people."

The strong online performance was in contrast to overall spending. Over the four days beginning on Thanksgiving, spending fell an estimated 2.9 percent to $57.4 billion, according to the trade group the National Retail Federation. Overall, the NRF expects holiday spending to rise 2.9 percent to $602.1 billion.

"Any notion that Cyber Monday is declining in importance appears to be completely unfounded," comScore Chairman Gian Fulgoni said in a statement Tuesday. "While it's true that many retailers are bleeding their Cyber Monday promotions into the weekend before and the days afterward, Cyber Monday itself continues to be the most important day of the online holiday shopping season."

However, he did say that early promotions had some consumers buying more items earlier in the weekend, suggesting that Cyber Monday could have even been stronger were it not for the emergence of this trend.

Consumer electronics and video game consoles and accessories were among the biggest sellers of the day. Home and garden products, clothing and accessories, as well as sports and fitness products also performed well.

ComScore tracks U.S. online sales based on observed behavior of a representative U.S. consumer panel of 1 million Web users.

One big online shopping trend so far this year is shoppers researching and buying on mobile devices like smartphones and tablets, said Forrester Research analyst Sucharita Mulpuru.

"There was an enormous lift in the number of people who use mobile devices, and it's been trending that way for the last couple of weeks," she said. Forrester forecasts $78.7 billion in U.S. online sales this holiday season, a 15 percent increase over 2012.

Meanwhile, IBM Benchmark reported on Tuesday that Cyber Monday sales rose 20.6 percent. IBM Benchmark takes sales results from over 500 online retailers and analyzes the data to estimate total online spending. Mobile sales, including smartphones and tablets, made up 17 percent of total online sales, an increase of 55.4 percent compared with last year.

Department stores were the strongest performers, with sales up 70 percent. The group does not give dollar amounts. Over the five-day shopping period beginning on Thanksgiving, sales rose 16.5 percent compared with 2012.

Jay Henderson, strategy director of IBM Smarter Commerce, said the fact that there were strong online sales on Thanksgiving, Black Friday and Cyber Monday bodes well for the rest of the season.

"We should see continued growth straight through the holiday season," he said. "Consumers seem to be online and spending in force."

The name Cyber Monday was coined in 2005 by NRF's online arm, called Shop.org, to encourage people to shop online. After retailers revved up deals for the day, it became the busiest online shopping day in 2010.

The name was also a nod to online shopping being done at work where faster connections made it easier to browse.

ComScore said Tuesday that even with high-speed connections being the norm these days, nearly half of consumers are still shopping online at work on Cyber Monday.

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AP Business Reporter Sarah Skidmore Sell contributed to this report from Portland, Ore.

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Hub-Beijing travel ‘traffic’ spurs flights

Hainan Airlines' move to start nonstop flights between Boston and China was spurred by the already large number of travelers between the two destinations and the expectation for future growth, a company official said.

"There's a tremendous amount of traffic between Boston and China because of the educational travel, the leisure travel and the business travel in both directions," said Joel Chusid, Hainan's U.S. executive director. "It's a good thing for both economies. The market is also growing. We expect (it) is going to be further stimulated because of the nonstop service."

The Chinese airline confirmed yesterday that it plans to start direct flights between Logan International Airport and Beijing's Capital International Airport on June 20, as the Herald first reported last week. The flights initially will be four times weekly.

Hainan, Massport officials and Gov. Deval Patrick are set to announce the new service today. "Nonstop service from Boston to Beijing will open up new commercial and economic opportunities, and I thank Hainan Airlines for their partnership in achieving this significant milestone," Patrick said in a statement.

Hainan will start taking reservations within a few days for flights aboard Boeing 787s that will take a little more than 13 hours.

"It means a great deal because there are a large number of high-tech and not so high-tech companies in the Boston area that have very important trade relations with Chinese companies," said attorney Samuel Shafner, co-chairman of Burns & Levinson LLP's China practice. "The ability to easily make that trip may reduce a temptation for those companies to be located in markets like New York, where they have a direct flight."

