More on public pensions and the economy

[Allan from Fallbrook]

[quote=CDMA ENG]Oh Boy… Here we go again…

Piggs… Clear to arm… Clear to fire.

CE[/quote]

CE: Fire in the hole! Grab a beer and some chips and enjoy the (impending) fireworks.

[CA renter]

[quote=no_such_reality]It’s not revenue drops.

San Bernardino’s total revenue is down 11.2% from peak.

That’s all. The property tax drop, sales tax drop, VLF transfer etc, UUT, etc are down a total of about $11 million.

They have not lost half of their property tax base.[/quote]

Yes, it’s revenue drops.

Charts:

http://www.ci.san-bernardino.ca.us/civica/filebank/blobdload.asp?BlobID=10033

Think they’d need to file for BK if their revenues hadn’t dropped so precipitously?

[Allan from Fallbrook]

[quote=briansd1]CA renter, your solutions won’t work. They are all conditional on each other and that’s not how the real world works.

In the real world, you get what you can.

If nothing is done, municipalities will go into bankruptcy one after another. That could be the best solution of all.

The response to the financial crisis is the same. If Congress won’t act, the Federal Reserve must step in.[/quote]

Brian: I’m curious. What would Congress do (if it acted)? And, what would the Fed do (if it acted)?

There is a much larger story here and it will have a catastrophic effect on unions, Big Labor and those city (Chicago, NYC, LA) and state (Illinois, California) “machines” that control votes, dispense patronage and provide significant GOTV muscle for the Democratic Party. You can certainly argue that demographic shifts are going to affect the Republican Party, especially the base, but what’s happening now across the country will have a similar destabilizing effect on the Dems, too.

Hence, the all-out, total war nature of the Scott Walker recall in Wisconsin. Following that loss, public sector unions in Wisconsin began shedding membership in droves: http://www.chieftain.com/business/election-losses-shake-afscme/article_af844dbe-b1df-11e1-8e63-0019bb2963f4.html. Loss of membership means loss of dues and loss of dues means less clout in pushing Dem politicians at the local, state and federal level.

When you consider CTA and CCPOA clout in California, such losses would literally change the calculus in the state, especially when you consider how much money the CTA spends: http://www.arnoldwatch.org/articles/articles_000802.php3, how it encourages teachers to use their classrooms as bully pulpits: http://capoliticalnews.com/2012/05/27/cta-encourages-teachers-to-use-classrooms-to-promote-political-agenda/ and the outsize influence it wields as a result. You wonder why Governor Brown is shit-scared of these people and is unwilling to make any serious changes?

If this influence peddling begins to erode as a result of municipal bankruptcies, changes in CBA and the increasing pisstivity of voters, well, maybe there is hope for this state after all.

[CA renter]

[quote=sdrealtor]”Many cities greatly expanded their budgets for capital projects during the bubble. Many of these projects were unnecessary and over-the-top “monuments” on which politicians could place their names for all to see.”

Do you mean like these?

http://piggington.com/public_sector_porn

“That means any assessment of blame for their predicaments has to expand from such usual suspects as greedy public employees to include banks that flooded these cities with subprime mortgages that were resold into the high-flying securities market.”

You will note that the passage she quoted EXPANDS the blame to include others it does not exonerate the “usual suspects as greedy public employees “.

In the private sector we have a remedy for entities whose expenses (including payroll) are out of line with revenue (no matter what the cause of it)- layoffs, pay cuts, massive restructuring, bankruptcy and whatever is necessary to bring things back into line. Its coming to the public sector soon……[/quote]

Yes, like those. In both of your threads, I specifically stated that I don’t condone ornate “monuments,” buildings, etc.

My beef with you is that you keep trying to imply that boots-on-the-ground workers are somehow responsible for this mess. They had nothing to do with the economic crisis, and nothing to do with the fancy, irresponsibly ornate buildings and monuments going up during the bubbles.

BTW, when he talks about “expanding the blame,” he’s not saying that union members are responsible, just that people need to expand their narrow perspective WRT fault and where the blame lies.

[CA renter]

Allan, you’re making the assumptions that there aren’t *other* vested interests who are behind the attacks against unions. Do you think they’re doing this to be nice? Think it’s about lowering taxes for Joe Sixpack?

I’m all for getting union money out of politics, but ONLY if we get ALL money out of politics. If labor doesn’t have a seat at the table, then neither should capital and other “private” organizations who are trying to take control over public assets and cash flows. THAT is what’s behind the attacks on unions, and not a single “private sector” worker is going to benefit from it.

