I can’t resist the temptation to climb up on the old soap box briefly today. Earlier today there was an article published on Yahoo Finance’s “The Daily Ticker” about municipal bankruptcy declaring that it’s the “tip of the iceberg”.
In the article, Richard Brodsky, senior fellow at Demos.org and former 14-term New York State assemblyman, said "This is the tip of the iceberg for different reasons in different places.”
The article specifically referred to this week’s decision by the City of San Bernardino, CA to seek Chapter 9 bankruptcy protection. “San Bernardino, Calif., is the latest municipality to seek bankruptcy protection for its $45 million budget shortfall, following Mammoth Lakes and Stockton, which was the largest U.S city to ever go bust. Bankruptcy filings by these three California cities have raised questions about the scope of budget issues on the local level and whether there will be more,” the article said.
That’s well and good but many experts, including Brodsky, are predicting even more filings or other maneuvers to escape budget disasters than the cities in California—although California is arguably the most at risk state and its cities the one’s which are also most in peril.
San Bernardino’s woes are shared by cities such as Scranton, PA and North Las Vegas, NV both of which have attempted to take measures other than bankruptcy which is an option not available to municipalities in those states.
According to the article, Brodsky said that years of declining property values after the housing bubble burst have left many cities strapped for cash. “If property values fall, so do revenues collected from property taxes. Additionally, while people do love their services, there's been a growing distaste for increasing tax revenues to pay for those benefits.”
And that’s my point of departure with this expert and others who are out there blaming these municipal failures on traditional “tax and spend” liberals. The fault comes right back to anyone who was in elected positions passing ordinances and laws; setting policy and negotiation labor contracts from the mid-90’s through today.
Around the “turn of the century” I recall seeing and hearing news reports and “experts” addressing the question of “will the real estate bubble burst?” Typically the answer was, “no”. These experts in finance and business were calling for continued double-digit appreciation in real estate for the foreseeable future and beyond. Budgets in government were predicated on it. Bond issues were based on this ever-upward spiral. Public employee retirement programs were banked on it.
And each time I would hear something like that I would cringe. “Hell, yes!” The bubble has to burst. What goes up must come down. Budget for a worst case scenario on income and make expenses match up. I’m a huge believer in budgeting other peoples’ money as conservatively as possible.
Yeah, this is going to be the tip of the iceberg. I wouldn’t be surprised at all if the entire state of California gets brought down by it. Why? Because NO ONE in government, anywhere, thinks to be a good steward of “the people’s money”.
There are far too many public employees who live better than the people they serve. There are far too many who receive much better health care and retirement benefits too. It used to be that public employees made enough (barely) to live on but were assured of health care along with a decent retirement for their years of public service. But public service was construed to be a bit of a sacrifice or trade-off—security after age 50 for 25 or 30 years of service beforehand. Ain’t nothing wrong with that either.
Used to be that infrastructure was planned based on long-term needs. It was added to new developments using “special assessment districts” or in commercial/industrial parks with tax increment finance.
But, the bubble burst. Our days of “sunshine and lollipops” and “everything’s going to be peachy-keen forever” were a fiction—a fiction that only someone intent on fooling themselves would advocate, believe or act favorably upon. And yet governmental units at the city, county and state level all over America have been doing just that for a couple of decades.
But to hear so many tell it, it’s all Obama’s fault. Bull-hockey. It’s our fault. We let it happen. We got too busy living the good life to be involved or to scrutinize what was going on in our city or county. We bought in and drank the kool-aid.
And there’s not going to be too many “do-overs”. Get ready to pull in your horns. And folks, if you want to scream and shout “Save Our Schools”, “Keep Class Size Down”, “Lower the Crime Rate” or whatever make sure you know how you’re damn well going to pay for it first—that better be written in big letters on the other side of your placard.
Because yeah, this is only “the tip of the iceberg”.