JoshHeaps.Net/Content/Socialism/buyouts.md

@@ -97,12 +97,38 @@ So buyouts get:
 - **Their own money.** $100 million, set aside in the same one-time charter, separate from the $350 million for new co-ops. That raises taxpayers' worst case from $350 million to $450 million, and the model says so. Up to $5 million of it pays for the workers' advisers and governance help. Buyout loans can never draw on the startup money or the startup help budget, so they can't shrink the main test.
 - **Their own limits.** The same $3 million lifetime limit, which covers every business owned by the same seller or group, so one owner can't split a company into pieces to get around it. The same caps on industries and places apply. With a private lender's share and the seller's share on top, that means companies priced up to about $5 million: small and mid-sized firms. Bigger sales can use the ESOP market that already exists.
 - **Their own test, judged at year 12 with the rest.** It has two parts, and both must pass:
-  1. **The money.** The buyout money has to earn at least the Treasury rate after all losses and costs, and its losses can't be higher than the loss rate the bank publishes before its first buyout loan.
-  2. **The pay.** Among converted firms still open, members' median pay per hour can't have fallen below where it was before the sale, after inflation. A track that gets repaid by cutting its members' pay hasn't passed.
+  1. **The money.** The buyout money has to earn at least the Treasury rate after all losses and costs, including the advisers' budget, the appraisals and the track's share of running the bank. Its losses can't be clearly higher than the loss rate the bank publishes before its first buyout loan ([below](#who-buyouts-are-compared-against)). Deals the bank made alone count, and so do loans restructured to keep them alive, under the same rules as the startup test ([Keeping zombies alive](pilot-safeguards.md#keeping-zombies-alive)).
+  2. **The pay.** The test follows everyone who was on the payroll at the sale, members or not, whether their firm is still open or not. Their median pay per hour, after inflation, can't have fallen below what it was over the last two audited years before the sale. Workers whose firm closed count at what linked government wage records show they earn now, and as below the line where no record can be found. A track that gets repaid by cutting pay, or by letting the lowest-paid go, hasn't passed.
 
   The two tracks pass or fail on their own. A good buyout record can't rescue a failing startup test, and a bad one can't sink a passing one.
 
