American States & Cities Broke.

[pangea]

Our first stop today, Cincinnati:

To keep pace with projected expenses, the city's $26.4 million contribution to the pension fund this year would need to rise to $84 million in 2010 - a scenario that council members and other city leaders concede is unrealistic.

That's just the pension. Lets see how the general budget situation is:

With the city facing a 2010 budget deficit estimated at $51.5 million...

By 2018, the city would need to devote 49 percent of its payroll, or $102.4 million, to the retirement fund to maintain the status quo.

http://news.cincinnati.com/article/2...0108/910020352


How about Massachusetts? They raised taxes 25%, raised meal taxes, started taxing new things.

State tax revenues are on pace to fall as much as $200 million below projections this month, signaling a disappointing year in tax collections that could trigger new rounds of emergency budget cuts, preliminary figures show.

http://www.boston.com/news/local/mas...han_projected/

And:

http://www.masslive.com/chicopeeholy...580.xml&coll=1


San Diego needs just $179M.

http://www3.signonsandiego.com/stori...&zIndex=175560

SAN DIEGO — The city of San Diego faces a $179-million budget deficit next year, a gap that will almost certainly lead to layoffs and cuts to core services such as police, fire, parks and libraries.

Oregon?

Oregon schools and governments are confronting a big increase in pension costs because of last year's meltdown in the financial markets.
The Public Employees Retirement System fund lost 27 percent of its value last year. The losses mean that the funded status of the system — the percentage of liabilities covered by the system's assets — declined from 98 percent at the end of 2007 to 71 percent at the end of 2008

http://www.kgw.com/sharedcontent/APS...D9B2GBO81.html

Pittsburgh's just short a Billion. Pension's 29% funded.

the city struggles with a shortfall of almost $1 billion for pension and bond obligations

http://www.bloomberg.com/apps/news?p...d=aUY90NWSaEXQ


Now somewhere in Northern Ohio:

The city is already about $1.5 million in the red. If the city can't make enough cuts to cover the general fund debt and its supplements, it could increase to about $2.1 million.

http://www.morningjournal.com/articl.../mj1697593.txt

Detroit, no surprise here.

As the city faces a $300-million accumulated budget deficit and up to an $80-million cash shortfall, Mayor Dave Bing said he is examining ways to cut costs, including limits on who receives vehicle stipends.

http://www.freep.com/article/2009100...top-appointees


New Albany

The state’s Department of Local Government Finance ordered the city last week to reduce its 2009 general fund budget by $4.8 million -- from $15.3 million to $10.5 million.

http://www.courier-journal.com/artic...+for+Wednesday

Hawaii?

The state had thought it finished fiscal year 2009 with $8 million, but the mistake means that the general fund finished the year $36.8 million in the red.
The state is facing a $786 million budget shortfall through this fiscal year and next. The latest number brings the total shortfall to $822.8 million.

http://pacific.bizjournals.com/pacif...8/daily41.html

New Mexico?

Based on a financial report prepared in August, revenues are projected to be almost $114 million below spending in 2009 and the state would need to offset that by tapping into the reserves.

Some lawmakers expect this year's revenue outlook to worsen because of the lingering recession in New Mexico, causing the deficit to swell to more than $500 million.

http://www.alamogordonews.com/ci_13441457


Sure, the unemployment and foreclosure numbers should start to stabilize with budget numbers like these. Right. All is well.

DOW 10,000 here we come!

[Raz]

Re: American States & Cities Broke.

Don't be such a naysayer, pangea. Uncle Ben Bernanke has $TRILLIONS and will print up whatever America needs!
Happy days are here again!

It's people like you with their "negative waves" that cause Depressions - have a little faith, baby; have a little faith.
(Thanks to "Oddball" from Kelly's Heroes.)

[Slimprofits]

Re: American States & Cities Broke.

The Massachusetts Taxpayers Foundation is estimating a state budget deficit of nearly $2.8 billion for 2011 with remaining state and federal reserves down to $1.3 billion.

And as for the cities and towns:

The recent large decline in pension assets will require an estimated 30–50 percent increase in annual pension appropriations for most cities and towns beginning in fiscal 2011 or 2012

http://www.masstaxpayers.org/files/mass_fiscal.pdf

[pangea]

Re: American States & Cities Broke.

Maybe this is what the fed is working on? Watch the video. Really, what's the difference?

http://wbztv.com/video/?id=81768@wbz.dayport.com

http://wbztv.com/local/fake.money.co...2.1222640.html

[Rajiv]

Re: American States & Cities Broke.

However, North Dakota continues to run a surplus, and reduces taxes acroos the board!

From the St.Paul Legal ledger

North Dakota sits with its $1.2 billion budget surplus

From the Boston Globe:

the 2009 Legislature's across-the-board reduction of state income tax rates, which lowered the top individual income tax rate from 5.54 percent to 4.86 percent, and the lowest rate from 2.1 percent to 1.84 percent of state taxable income.

