Skip to comments.Fourth California Bankruptcy Comes Knocking
Posted on 08/15/2012 1:22:13 AM PDT by kevinanchi
Just outside Los Angeles is the City of Compton, home to 93,000 people a city running out of money. As the city treasurer eloquently put it, he has $3.0 million in cash and $5.0 million in bills due in the next month. (Source: Reuters, July 18, 2012.)
If debt restructuring decisions are not made soon, the City of Compton could file for bankruptcy as early as September.
Due to the fact that Compton has a $43.0-million budget deficit hole, it has been unable to secure a line of credit to get it through a difficult period. The reason why it cant secure a line of credit is that the budget for 2012 is forecasting a further budget deficit of $9.0 million!
The city warns that it needs to make critical repairs to its water system in order to bring it up to code and that will add another million dollars to the budget deficit!
The issues plaguing Compton were the same factors that took down the other three cities in California and are threatening to take down many more cities and states across the U.S. as budget deficits grow: falling tax revenues due to a drop in house prices, large pension budget deficits, generous public employee pay, and weak economic growth.
Speaking of the bankrupt California cities, one of themSan Bernardinocan now only provide services to its citizens on a cash basis. (Source: CBS Los Angeles, July 19, 2012.) San Bernardino is asking the State of California to assist, because it may not be able to collect the trash this week. The city is warning residents not to leave the garbage outside for too long or it will become a health issue.
The Federal Reserve is so concerned about the budget deficit situation, it created the State Budget Crisis Task Force to study it.
The study simply confirmed what the states and municipalities have already been saying. Medicaid, the federal-state health-care program for the poor, is eating away a bigger portion of state budget deficits than spending on school education.
The study also highlights the fact that pension costs are overwhelming budget deficits. Another disturbing trend is that, to close budget deficits, cities are cutting their funding of local colleges by a significant percentage. That in turn is increasing tuition costs for the average citizen, which is making it harder for the average person to attend college and so places the U.S. on a precarious path of weak economic growth for the future.
Dear reader, the above is evidence that this issue will continue to take on greater and greater importance, because it does affect the country and its economic growth potential. (See: Madness in Pennsylvania and One More Bankruptcy in California.)
The more pressing problem is that, as the budget deficits get worse, individual states will certainly come knocking on the door of the White House for answers. Does the White House have any solutions to the budget deficits or will money printing be needed to solve the problem? I believe the answer is obvious.
Why not, Compton’s been morally bankrupt for decades. Chock full of rappers and gangbangers.
Bring on the bulldozers.
Isn’t this the city that hired $100,000 meter maids?
Straight out of compton yo
Compton, CA = what a shocker. /s
I think it’s now considered “demeaning” to call them meter maids.. I believe they are called “Parking Enforcement Engineers.”. :)
There are 10 parking enforcement employees for the 1.3-square-mile beach city southwest of downtown Los Angeles, and they pull down some disproportionate compensation, considering their job functions. In fact, the two highest-earning employees for fiscal year 2011-12 are estimated to have made more than $92,000 and $93,000, respectively, according to city documents provided by Patrick Kit Bobko, one of five council members and who also serves as mayor pro tem. Those two have supervisory roles. The other eight parking-enforcement employees make from $67,367 to $84,267 in total compensation.
Bobko also wrote in a memo that the retirement costs for these 10 employees from [fiscal year 2011-12] through their retirement age at 62 was nearly $1.6 million, and the medical costs for these employees from this fiscal year to their retirement at age 62 would be $1,353,827. Excluding salaries, the [retirement] contributions and medical costs for the 10 employees performing parking enforcement will cost, on average, nearly $300,000 apiece.
Romney/ Ryan need to pound this and pound this.
any question they are asked during the debates need to be brought back to the economy.
And illegal immigrants consume how much of the limited resources?
A $43,000 DEFICIT for 93,000 population works out to about $500 per person, or $2,000 for a typical family of four. City budgets don’t include schools. I’m not aware of many cities that would have a total budget of $2,000 per family, much less a budget so large that the deficit, alone, is $2,000 per family. How stupid are these people?
$43 million DEFICIT, that is.
No white people to tax that can pay for stuff in Compton...
Gotta tax whitey somehow... Tax the suburbs!
Shhhh. You are revealing the Obama strategy for the next term.
CA revenues are behind forecast and they just voted a new business tax law that will encourage companies to move people and facilities out of CA. The state is running short of cash..now. One can declare bankruptcy and seek protection..or one can go bankrupt by running out of money and have creditors refuse to supply or take you to court. CA will probably do the later.
I find it interesting that no one has mentioned the domino effect yet.
When a city goes bankrupt the people who underwrite and buy municipal bonds take notice. When multiple cities in the same state go bankrupt the people who underwrite and buy municipal bonds leave. When that happens where do other cities who are in financial crises go to get money to survive on?
California is rapidly coming to the end of the road. Too bad because it was a great state.
My only question is: If California was always the lead state in trends how long will it be for this trend to spread back East?
So, you create another state entity, with a new budget, to "study" a budget deficit. After a year of spending, they submit a paper that will be ignored. No wonder they're in trouble.
I watched Ron Paul lecture Ben Bernanke as Bernanke testified in front of the Senate Banking Committee.It was classic Paul at work. His question to the Fed Chairman (paraphrased): To help the economy, when will the Fed stop printing money out of thin air (because it hasnt helped) and look at another way to improve the economy? From what I could understand, Bernanke was putting the blame back on Congress, saying Congress gave the Fed the power to print money. In Bernankes words, Congress is in charge here, not the Federal Reserve. During his testimony, Bernanke said if Congress doesnt get its act together on the budget crisis and the fiscal cliff, it would probably knock the recovery back into a recession and cost a lot of jobs
Lets face the facts, No major changes will happen at the government in respect to the Bush-era tax cuts or the budget crisis until the November election. By that time, the U.S. will likely already be back in a recession. Too late, again.
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