Hainan, whose first nonstop U.S. service started in Seattle in 2008, had talked of Boston being its first U.S. destination since at least 2005. In his 2006 state of the city address, Mayor Thomas M. Menino announced Hainan expected to start air cargo service between Boston and Beijing and Shanghai that summer and passenger service that December. That plan was derailed by delays in the delivery and certification of the 787, Chusid said.

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German giant to venture into Hub

The venture arm of one of the world's largest pharmaceutical companies is opening its first U.S. office in Kendall Square, pledging to make $130 million in investments to life sciences companies.

"We chose Boston because it is unique," said Martin Heidecker, who will lead the Boehringer Ingelheim Venture Fund, an affiliate of Ingelheim, Germany-based Boehringer Ingelheim, citing the area's renowned universities and established biotech companies.

Heidecker said he will invest in early stage life sciences startups, and expects to give about $13 million to each company to help them grow and develop their technologies.

"We have a long-term perspective," Heidecker said, adding there is no time limit for the fund to be invested.

Although the main goal is to invest in companies that can eventually be acquired by Boehringer Ingelheim, Heidecker said he believes the products he ends up investing in will be difference-makers regardless of his parent company's involvement.

"The products result in solving the medical problems we have in the future," such as cancer, Alzheimer's and dementia, he said.

One of the reasons the Boehringer Ingelheim Venture Fund is different is its penchant for molding companies, Heidecker said.

"This is very hands on, very early" in a company's life, he said.

Although Heidecker will look for companies to invest in around the country, locating the office in Cambridge will naturally mean more investment in the local area, said Peter Abair, director of economic and global affairs for the Massachusetts Biotechnology Council. The average investment in Bay State biotech companies was about $8 million last year, he said.

"We do know venture capital does tend to stay close to where the VC firms can keep an eye on the companies," Abair said.

Heidecker, who has been in Cambridge for a month, said he has already found companies he is interested in backing.

"There will be investments in the near future," he said.

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The Ticker: Hilltop Steakhouse auction and more...

U.S. sales up 1% 
over weekend

National retail sales climbed a mere 1 percent to an estimated 
$22.2 billion during the four-day Black Friday weekend that started on Thanksgiving for most of the nation, according to Chicago tracking firm ShopperTrak. Sales in the Northeast fell 1 percent, and store foot traffic dropped 9.8 percent. Record online sales on Cyber Monday, meanwhile, rose 20.6 percent from 2012, according to IBM. Mobile sales accounted for more than 17 percent of the sales, up 55.4 percent year-over-year.

Hilltop items to be sold at auction

The contents of the former Hilltop Steakhouse, the landmark Saugus restaurant that closed in October after 52 years, will be sold at an onsite auction Dec. 14. Restaurant equipment will be sold starting at 10 a.m., and furnishings, memorabilia and decorative items will go on the block at 
2 p.m. Among the items will be mounted bison heads, 11 carved wood cigar store Indians from the 1960s and Hilltop buttons, pins and menus. A preview is scheduled for 11 a.m. to 6 p.m. Dec. 13 and from 8 a.m. on auction day.

Kristin Pados joins Nara Logics Inc.

Nara Logics Inc., a computational neuroscience company that provides personalization to deep Web data, announced the appointment of Kristin Pados to its executive team. Pados will be joining the company at its Cambridge headquarters as senior vice president, product and general manager.

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Boston researchers find way to cut medical errors

BOSTON — Researchers at Boston Children's Hospital say they have devised a new system of shift-to-shift patient handoffs that significantly reduces medical errors.

The researchers announced Tuesday that after introducing the system on two inpatient units at the hospital, they found that preventable errors declined by more than half over three months.

The researchers trained doctors on team-based communication strategies and introduced an acronym to help them remember key points to cover when discussing patients. They encouraged people to gather as a team, and to discuss patient care together in a quiet space, rather than the busy hallway.

The Boston Globe (http://b.globe.com/18hwKde ) reports that the researchers are now studying the new procedure at nine pediatric centers around the country, with a $3 million grant from the U.S. Department of Health and Human Services.

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Information from: The Boston Globe, http://www.bostonglobe.com

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