It did not take into account the Legislature's corporate tax changes, which reduced North Dakota's number of corporate tax brackets from five to three, cut the top tax rate from 6.5 percent to 6.4 percent, and applied the top rate to income greater than $50,000. Previously, the maximum tax rate was assessed against corporate income greater than $30,000.

It should be noted that on the individual income taxes, the tax brackets themselves do not tell the entire story

State taxes are only paid on income greater than $35000. The top rate does not kick in till an income of $350,000. Native Americans (6% of the population) do not pay any state income tax.

So perhaps Ellen Brown is correct in her evaluation.

[GRG55]

Re: American States & Cities Broke.

However, North Dakota continues to run a surplus, and reduces taxes acroos the board!

From the St.Paul Legal ledger



From the Boston Globe:



It should be noted that on the individual income taxes, the tax brackets themselves do not tell the entire story

State taxes are only paid on income greater than $35000. The top rate does not kick in till an income of $350,000. Native Americans (6% of the population) do not pay any state income tax.

So perhaps Ellen Brown is correct in her evaluation.

Perhaps Ellen Brown is correct.

Then again, perhaps the low personal income and corporate taxes, and the State surplus, are due, in part, to the fact that North Dakota now produces approximately 200,000 barrels of oil per day.

This puts North Dakota behind only Texas, Alaska, and California. It also puts it on par with historical producers Oklahoma and Louisiana...the difference being that North Dakota's production is rising quickly while Oklahoma's is flat and Louisiana's is steadily declining.

Here's a link for anyone wanting more data on North Dakota's oil and gas situation.

[Rajiv]

Re: American States & Cities Broke.

Yes, but it has a history of being fiscally sount ever since it revolted against the bankers in 1919, and seems to have had budget surpluses for the last forty years -- as far back as I have gone.

[jimmygu3]

Re: American States & Cities Broke.

Don't be such a naysayer, pangea. Uncle Ben Bernanke has $TRILLIONS and will print up whatever America needs!
Happy days are here again!

It's people like you with their "negative waves" that cause Depressions - have a little faith, baby; have a little faith.
(Thanks to "Oddball" from Kelly's Heroes.)

Seriously, is the Fed openly buying state and muni bonds? Is a "Bernanke put" keeping yields down? Seems like a great way for the Fed to accomplish QE and bail out states at the same time. However if we started to see significant defaults, the game would be off and yields would rise quickly. I'm just speculating, but any info from someone who knows would be appreciated. Thanks.

Jimmy

[GRG55]

Re: American States & Cities Broke.

Yes, but it has a history of being fiscally sount ever since it revolted against the bankers in 1919, and seems to have had budget surpluses for the last forty years -- as far back as I have gone.

I don't disagree. The values and behaviours of the people and politicians of North Dakota are no doubt quite different from, say, California. However there are numerous examples of previously prudent and fiscally sound jurisdictions corrupted by crude.

Forty years ago the Canadian Province of Alberta was much like North Dakota is today. Sparsely populated, small city populations and a consequently significant rural influence over the politics, an attitude of thrift and prudence with its origins in the family farm.

All that started to change as the 1970s oil boom rapidly transformed the province, which became addicted to the gusher of revenues from sharply steepening petroleum taxes and royalties. Within a decade the province had all but abandoned any semblance of a balanced approach to revenues [to this day it is politically impossible to impose any sort of provincial consumption tax in Alberta]. Revenues from petroleum grew to such embarrassing levels that the Province started shovelling some of it into a "Heritage Savings Trust Fund"...ostensibly for the benefit of "future generations of Albertans"...all the while increasing spending like drunken sailors. The so called "Conservative" government of the 1970s celebrated its undeserved "free enterprise" credentials by starting a provincially owned oil and gas company, and then decided to buy an airline [Pacific Western].

Then came the early 1980s Bust [by definition every Boom is followed by a Bust :eek: ]. Expecting the downturn to be "temporary" [it lasted more than 20 years!] the government steadfastly continued to spend. Unwilling to raise taxes, under pressure to provide aid to the now struggling drilling and oil services industry, the government did what was expedient and started raiding the Heritage Fund...future generations be damned. Once reality finally dawned, the Province spent the 1990s gradually cutting its spending, broadened its tax base, reduced its public debt and restored its finances.

Today the Provincial government is led by a farmer. But you won't know it. Neither the government, nor most of the people it leads, learned anything from the previous experience. They have repeated all the same mistakes during the petroleum and resource boom of this decade. The Province is once again mired in record-setting deficits due to an overdependence on deeply cyclical petroleum revenues that the current government, once again, assumed would last forever. What took 20 years to fix was unravelled in one-quarter of the time.

