City Journal Summer 2014

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Summer 2014
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Nicole Gelinas
What to Do When You’re Broke « Back to Story

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Upstate NY has no future. It is the rustiest of the rust bowls. Unlike Ohio, Wisconsin and Indiana which are reinventing themselves under anti-union Republican legislatures and governors, NY is mired in the Wagner-Rockefeller-Cuomo model, with closed shops, high labor costs, high taxes, rotten services and employer-hostile unions. Worse, it is governed by Downstate that lives off of Wall Street and could care less about manufacturing. (And if Wall Street should shrink further, look out below!) Upstate is a no-hoper and nothing will change it. Buffalo, Rochester, Syracuse, Utica, Schenectady--all doomed, all future Detroits.
righthere rightnow August 29, 2013 at 1:13 PM
and WHO is it that wants to divert $18-22 billion (with a B) to "hurricane diversion" via four storey, 40 mile balloon??

dare ya. ASK ME for a BETTER idea!

[ start sending the non-disclosures ]
Seemingly smart, educated, rational people keep driving local and state governments towards financial ruin. Besides unions, the private sector conspires with local and state governments to keep spending, borrowing and refunding. The high-rollers spending other peoples money are in abundance. The problems extends beyond naive local officials and unions to a broad array of private sector profiteers. The missing player remains an active citizenry and press. This is a perfect arena for masked neglect and financial ruin.
After reading the article, I dug up the latest report of the Buffalo Fiscal Stability Authority which has been in operation since 2003.

The authority publishes an annual report which would probably take at least a few days to digest, but I managed to find a few references in the 2012 report (through June 30,2012) to an item called "Other Post employment Benefit (OPEB)liability" showing a otal of $3.32 Billion on a GAAP basis ($1.64 for the city operations and $1.68 for the schools).
The 2009 report gap was reported at $2.4 billion ($1.2 each).

That's a $920 million GAAP increase over three years in a city with a total budget of $1.345 billion in 2012.

In a section titled "other considerations" was the following comment:

"OPEB liabilities, estimated at about $1.6 billion for the City, with an annual contribution of $108 million will need consideration going forward. Despite the fact that funding is currently not required,
its impact will start to be felt in the next few years and a course of
action to deal with this issue will need to be contemplated."

It looks to me like your article is spot on... The liability for the non-school portion of the OPEB grew by $440 million in three years while the contributions were (at best) only 75% of that. Even the fiscal control boards can do nothing more than keep kicking that can down the road.





Notice the frequency that the term uniformed service workers( police,firefighters ) appears in discribing out of control payroll, benefits & pensions. Many communities have become financial hostages of the very employees who were supposed to provide protective services to the public. Our fear has overcome our collective good judgement.
It All comes down to 2 things:

(1) Our elected official make decision based on self-interest and the receipt of BRIBES (campaign contributions and election support), and

(2) Public Sector Unions are CANCER on Society and Collective Bargaining with such Unions should end.
CA CHING, CA CHING, CA CHING !!! YEAH, IT MUST BE THAT TIME OF YEAR AGAIN !!! My Union Boss down at the Town Hall emailed me yesterday and
Told me that this article was hitting the Papers today, and He told Me
to make it Look like I was Working till this Blows Over in a week. I
know the routine !!! In a week, I'll be back to my usual activity of
Collecting A Paycheck for Doing Nothing !!! Hey, Private Sector
Workers; You really gotta Pony Up more Taxes !!! I need at least a 10 %
raise !!! My Cabin Cruiser at the Dock behind my Vacation House in
Florida needs a New Engine. My wife has been after me for a new car.
She wants a BMW X6 G-Power Typhoon S !!! I told her I can't afford that
car. So then she says she will accept a Mercedes-Benz CL-Class and
Nothing else !!! I also got Private School Tuition of $ 40,000.00 due
in September. I got Credit Card Expenses coming out my AXX !!! That
new 3000 sq ft extension on my house raised my property taxes $ 15,000.
The maid and the housekeeper want raises. The gardener also wants a
raise. You see Bunky; It ain't easy in the Public Sector !!! So come
on Private Sector Worker; Pony Up and Pay More Taxes so I can afford to
live here !!! You See; Life Is Not Fair, and the DemoRats will take
care of Everything !!! HAPPY DAYS ARE HERE AGAIN !!!
Of course contracts with public sector unions should be cancelled, their pensions readjusted downward, and defined contribution pension plans instituted.

But make no mistake about it. The states, cities, and unions will be begging for a federal bailout.

They hope eventually that the FED will buy their junk obligations. This will spread the pain of paying for the local public-sector excesses across the entire nation ... and future generations.

It would be the height of irresponsibility to that this, but this is what the unions will aim for.
Let's get clear what caused the 1975 New York City budget crisis. Welfare costs were the least of it, despite the obsessive RWNJ insistence on blaming Blacks for everything wrong in America. The total for Social Services came to $3.1-billion of an $11-billion operating budget and close to $1.9-billion in debt service. However, three-quarters of the Social Services money came from state and federal sources, not local taxes. The local increase had run to less than $200-million during the 1970s.

Financial gimmicks simply misstated the balance sheets:

-- Overly optimistic forecasts of revenues
-- Heavy use of revenue anticipation notes, including notes for revenues that did not materialize
-- Underfunding of pensions
-- Use of funds raised for capital expenditures for operating costs
-- Appropriation of illusory fund balances, meaning that special fund revenues were overestimated and used to balance the budget
-- Writing checks late to tweak end-of-period statements

The first unions that got explosive deals were police and firefighters. You will find that pattern all over the country -- Wisconsin recently showed the back side of this distortion where public unions were cut back EXCEPT for the (R)-voting State Police.

In NYC during the 1970s rent control had a measurable impact by reducing property tax collections. Welfare budgets increased as noted, but that was mostly from New York State where Governor Rockefeller was ramping up to run for president.

A Municipal Assistance Corporation tried to raise funds, but ran into 11% interest rates. National interest rates were also sky high -- almost 7% for AAA municipalities.

Eventually this "crisis" was papered over by having the trustees of the city employees' pension funds use the trusts to buy $2.7-billion in MAC and other city securities. Going after pension trusts expanded the effective shortfall that the city had already run up to fund pensions.

Tax giveaways continued unabated. Of course they did. Corporations had learned to extort tax breaks.

And in 1975-1976 some 15,000 teachers were fired with disastrous effects on student performance. Transit fares went up 40%. CUNY went from 129 years of free tuition (beginning with Free Academy in 1847) to a decline that continued until 1999.

But them tax breaks went on stronger and stronger. Overall corporate taxes have declined from 30% of profits in the 1960s to 12% today. But blame the ills of our cities on the public unions, all of it. That's the hoax you're selling, so go with it.
Ca. law prevents the modification of pensions in bankruptcy, but section 903 of the bankruptcy act allows it. It's just that none of the three Ca. cities requested a modification strictly because of political reasons. The pension deficits will swallow all three cities. Detroit has requested modification of pensions per section 903, so we will finally have a decision(and then appeals) about whether section 903 means what it says