Ask yourself: Who is responsible for the destruction of our manufacturing base? Who paid to have our tax and trade laws changed so that businesses could off-shore jobs and bring in cheap foreign labor? Was it public sector workers, or corporations/capital?

Again, dismantling the last bastion of labor (and that means ALL workers — public and private) will only make things worse for private sector workers. How will taking away these few remaining decent-paying jobs that are available to the general public benefit ANY working person? I contend that it will harm every single worker in the U.S.

[desmond]

Does it really matter what happened to all the money? No, rarely those responsible for the fiscal fiasco get punished. In reality it will be the workers that will have to take more hits to their pay for the poor business policies of others. btw, pleading with others on this board that your are right won’t matter one f-ing dollar.

[poorgradstudent]

We’ve already seen most governments slash or eliminate pension benefits for new hires. What we’re going to also see as the economy recovers is public employees start to demand salaries that compensate for those lower benefits. Pretty simple economics.

[bearishgurl]

[quote=Allan from Fallbrook][quote=CDMA ENG]Oh Boy… Here we go again…

Piggs… Clear to arm… Clear to fire.

CE[/quote]

CE: Fire in the hole! Grab a beer and some chips and enjoy the (impending) fireworks.[/quote]

I began my 2-cent response this morning but had to take a rain check on it until later this eve. Stay tuned …

Thank you for posting those awesomely informative links, CAR!

;=D

[sdrealtor]

That is utter BS.

I cant remember a single time that I implyed boots-on-the-ground workers were responsible for the mess as I have always maintained its a flawed system. The system is structurally set up for disaster. It allows fraud and abuse without accountability.

I think they do good work and nearly all I of them I have met are good people. What they are doing is exploiting the system that they function in just as any other person does in any other line of work. They are no worse nor are they any better. That is why they should be treated the same and not be a privileged class.

BTW, he’s also not saying the unions arent responsible.

[Aecetia]

So Brian, what do you propose to do with the “privileged class”? What is the solution to the retirees already getting the pensions?

[SK in CV]

[quote=Aecetia]So Brian, what do you propose to do with the “privileged class”? What is the solution to the retirees already getting the pensions?[/quote]

As a practical matter, I’m pretty sure nothing can be done, unless those already getting the pensions are doing so as a result of illegal acts. That is, unless the retirement systems go bankrupt, in which case all pension beneficiaries would probably be treated similarly.

[no_such_reality]

[quote=CA renter][quote=no_such_reality]It’s not revenue drops.

San Bernardino’s total revenue is down 11.2% from peak.

That’s all. The property tax drop, sales tax drop, VLF transfer etc, UUT, etc are down a total of about $11 million.

They have not lost half of their property tax base.[/quote]

Yes, it’s revenue drops.

Charts:

http://www.ci.san-bernardino.ca.us/civica/filebank/blobdload.asp?BlobID=10033

Think they’d need to file for BK if their revenues hadn’t dropped so precipitously?[/quote]

Can’t you read your own links? Total revenues have decreased 11.2%. Chart 45.

Total budget peak $133M, total budget today $118.
http://www.ci.san-bernardino.ca.us/civica/filebank/blobdload.asp?BlobID=13895

Yes, they would BK, they’ve been overspending for years BEFORE the drops.

Read page 3. Then read page 13, then page 14. The charts should clear it up for you.
http://www.ci.san-bernardino.ca.us/civica/filebank/blobdload.asp?BlobID=13760

[bearishgurl]

[quote=no_such_reality]Total budget peak $133M, total budget today $118.
http://www.ci.san-bernardino.ca.us/civica/filebank/blobdload.asp?BlobID=13895

Yes, they would BK, they’ve been overspending for years BEFORE the drops…[/quote]

nsr, I’ve downloaded the current budget and will print it. But I just have one question for you.

WHY do you think SB felt they needed to hire as many people as they did (and “overspend” on these additional salaries) during the “boom” years??

[bearishgurl]

As to CAR’s earlier links today, a few things really stood out to me in Dr. Husing’s prophetic Power-Point presentation (2010) on the City of San Bernardino:

http://www.ci.san-bernardino.ca.us/civic…

Pg 3: Inland Empire (IE) was down 93,327 jobs between 2008 and 2009

Pg 4: By 12/09, the IE had a 15% unemployment rate

Pg 6: By 2009, the IE had 3x the unemployment rate of 2000 to 2008

Pg 8: By 2009, building permits in the IE had declined 82.4% since 2005

Pg 10: The economic base of the IE has always been largely blue-collar

Pg 15: Question: Would three million people have actually relocated to CA between 1997 and 2007 if there was was no new construction there available to purchase with easy qualifying terms?

