Posted on 08/08/2013 12:01:16 PM PDT by SeekAndFind
Think Motown is the only major U.S. city in a boatload of financial trouble? Think again.
Detroit's bankruptcy filing sent shivers down the spine of municipal bondholders, government employees, and big-city urban residents all over the country.
That's because many of the 61 largest U.S. cities are plagued with the same kinds of retirement legacy costs that sent Detroit into Chapter 9 bankruptcy this summer.
These cities have amassed $118 billion in unfunded healthcare liabilities. These are legal promises to pay healthcare benefits to municipal workers beyond the employee contributions to finance those funds. This is a giant fiscal sink hole — and because of defined benefit plans, the hole keeps getting deeper.
Detroit may be the largest city in American history to go bankrupt, but it is not alone. The city raced to the financial insolvency finish line before anyone else in its class.
Keep an eye on "too big to fail" cities like Chicago, Philadelphia, and New York.
During a speech yesterday in Brooklyn, New York City Mayor Michael Bloomberg reminded constituents that tough decisions facing the nation's largest city are serious and that it isn't out of the question for New York to go the way of Detroit unless something is done to fix big financial problems. Simply raising taxes isn't a sane solution due to New York City residents already paying some of the highest taxes in the country.
Bloomberg isn't right on much, but he's right on this. Naturally, the teacher's unions aren't impressed with talk of cutbacks despite new reports showing test scores for students in math and reading have plummeted.“Avoiding the hard choices is how Detroit went bankrupt,” the mayor declared in a speech in Brooklyn.
With less than five months left in his term, Bloomberg hailed the city’s diverse revenue base while cautioning that the contracts the next mayor signs with municipal unions could determine the city’s fate for the near future.
The mayor reminded his audience that Chicago laid off 2,100 teachers and school employees last month, in large part because of soaring pension costs.
Chicago is far from alone. Cities across the country all face the prospect of pension costs swallowing more and more of their budget, and New York is no exception,” the mayor said.
“Anyone who thinks it can’t happen here needs only to look at the late 1970s when the city laid off more than 10,000 teachers and thousands of police officers, firefighters, sanitation workers, hospital workers and other city employees.”
Bloomberg went on to slam the health-care freebies city workers enjoy and even praised his sometimes-foe, Gov. Cuomo, for demanding and winning concessions from state workers.
“About 95 percent of our employees and retirees contribute nothing — not even a dollar — to their basic health-care premiums. Compare that to state government, where more than 90 percent of workers contribute to their premiums,” the mayor said.
City results on state math and reading tests plummeted last year – confirming warnings that testing kids on tougher educational standards would shock the school systems from New York to Buffalo.Bloomberg has just five months left as New York's mayor. Whoever is elected to replace him has some big decisions to make.
Fewer than 30 percent of public school kids in grades 3 to 8 passed the state math exams last year, while roughly 26 percent passed the exams in reading, according to the Wall Street Journal.
Josh Barro makes the following observation in the Business Insider:
New York has the highest taxes in the U.S., providing very generous pension and health care benefits to public workers that now consume 1/5 of the city’s budget, with a vast social services apparatus that in most other places would be left to the state government to manage.
And that all works because Wall Street is a money machine. Bankers make way more money here than they could make if they moved their businesses elsewhere, and they love living here, so they will put up with high taxes, high rents, and all the other aspects of New York that make life here expensive.
And they really do pay the city’s bills. In 2008, 44% of wages earned in New York City went to people working in the finance and insurance sector; even in the depth of the financial crisis, that share only declined to 37%. Those figures actually understate finance’s importance to the city’s tax base — after all, who’s hiring high-paid lawyers and going out to fancy restaurants and buying apartments in luxury towers that construction workers build? Bankers.
In fact, these huge salaries and profits are what saved New York from its last great fiscal crisis, which we experienced when, like in Detroit, our economic and population base shrank to a point where they could no longer support the city’s financial commitments.
Bloombutt did nothing to curtail the tailspin in his tenure as mayor. He was too busy with other things way less critical.
He’s right. And if New Yorkers elect the Wiener or the carpet muncher - - they SHOULD have the same fate as Detroit.
Well the solution is simple.
What they need is many, many more government programs to fix this matter.
And a little weaner in charge
We could tow NYC out to sea, start an Islamic revolution, and the revolutionaries could receive foreign military aid.
Problem solved.
To much time for midget man spent or soda sizes, running around the country promoting gun control than doing the job he was elected to do by his New York voters better know as bloomy’s sock puppets.
Tell Bloomberg to just relax, take it easy, have a Big Gulp, and have faith that the Federal government will take care of all the problems there.
So let’s at least consider fracking. Ya think??
Heh heh heh...couldn't happen to a better bunch of dirtholes.
With one exception, every out going mayor for decades has said this same thing as their time dwindled down. The one exception was Rudy who had other things on his mind at the time.
“Bloomberg has just five months left as New York’s mayor. Whoever is elected to replace him has some big decisions to make.”
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Yeah, like passing the 22nd Amendment...
Das VidanYah...
This is a filament, an extension, of a way, way bigger problem.
The public employee pension timebomb!
Bernanke is gonna have to crank up those presses into super-overdrive.
What is going to happen when people are forced to default and abandon their property because they simply can’t afford the taxes, most of which by that time are not providing services but are going into the pockets of some retired teacher or whatever?
Just for the record, Gerald Ford NEVER SAID THOSE WORDS.
He and Marie Antoniette have been two of the most misquoted figures in history.
In fact, Only two months after saying or meaning or merely implying “drop dead” — or, perhaps, resorting to tough love by holding the city’s feet to the fire — Ford signed legislation to provide federal loans to the city, which were repaid with interest.
The Nannie Bllomberge sure likes controlling what other people do.The most important things he should be trying to control is spending in New York City.
New York was bailed out once.If they go belly up its should be all on the city.Their leadership created the mess.They should be held accountable to clean it up.
Of course it could happen to NYC. The city is run by crooks and left wing wackos like Bloomberg.
Tabloid headlines are designed to catch your eye and make you buy the newspaper so I’ve never had a problem with that particular headline. Of course, much like the satire articles here that people go ballistic over without noticing the satire alert, many NYers didn’t bother to read past the headline and believed those were Ford’s actual words.
I believe New York is still repaying those loans from Ford.
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