Posted on 09/13/2008 2:31:09 PM PDT by Lorianne
VALLEJO, Calif. -- Mayor Osby Davis, who has lived in this waterfront city across San Pablo Bay from San Francisco for 60 of his 62 years, says: "If you have a can that's leaking two ounces a minute and you put an ounce a minute in it, it's going to get empty." He is describing his city's coffers.
Joseph Tanner, who became city manager after this municipality of 120,000 souls was mismanaged to the brink of bankruptcy, stands at a whiteboard to explain the simple arithmetic that has pushed Vallejo over the brink. Its crisis -- a cash flow insufficient to cover contractual obligations -- came about because (to use fiscal 2007 figures) each of the 100 firefighters paid $230 a month in union dues and each of the 140 police officers paid $254 a month, giving their unions enormous sums to purchase a compliant city council.
(Excerpt) Read more at washingtonpost.com ...
Get ready for your property taxes to go up. (Not to mention your income taxes to pay for the housing scam).
This could be a big problem across the board.
Darn, that public school math is soooo challenging!
Unlimited sick pay cash-in at retirement. 90% base pay for the rest of your life. Full medical for the rest of your life. Unlimited vacation pay at retirement. Some collected $300,000 cash payments and then retired. Where else can you do this with only a high school education or less?
Bankruptcy is the only solution in the long. In most state laws, a budget crisis can put everything on the table. The public employee unions and their rat supporters have vehemently opposed reasonable reforms.
The heart of the problem is the large subsidies for early retirement in public employee pensions. The typical public employee in many states retires at age 57 with 75% replacement income, inflation protection, and subsidized early retiree medical care. This level of benefits is a huge subsidy effectively providing an average of $500,000 of additional income at retirement time.
The public employee pension industry is a big part of the problem. This industry has convinced gullible legislators that public employee funds can provide a 8 to 8.5% discount rate at retirement. In contrast, the private sector is paying 5 to 5.5% discount rate on single premium insurance annuity products. If the public employee pension industry was privatized, it would collapse within a year unless subsidies for early retirement were ended.
The solution is going to be somewhat more complex than simply raising property taxes.
Somewhere out there is an economist who believes that inflation will make this go away. What he will prescribe is to entitle everyone with wages that are sufficient to fill that city treasury with enough taxes at the present rate so as not to enrage the taxpayers.
When the currency is sufficiently inflated, those who are sucking at the public teat will be encouraged to take a lump sum payment instead of monthly retirement checks.
At that time, the powers that be will feel safe in deflating the fiat currency and values will return to something more like that when we were on the gold standard.
Maybe that's why they declared bankruptcy. California towns don't have control over property taxes courtesy of Proposition 13.
One of the nations top financial planners that is always on the “Worth 270” list who is “Fee-Only” advises his clients to stay away from Muni’s because of this liability and potential for default.
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