I hope that North Dakota pays attention to what has happened in too many other oil producing jurisdictions, but when I read reports of extremely low income taxes and reduced corporate taxes and so forth, it suggests to me that North Dakota is falling into the same trap of overdependence on rising hydrocarbon production and revenues. If this continues for an extended period of time the attitudes of the people towards thrift and prudence will also likely wane.

Only time will tell.

[Rajiv]

Re: American States & Cities Broke.

Also, 200Kb/day = 73Mb/year, and at $60 per barrel = $4.4B.

How much of that is kept by North Dakotans, how much by the oil industry, and other out of state actors?

I am assuming that no more than 15% of that $7000 per capita stays in the state.

So if they can extract a budget surplus of $ 1.2 B on that with the low tax rate structure they have, Kudos to the brilliant legislators, budget analysts and the like who work for the state. I am sure that these supermen and superwomen would have been sought after by every other state in the US!

From the state budget, O&G revenues amounted to ~3% of the total revenues

[GRG55]

Re: American States & Cities Broke.

Also, 200Kb/day = 73Mb/year, and at $60 per barrel = $4.4B.

How much of that is kept by North Dakotans, how much by the oil industry, and other out of state actors?

I am assuming that no more than 15% of that $7000 per capita stays in the state.

So if they can extract a budget surplus of $ 1.2 B on that with the low tax rate structure they have, Kudos to the brilliant legislators, budget analysts and the like who work for the state. I am sure that these supermen and superwomen would have been sought after by every other state in the US!

Certainly they deserve credit for prudent fiscal management. However, it is not about how much revenue the State is extracting from petroleum today. North Dakota's in the early stages of a potential oil boom.

It's all about whether they can maintain their attitudes towards prudence and thrift, and resist the temptation to become addicted. Unfortunately the global track record of other oil producing jurisdictions is not encouraging in that regard.

[lurker]

Re: American States & Cities Broke.

This report

http://www.masstaxpayers.org/files/mass_fiscal.pdf

indicates that what is killing Massachusetts is mainly Medicaid and public sector pension shortfalls.

Another example of our fubar FIRE based healthcare system sucking the life from the rest of the economy.

[Retired Commish]

Re: American States & Cities Broke.

Great post, Pangea. The public pension shortfall, that many states/cities aren't commenting on yet...will be the noisest problem correction of all. For years, legislatures have hired retired and well connected politicians to run their funds. Never having to eventually answer to the voters, these folks kept adding to the benefits and even adding massive increases to cops and firemen catagories. They obviously thought the profits were going to go on forever so they continued to extrapolate the past into the future. Well, the future is here and it ain't pretty! Nobody has ever (to my knowledge) suggested cutting the value of public pensions...but that's exactly where many of them must go to bring some balance to the new realities we face today. JMO.

[BK]

Re: American States & Cities Broke- Pension math

I have a number of friends who are good people who hope to get their generous Public Pension - someday. How can anyone expect to get 50%-70% of the average of their highest three years of employment (until you die). Where would that money come from?

Imagine you are a teacher and you have 30 years in - lets say you make $79000- the way the game is played is you load up on extra duties.
1. A coach may make $3000-$5000/season
2. Travel to Germany with the school kids - approximately $900-$1000 is added to your annual salary number.
3. Become a Class Advisor - pick up an additional $2,500
4. Become a department head - $10,000

In no time your $79,0000 goes to $90,000 - $100,000-

You can now get a Pension based on $90,000 - $100,000 - bumping your pay for three years with extra tasks (that you are paid for ) can bump your annual Pension by 5-10% for life - Try to pull off that kind of magic - no possible for the private sector chumps!

Sorry - the extra contributions and returns that Public Pension funds will need to support these poorly negotiated Pension obligations would be impossible for John Paulson to pull off.

In Jersey - if you held a State job - many retire and pick up Crossing Guard assignments - because it can bump up your Pension pay out. Does any one remember the good-ole days when children would be School crossing guards - best part they are free! How about bringing back Auxiliary Police Officers - their free too!

[raja]

Re: American States & Cities Broke- Pension math

I have a number of friends who are good people who hope to get their generous Public Pension - someday. How can anyone expect to get 50%-70% of the average of their highest three years of employment (until you die). Where would that money come from?

When pensions fall 50%, hopefully the newly poverty-sticken pensioners will ask, "How did this happen? Who is to blame?" . . . and they will come to the correct answers and vote the government enablers out of office and put the Wall Street gamblers, etc., in jail.

As Obama said in a recent press conference:

"We were on the verge of a complete financial meltdown, and the reason was that Wall Street took extraordinary risks with other people's money. They were peddling loans that they knew could never be repaid. They were flipping those loans and leveraging those loans. Higher and higher mountains of debts were being built on loans that were fundamentally unsound . . . and all of us are now paying the price."