Today, we will focus on the horrible government economics of government entities around the country, the horror created by short sighted, greedy, and corrupt members of the American political class. Apparently, bad financial management is not unique to Detroit politicians. While reviewing the following list of impending government disasters, keep in mind that some politicians in government want to send money to Detroit to bail it out of its incompetence.
This would be a very bad idea since Detroit is highly unlikely to be the only victim of its' politicians. Would all of these other impending disasters also be given bailout relief from other taxpayers? And if not, who would decide what government entities are rescued, at least temporarily, and which ones would be allowed to die off.
Kind of like what the Federal government and Washington politicians did during the Great Recession, arbitrarily deciding which banks died (Lehman Brothers, Bear Sterns, etc.) and which lived (Citi Bank, Bank Of America, etc.), usually basing their decisions on how much campaign funding each banking entity gave them in the previous election.
So, let’s get started. Most informed Americans now know that political incompetence, economic ignorance, and widespread political corruption have led Detroit to declare bankruptcy when it reached the obvious conclusion that it had neither the assets or tax revenue stream to resolve the debt, economic, and cultural hole the local politicians had dug for the city.
But Detroit was neither the first major city to declare municipal bankruptcy (e.g. Stockton, California had already declared bankruptcy) or, according to an article from the Washington Examiner, the last. The article reviewed the work of Moody's Investors Service, a major bond-rating agency, which recently issued a report identifying 9 mostly famous and large sized American cities that are in trouble from a of credit-worthiness perspective.
In general, the most dire, underlying problem affecting the financial viability of these cities is their underfunded and over promised pension liabilities for retired city employees. Moody‘s pointed out in their analysis that many of these cities‘ pension liability calculations may be severely deficient and are reporting pension funding levels that are not correct
"The purpose of the [analysis] adjustments is to provide greater transparency and comparability in pension liability measures for use in credit analysis," said Timothy Blake, a Moody's managing director.
The article makes sure to point out that the following cities are not facing immediate danger of going into bankruptcy. However, the Moody’s analysis should be a danger sign for the following cities’ voters and citizens because they are the ones that are going to get hit with the consequences of any bankruptcy fallout.
Highlights of the Moody’s analysis singles out the following nine American cities as being on shaky economic and pension funding grounds, all the result of political class greed and incompetence:
Chicago
- Moody's downgraded The Windy City's credit rating by three notches in mid-July.
- The primary reason for the downgrade is the $19 billion in unfunded pension debt.
- In an ominous sign, the Chicago mayor, Rahm Emanuel, has told Chicago city employees that they should sign up for Obama Care’s health insurance exchanges, with the implication being that the city will try to find a way to dump the health care insurance of the city’ employees onto the Federal government and Federal taxpayer to save money.
- As proof of this likely need, the article cites a Pew study that reports Chicago's retiree health benefits are exactly 0% funded. In other words, not a single dollar has been set aside in savings against a future $1 billion health care insurance liability.
- Since Illinois is facing a $97 billion unfunded pension liability of its own, it is highly unlikely that the state government is going to bailout the city of Chicago.
Portland, Oregon
- Moody's has found a slew of economic problems in Portland since it is reviewing the city's credit rating for its general obligation bonds, tax obligation bonds, housing bonds and redevelopment bonds.
- The article quotes another Pew analysis that shows Portland "had virtually no assets" to offset unfunded liabilities of $2.3 billion just for its pension and disability plan for police and firefighters.
- In other words, the city is paying for the retirement costs of those uniformed employees on a pay-as-you-go basis, meaning its politicians have not been able or willing to stow away funding in past years for future retirement needs of these city employees.
Omaha, Nebraska
- Omaha has managed to ring up more than $1.4 billion in pension liabilities and it has only enough cash saved to pay about 43% of those costs, according to Pew.
Minneapolis, Minnesota
- Minneapolis could be facing a credit downgrade from Moody's in the near future.
- The city has more than $700 million in unfunded pension liabilities, causing Moody’s to take another look at the city‘s financials and general obligation debt
Cincinnati, Ohio
- Moody's recently downgraded Cincinnati, as a follow up to when its analysis placed the city on the list of possible downgrades back in April.
- Not surprisingly, Moody’s cited pension debt as the main reason for dropping the credit rating for Cincinnati's bonds.
- "The outlook on the city of Cincinnati is negative, reflecting our expectation that the city will continue to face budgetary pressure stemming from required pension contributions to the City Retirement System and potential long-term pressure from its exposure to statewide, multi-employer, cost-sharing pension plans," Moody's wrote.
- The city's unfunded pension liability tops $700 million.
Providence, R.I.
- Although not facing an immediate downgrade from Moody’s, according to the article, the city has one of the worst-funded pension systems of any major city in the U.S.
- Its pension funding ratio, the percentage of pension debt versus current assets to pay those debts, of 42%, makes Providence's pension mess even worse than Chicago's.
- The city may have recognized that its financials are in bad shape since 1) it recently suspended annual cost-of-living adjustments for city employee retirees and 2) now requires all former workers older than 65 to switch to Medicare instead of receiving health benefits from the city. Thus, much like Chicago, the city is looking for ways to dump its municipal costs onto the Federal government taxpayer.
Trenton, N.J.
- Moody's is currently reviewing general obligation bonds issued by Trenton's public school system.
- A downgrade on those school bonds would follow in the footsteps of a citywide ratings downgrade that hit in 2011.
- Much like Chicago, Trenton may not be able to get help from other government entities since the home county of Trenton, Mercer County, had its credit rating knocked down a notch by Moody's earlier in 2013.
Santa Fe, New Mexico
- In putting Santa Fe "on notice" a few months ago, Moody's noted the severity of the city's pension problems. Moody's ranked the city of Santa Fe as the worst in the country, saying it has net pension liabilities equal to six times its operating revenue.
- Moody's is also reviewing two other cities in New Mexico and the credit rating for Santa Fe County.
Charleston, W.Va.
- Like Providence, Charleston is another state capital that made the articles top nine list of infamy despite not attracting direct scrutiny from Moody's -- right now.
- The reason the city made this list is that Charleston has the worst-funded pension system of any major city in the United States, possessing only 24% of the necessary funds to cover its $337 million in pension debt.
- Like Chicago and Trenton, Charleston won't be able to look to other levels of government for help. Its home state of West Virginia is dealing with its own pension crisis with only Illinois having a worst funded ratio of its state pension plans.
Sad, sad, sad. Short term thinking politicians have been making silly and financially dangerous concessions to city unions over the decades to ensure that they have union support when election time rolls around. Now, those checks and promises are coming due and the resources and tax streams are nowhere to be found.
Tomorrow, we will look at even more political class insanity in this area where we review other government entities in detail that are likely to pull a “Detroit” in the next few years. They cannot all be bailed out by the Federal government and Federal taxpayer, there are just too many cases of political promises run amok. And whenever that happens, it is the average taxpaying citizens that get screwed, not the culprits at city hall, in the state house, and in Washington.
Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:
www.loathemygovernment.com
It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.
Please visit the following sites for freedom:
Term Limits Now: http://www.howmuchworsecoulditget.com
http://www.reason.com
http://www.cato.org
http://www.robertringer.com/
http://www.youtube.com/watch?v=08j0sYUOb5w
No comments:
Post a Comment