Posted on 02/07/2018 8:23:14 AM PST by SeekAndFind
America's states and municipalities should be awash in good budget news. Unemployment remains below 5%, inflation is tame, and the stock market rose more than 20% in 2017 — the ninth year of a bull market. Yet many local governments faced intense struggles last year to balance their books.
Localities have confronted unrelenting fiscal pressure since 2008, a result of the weakest recovery since World War II of tax revenues combined with ever-escalating costs. Many states and localities have had to rewrite budget books in ways that leave taxpayers paying more — and receiving less.
"U.S. states have entered a new era characterized by chronic budget stress," the financial analyst Gabriel Petek, a managing director in the U.S. Public Finance group at S&P Global Ratings, wrote last April.
President Trump has promised $1 trillion in infrastructure spending that could provide some help to localities, but what governments across the country really need is a return to economic growth rates of 3% or higher.
Tax reform passed in December looks like it will help but states and cities will also need to become more efficient and innovative in delivering basic services, or else face a future of tax hikes and service cuts to keep up with their mounting bills.
Local governments got a sense that something might be different starting in 2009, when state tax revenues, hammered by the steep recession, collapsed by nearly 9% — only the second time in the postwar era that state revenues had declined from one year to the next.
Then revenues slumped again in 2010, by 4% this time, leaving governments tens of billions of dollars short of where they'd been just two years earlier.
It took states until 2016 to regain everything that they had lost in the recession, on an inflation-adjusted basis.
(Excerpt) Read more at investors.com ...
This is the result of decades of politicians buying votes with extravagant promises of future rewards, all under the assumption that they will be long gone went the bill comes due. Well, that day is here.
America’s leftist, statist, SJW politics, and government (and academia) are all supported on a tidal wave of cheap, printed money, and massive debt, courtesy of the Federal Reserve. Its why the Fed is the foundation of progressive, leftist government.
It will be very rough and painful, but bankruptcy of states and municipalities is necessary and in itself will reform our politics more than any President or Congress may muster.
I’m with circlecity. Governments should not promise pensions. They are ruining cities, states, etc. And We the Taxpayers are funding government employees’ retirements instead of our own. Not good. Not feasible.
Seems to me that I have heard all of this before.
The easy solution is for Congress to allow insolvent pension funds to convert from defined benefit pensions to 401k style systems where employees and retirees receive only what has been paid into the fund on their behalf.
Yep. The politicians know they can promise anything and be rewarded with generous campaign contributions and support from the government workers unions. Since it isn't the politician who will actually pay it, they are willing to offer the unions the world. The unions know if they return a small piece of this largess back to the politicians then the money will keep coming. Nowhere in the "labor negotiation" is there anyone representing the interests of the people who are actually expected to pay for all this. Therer's a hard rain gonna fall.
This is a good read and pretty insightful. Thanks for posting.
Or the municipalities can file bankruptcy like Detroit did.
Retired Detroit cops and firefighters took it up the shorts on their pension. But the stone had no more blood to give.
We need to eliminate all pensions, at least for all new hires. Have them get 401Ks like the rest of us.
For those with pensions, have the bankruptcy judge reset the pensions according to base pay, NOT the inflated-by-overtime “final year pay” that many “connected” insiders retire according to.
“Inflation adjusted” hides reality. My town is in the midst of a budget crisis. We are subject, thankfully, to a ceiling on increases in local property taxes of 2.5%. The town’s share of the school budget this year has increased by 10%! Adjusting these numbers for inflation does not make sense because I pay with real, post inflation tax dollars. So for the nearly 30% of the Town receiving Social Security, you compare that 10% to the 2% increase in Social Security for 2018. It cannot go on. Our School Committee essentially got played by the Teachers’ Union when they signed the last 3 year contract. The contract includes both step increases and COL increases which combined means an 8% year over year increase! Tax payers do not stand a chance.
Wouldn’t it be better to convert the pensions to 401k than to simply dismiss the obligations in court?
This should not be an “existential” threat. It should just be a threat to those municipalities and the employees and retirees thereof. The rest of us should just stand aside and let them deal with it.
Some “backward” and old-fashioned states like Oklahoma actually have their state pension fund more than 95% funded, which in realistic terms means fully funded. Of course, these retirement plans don’t pay out the amazing sums promised in California and Illinois and New Jersey, but at least they are solvent. State employees, retirees, and the independent tax-paying citizens get a square transparent deal.
We see federal income tax and state income tax and county property tax.
The Democrats see money.
They view it as a whole.
If they lose federal control, then they go harder at state and county.
Taxes are an organic whole to them.
>>For those with pensions, have the bankruptcy judge reset the pensions according to base pay, NOT the inflated-by-overtime “final year pay” that many “connected” insiders retire according to.
My municipal pension is based on highest 3 of the last 5 years of Base Pay. I pay in 10% of my base salary to fund it.
NO FEDERAL BAILOUTS!!!!
These ponzi schemes MUST be resolved at the State and Local level.
Hey Jerry!!!
Cancel the train!
You can’t afford it!
Thank God I have a federal pension, which is protected — unlike state and municipal pensions.
This is all very true
I live here in California and they will never be able to pay what they promise.
unions own them on the state lock stock and barrel
Same with Chicago. He and pretty much any other major city it’s been run by democrats for 50 years
The biggest question is : is money itself real or not?
i’m going to argue that it is not
Democrats bought the votes with ‘other people’s money’... just like the crap done in Venezuela - - and these States can just go under like Venezuela’s gonna do... NEVER bail them out... NEVER.
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