Pg 18-19: Out of 1,080,328 existing homes in the IE, 628,327 were “underwater” in 2010. Out of those “underwater,” 250,831 (40%) were in default in 2010, 183,447 (29%) had a Notice of Sale file on them and 119,066 (19%) were REO’s. This leaves 12% of these underwater homedebtors in the “Squat-SS” group, the “Squat-Mod” group or the group still paying their mortgages in a timely manner.

Pg 23: 51.5% of the SB’s households are tenants

Pg 24: 25% of the IE’s SFRs are tenant-occupied or vacant

Pg 25: 38.3% of SB’s households receive some form of public assistance

Pg 44: The RE crash in the IE affected those who worked in FIRE and related industries the most

Pg 48: 48.5% of adult SB Co residents possessed a HS Diploma or less; 47.8% of adult RIV Co residents possessed a HS Diploma or less

Pg 53: In 2004, 93 ships in the Port of Los Angeles could not be unloaded due to not enough available labor (this was NOT due to a lockout or strike)

Pg 57: The IE lost 34,900 manufacturing jobs since 2007

Question to ponder: If Dr. Husing’s info on pgs 10, 23, 24, 25 and 48 was accurate or near-accurate in 2000, why did the IE’s leaders vote to approve all the subdivisions they did??

…What sets Stockton and San Bernardino apart is a far narrower set of circumstances: They were at the epicenters of the American housing bubble and the American housing bust.

How bad was the bust? Of the 372 federally designated metropolitan areas in the United States, Stockton ranks first in foreclosures, while Riverside-San Bernardino-Ontario ranks third. Among the thousands of U.S. cities, San Bernardino proper ranks third in foreclosures, while Stockton ranks fifth. Ranking the May unemployment rates in those same 372 metropolitan areas, with the area with the lowest unemployment listed as No. 1, Stockton ranked 364th and San Bernardino 354th. Unemployment in the city of Stockton in May stood at 17.5%. In San Bernardino, it stood at 15.9%.”

. . . It’s these numbers, not political chicanery or wage-and-pension rigidity, real though [sic] they may have been, that set Stockton and San Bernardino apart and that best explain what happened to them. That means any assessment of blame for their predicaments has to expand from such usual suspects as greedy public employees to include banks that flooded these cities with subprime mortgages that were resold into the high-flying securities market. It should include the huge retail corporations that have devised supply chains that employ area residents at barely livable wages.

Conventional wisdom may blame the unions and the pols. The facts tell a different story.

http://www.latimes.com/news/opinion/commentary/la-oe-meyerson-city-bankruptcies-foreclosure-20120725,0,6443912.story

As to this piece, I agree that Stockton and SB both have many factors in common which contributed to their bankruptcies. Both overbuilt with *new* residential construction (which was primarily sold to underqualified buyers). This comedy of errors led to a complete crash of their residential RE values leading to a precipitous drop in property tax revenues and jobs in the local RE/construction industry.

However, unlike the author, I believe the pols ARE to blame. It was actually THEY and/or their appointed officials (their direct reports) who issued or caused to be issued voluminous subdivision permits, primarily during the millennium boom, which, along with readily available NINA purchase money 1st and 2nd TDs and refinance 1sts, 2nds and HELOCs, was the direct cause of the boom and bust cycle which followed. The boom cycle caused the cities of SB and Stockton to be flooded with new residents who would not have otherwise have flocked there but for all the *new* construction available for no money down in CA with easy qualifying which was priced at far less than the coastal cities.

See my comments where I already discussed this phenomenon:

http://piggington.com/stockton_bk_here_we_come
re: the Stockton BK filing

http://piggington.com/otcontest_to_guess_the_occupant_of_beautiful_new_building_in_rsf
re: the Vallejo BK filing

See also: http://piggington.com/ot_san_bernardino_votes_to_file_for_bankruptcy_protection

[quote=bearishgurl on July 14, 2012 – 3:00pm.][quote=no_such_reality]. . . Tax proceeds may have fallen, but they haven’t fallen that much. It’s a sign of the massive over building, over staffing cities have done. . . [/quote] Actually, NSR, tax proceeds to CA cities and counties HAVE fallen a great deal, due to downward adjustments made by many CA county assessors in accordance with Proposition 8 . . . [/quote]

[SK in CV]

Nice work bg.

[Author]

Posts