Hamtramck, Michigan, is running out of money. City Manager William Cooper tells The New York Times: “We can make it until March 1—maybe.” And Hamtramck is not alone. According to the Times, 15 municipalities have pursued bankruptcy in the past two years. And if the economy does not improve revenues, many other local governments will be in the same boat. Many of these cities, like Hamtramck, have already cut spending on parks, senior centers, and road maintenance. But there is one area they can’t cut: salaries, benefits, and pensions of …
The year 2011 will be the year of decision for underfunded state and local governments with pension and debt problems. The end of federal money from the stimulus package that many cities and states have used to prop up their finances, combined with the outsized cost of meeting their pension promises, will force a growing number of these governments to act. The immediate reaction for many will be to try to pass the cost onto the federal taxpayers in the form of a bailout, but Congress should strongly resist any …
There is bad news and worse news for state governments faced with underfunded pension promises. First, a new academic study shows that not only is the total gap between the pensions that state governments have promised to pay their employees and the available resources much larger than previous estimates, but that gap cannot be closed with easy changes to those promises. Using the usual method of calculating the cost of pension promises, the study estimates that 116 major pension plans sponsored by the 50 states have assets of about $1.8 …
The fact is that New Jersey lied and got caught, but taxpayers everywhere may benefit. Yesterday, the State of New Jersey settled with the SEC on charges that the state committed securities fraud by failing to disclose the true state of its state employees pension funds. This admission is an important step toward ending accounting policies that allow states to claim that the state teachers and employees’ pension funds are fully funded, when they really have billions of dollars of deficits. By using accounting tricks, New Jersey claimed to have …
Stephen Moore has a must read article in the Weekly Standard this week detailing not only how public sector unions have bankrupted the city of Vallejo, California, but also demonstrating that local governments nation wide are also at risk. noting that 80% of Vallejo’s budget is eaten up by labor and pension costs, Moore warns: “Welcome to the next great financial bubble in America–a fiscal time bomb that could cause your local and state tax bills to double or even triple in years to come.” Other details in the piece …