-If the bank's share of a typical deal is about $1.5 million, half the limit, $100 million funds roughly 60 to 70 buyouts. That's too few for the tight survival comparison the startup test uses. So survival is published and compared, but as evidence, not as a pass-or-fail line. The comparisons are with similar businesses bought by conventional owners using government-backed small-business loans, and with ESOP buyouts, which federal pension filings make it possible to follow. The terms of every deal are published: the price, the appraisals, the loans and the seller's share.
+If the bank's share of a typical deal is about $1.5 million, half the limit, $100 million funds roughly 60 to 70 buyouts. That's too few for the tight survival comparison the startup test uses. So survival is published and compared, but as evidence, not as a pass-or-fail line. The terms of every deal are published: the price, the appraisals, the loans and the seller's share.
+
+### Who buyouts are compared against
+
+Three groups of businesses can be followed. None of them makes a clean experiment, so the comparisons describe; they don't prove that worker ownership caused a difference. The reviewer publishes the matching rules, the code and every classification before the first buyout loan, so nobody can pick the comparison after seeing the results.
+
+**1. Businesses bought with government-backed small-business loans.** The SBA publishes every loan in its main program, including the borrower's industry, the loan size and term, the approval year, and whether the loan was paid off or written off. It also marks loans made for a "change of ownership" ([SBA loan data and its field list](https://data.sba.gov/dataset/7a-504-foia)). By this site's count of the SBA file as of June 2026, leaving out cancelled loans, there were about 4,600 to 6,900 a year from 2020 to 2025, and about 13,800 of $1 million or more since 2020.
+
+- **How they're matched.** On industry, approval year, the whole deal's debt (not just the bank's slice) and loan term. A long term usually means the loan bought a building too, and in these buyouts the seller often keeps it. Loans that look like partner buyouts or employee-ownership deals are dropped where they can be spotted.
+- **What's compared.** The share of money written off, at the same loan age on both sides. The SBA reports write-offs before anything is recovered afterward, so the bank's losses are counted the same way.
+- **The loss rate the test uses.** For change-of-ownership loans of $1 million to $5 million approved in 2015 to 2019, about 1.9% of the money lent, and 3.1% of the loans, had been written off by mid-2026. That's a floor, not a final figure. About 39% of those loans were still being repaid, and the SBA publishes nothing about them beyond that, not even whether they're behind. And in 2020 and 2021 the government made 6 to 14 months of payments on these loans for their borrowers ([15 U.S.C. 9011](https://www.law.cornell.edu/uscode/text/15/9011)), which kept some from failing. So the bank's rate comes from a formula the reviewer fixes in advance: the SBA write-off rate in dollars for the same industries, sizes and terms, at the same loan age, adjusted for the pandemic years in a way that's also published. The reviewer's job is to make sure it wasn't set high, since a high rate is the easy one to beat.
+- **Chance.** About 65 loans at a loss rate like that means two or three failures. One more or one fewer moves the rate a lot. So the published rate comes with a margin worked out in advance for how much it could miss by chance alone, and the test fails only if losses land above that margin. That means the test can catch a track that does much worse than SBA lending, but it can't show that buyouts do better. The report says so.
+- **The deals aren't built alike.** The bank's loans come after three audited years of profits, with a checked margin over the payments and a seller who waits to be paid behind the bank. SBA loans often have neither. Lower losses may just show that the screen and the seller's share work, not that worker ownership does, and the report says that too.
+
+**2. Businesses sold to an employee stock ownership plan (ESOP).** An ESOP is a retirement plan that owns company stock for the workers. Each such plan files a yearly return with the Labor Department that marks it as an ESOP, and separately as one that borrowed to buy the stock, gives the company's tax number and industry, and counts the plan's members ([Form 5500 instructions](https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-instructions.pdf)). A plan that ends files a final return.
+
+- **How they're matched.** By industry, state and size, starting from the first year a plan is marked as having borrowed to buy the stock, which is the closest the filings come to the date of the sale. ESOPs are expensive to set up and rare in companies this small, so the reviewer first reports how many matches exist. If there are too few, this comparison is dropped rather than stretched.
+- **What's compared.** Whether the firm is still open after 5 and 10 years, and whether it's still owned by its workers. A plan's member count includes some people who've left, so it's only a rough measure of jobs.
+- **Sales.** A final return doesn't say why the plan ended. The company may have closed, been sold, or merged the plan into another. Coders who don't know which firm is which sort each case using state business records, and every call is published. For survival, a sale counts as neither success nor failure, and then both ways, as in the startup test. For worker ownership, a sale counts as losing it, since that's the usual way ESOP ownership ends and exactly what the lock prevents.
+
+**3. Deals that almost happened.** Owners who applied but whose deals fell through: on the profit test, the payment margin, the appraisal or the workers' vote. They're the closest thing to the same businesses without a buyout. The reviewer follows them through the same records. Where a deal missed a line narrowly, like a vote decided by a few workers, it's close to a coin flip, and the reviewer reports those cases separately.
+
+**Pay and jobs.** Neither public record has pay. The track's pay test uses the co-ops' own payroll and linked government wage records ([The Pilot](pilot-spec.md#what-gets-measured)). The bank applies for access to those records before the first buyout loan. If access is refused, the report says so instead of leaving the comparison out quietly. Pay growth is also compared with pay in the same industry and county from public wage statistics.
+
+**Where the money went.** For each deal, and for the track as a whole, the report adds up 12 years of payments: to the seller, including everything counted as part of the price, interest to the private lender and to the bank, and what members got above their pay before the sale, in wages, profit shares and account balances. Passing the pay test only shows that workers weren't made worse off while they paid for the business. The ledger shows how much they gained, and how much went to the seller and the lenders.
+
+**What none of this covers.** Most small businesses change hands with no SBA loan and no ESOP, through cash, private loans and seller financing, and those sales leave no public trail. So the comparisons show how buyouts do against two kinds of financed sale and against deals that fell through, not against every sale.
 
 **Expect opposition.** Business brokers and private equity funds, who make money when owners sell, may see a public lender as a competitor. Italy's main employers' association got part of its worker-buyout program suspended by the EU ([Has This Been Tried?](precedents.md#italys-co-op-funds-coopfond-and-the-marcora-law)). Keeping the bank at market rates with no tax break is the best defense, because it leaves little to call unfair. The rest is in [Making It Last](durability.md).
 

JoshHeaps.Net/Content/Socialism/index.md

@@ -15,7 +15,7 @@ This model doesn't buy, seize or convert anyone's company. Instead it builds new
 
 - **Workers own their company.** Every member gets one vote. A share of the profits grows with tenure until long-time members split them equally, per hour worked, which is how federal tax law lets co-ops pay tax on it only once. Salaries still exist, and hard jobs still pay more. Part of each year's profit goes into a personal account that pays it back a few years later on a fixed schedule, whether or not you've left, which is designed to keep it outside federal pension law, and part goes into a permanent reserve that keeps the business investing. Members can't drain it through high pay or let the equipment quietly wear out, and big bets get an outside opinion first. An insurance pool the co-ops pay for protects workers' last paychecks and part of their savings if the co-op fails. A fair, fast process deals with members who won't do the work, with protections so it can't be turned on the wrong people. Members are the co-op's employees, so they get the minimum wage, overtime and injury insurance like anyone else. Where the law leaves owners out, of unemployment insurance in some states or of union protection, the co-op's charter fills what it can. Membership comes automatically after a short probation, so co-ops in high-turnover work like home care don't end up run by the few who stay. Where Medicaid requires 80% of home care payments to go to care workers, co-ops meet it from wages alone. Equal shares give members a reason to turn down growth into lower-paying work, so co-ops can grow by starting new co-ops they invest in instead. [Worker Ownership](worker-ownership.md), [Does Sharing the Profit Mean Less Effort?](free-riding.md), [When People Don't Stay Long](high-turnover.md), [Owners Are Still Workers](labor-law.md), [When Growing Means Sharing](growth.md), [Member Capital Accounts](capital-accounts.md), [How a Locked Co-op Is Taxed](taxes.md), [Protecting Members' Savings](savings-guarantee.md) and [Investing for the Long Run](the-long-run.md)
 - **A small public bank lends to worker co-ops.** It charges market rates, so it only succeeds if co-ops can really compete. Its whole job is to be willing to lend to a kind of company other banks won't. Spain, Italy and the US have all tried versions of this, and the pilot is built around what went right and wrong. [The Bank](the-bank.md) and [Has This Been Tried?](precedents.md)
-- **Owners who want to sell to their workers can.** The bank lends for these sales on a separate track, with its own $100 million and its own test. Only healthy firms qualify, there's no new tax break, the price is capped at an independent appraisal, the seller shares the risk, and the whole workforce votes. [When an Owner Wants to Sell to the Workers](buyouts.md)
+- **Owners who want to sell to their workers can.** The bank lends for these sales on a separate track, with its own $100 million and its own test. Only healthy firms qualify, there's no new tax break, the price is capped at an independent appraisal, the seller shares the risk, and the whole workforce votes. Its results are compared with SBA-financed purchases and ESOP sales, and its pay test follows everyone who worked there at the sale. [When an Owner Wants to Sell to the Workers](buyouts.md)
 - **Co-ops funded this way stay co-ops forever.** They can't be sold to conventional owners, and members can't vote to cash out what earlier members built. An independent lock-holder can veto any attempt, including selling the business off piece by piece. If a co-op goes bankrupt, only another co-op can buy it whole, and its workers get a real chance to be that buyer. That needs an amendment to federal bankruptcy law, drafted here. [The Lock](the-lock.md), [When a Locked Co-op Goes Bankrupt](bankruptcy.md)
 - **It runs as an honest experiment.** A one-time $350 million pilot aims to fund about 400 new co-ops. The success measures are published before the first loan. If, after twelve years, co-ops stay open about as well as similar conventional firms while paying their members fairly, and the bank earned at least what Treasury bonds would have, Congress votes on growing it. If not, it shuts down automatically. It's built so that a hostile government can't quietly freeze it or rig the result, though Congress can always repeal it. It also tests, by lottery, whether serious help before launch gets more co-ops started. Part of the loan money is set aside for co-ops in lower-paid work, so the bank can't drift toward only the safest co-ops, and the verdict has to say which kinds of co-ops it covers. The pilot can't show whether co-ops lift pay at other employers. Even after a pass, a sector big enough for that is decades away nationally. So growth comes in capped stages, and that effect gets its own test in a few local markets. [The Test](the-test.md), [The Pilot, in Numbers](pilot-spec.md), [Help Before the First Loan](before-launch.md), [Who the Bank Lends To](who-gets-loans.md), [After a Pass: How Big, How Fast](scale.md) and [Making It Last](durability.md)
 - **Co-ops back each other up.** They pool part of their profits into a shared fund. If one fails, its workers are moved into others instead of being left with nothing. [The Federation](federation.md)

JoshHeaps.Net/Content/Socialism/open-problems.md

@@ -35,7 +35,7 @@ An honest list of what the model hasn't solved yet, most dangerous first.
 
 11. **Federal or state?** *(Mostly answered.)* The test stays federal, because one bank with one plan makes one clean experiment. Any state can copy the bank under the same published rules, reported separately, and a model state law protects the lock ([Making It Last](durability.md#federal-test-state-copies)). Still open: whether a few state lenders sharing one plan would have been the stronger experiment after all, since the most durable public bank in America, North Dakota's, is a state bank.
 
-12. **Voluntary buyouts: in or out?** *(Answered.)* In, on a separate track: $100 million of its own, healthy firms only, a willing seller, no new tax break, a capped price the seller shares the risk on, a vote of the whole workforce, and its own test of money and pay, so it can't flatter the startup result ([When an Owner Wants to Sell to the Workers](buyouts.md)). Still open: whether a price set by the market is fair to workers who pay it out of their own future work, and whether about 60 deals can show more than that the loans get repaid.
+12. **Voluntary buyouts: in or out?** *(Answered.)* In, on a separate track: $100 million of its own, healthy firms only, a willing seller, no new tax break, a capped price the seller shares the risk on, a vote of the whole workforce, and its own test of money and pay, so it can't flatter the startup result ([When an Owner Wants to Sell to the Workers](buyouts.md)). Still open: whether a price set by the market is fair to workers who pay it out of their own future work, and whether about 60 deals can show more than that the loans get repaid. The comparisons are now set out: SBA-financed purchases, ESOP sales and deals that fell through, with a loss rate fixed by formula in advance ([Who buyouts are compared against](buyouts.md#who-buyouts-are-compared-against)). With so few deals, the loss test can catch a track that does much worse than SBA lending, but it can't show that buyouts do better.
 
 13. **Work where people don't stay long.** *(Partly answered.)* In home care, most workers leave within a year or two. Membership is now automatic after a short probation, the buy-in comes out of profit shares rather than pay, and pushing people out before they'd join counts against the co-op ([When People Don't Stay Long](high-turnover.md)). Still open: with a five-to-ten-year profit share ramp, only a small minority of care workers ever reach a full share, so the people who stay collect much of the profit the others helped make. A much shorter ramp for low-margin, high-turnover co-ops would fix that, but it would go against the founding plan's range and weaken the ramp's protection against under-hiring. Also open: whether default members take part in governance, and whether Social Security counts a profit share as earned income for SSI, which decides whether members on SSI lose more by joining. SSI may also count an account credit as income when it's made. Until Social Security answers, members on SSI get their share all in cash and join only if they say yes ([How a Locked Co-op Is Taxed](taxes.md#benefits)), and workers who have only an IRS taxpayer number still can't be members. How labor law treats worker-owners now has its own page ([Owners Are Still Workers](labor-law.md)). Federal labor law probably doesn't protect members' own organizing, so the charter does, and fixing the law takes a separate bill that may never pass. Some states leave members out of unemployment insurance, and whether founders' unpaid work before the co-op forms is outside wage law still needs the Labor Department's answer. A federal rule due in 2030 requires 80% of certain Medicaid home care payments to go to care workers' pay. Co-ops meet it from wages alone and pay any shortfall as wages, but in that work it leaves little room for profit shares or a reserve, and whether the rule survives is unknown ([When Medicaid decides how much goes to pay](high-turnover.md#when-medicaid-decides-how-much-goes-to-pay)).