Welcome To The Third World. Part 1 - State and Cities

State and City budgets in ruins

by John Rubino 

One upon a time, the US was a place where police came when you called, a basic safety net caught those who fell on hard times, and a lifetime of work was rewarded with a decent retirement. A First World country, in other words. To be born here was to win life’s lottery.

But apparently this was an illusion fueled by borrowing and money printing, and now that we can’t borrow quite so much, many things we took for granted are going away. Consider this video of Chicagoans being dropped from state health care assistance.

And these recent news stories:

O.C. cities reeling from revenue loss, public safety costs

Spiraling public safety costs and plummeting revenues have pushed Orange County cities to the brink. Many can’t pay their bills without raiding their reserves, an analysis by the Orange County Register has found.

The Register also found that the unfunded portion of accrued pension and health care costs for Orange County and its cities now total $8.75 billion — boosted by the cost of retirement for police officers and firefighters.

Most cities do not have a plan in place to address that debt. Like a consumer who has pegged his credit card, they are paying only what’s due immediately.

Declines in city revenue have pushed Costa Mesa to dismantle its two-helicopter air patrol and consider outsourcing half the jobs at City Hall. Stanton has locked the public out of its police station, hoping to reopen the office with volunteers. Anaheim cut $5 million from police and fire budgets, sidelining a fire engine and its crew.

The cuts to come could be worse, experts say. “It has been a painful couple of years and I think it will be painful still,” said Chapman University economist Esmael Adibi.

The Register looked at audited financial reports for each city as well as state pension documents and found:

Twenty-three Orange County cities outspent their general fund revenues during fiscal 2009-10, the most recent audited year.

Santa Ana spent 77 percent of its general fund on police and fire protection. Westminster, Stanton and Garden Grove also spent more than 70 percent on public safety. The city of Vallejo was at 80 percent when the costs of public safety drove it to bankruptcy.

Orange County cities face a combined $4.1 billion in unfunded pension and health care liability. County agencies face another $4.65 billion. Those figures are growing at 7.75 percent annually. Anaheim has the single highest city debt at $787 million for retirements and medical benefits, with Santa Ana following at $626 million.

“With (the benefits) that municipalities have agreed to, they’ve put themselves in a real squeeze,” said Bob Burton, spokesman for the California Public Employees Retirement System, which administers the pensions for nearly all Orange County cities. “They negotiated benefit packages they are having a hard time paying for.”

Illinois’ budget stiffs the dead
Memo to residents of the Metro East: Come Monday, don’t die if you can’t afford a funeral. The state no longer is willing to pick up the tab.

Illinois has a budget deficit of about $9.4 billion, despite raising income tax rates by roughly 66 percent earlier this year. It owes $2.4 billion in tax refunds, $4.6 billion in unpaid bills to its vendors and $2.4 billion in Medicaid and insurance obligations.

As part of trying to make ends meet, effective Monday, the state will suspend its practice of paying $1,655 to funeral homes that bury the approximately 12,000 public aid recipients who die each year. The Illinois Funeral Directors Association says that barely covers the cost of a simple funeral and burial.

In the past, the state set aside about $15 million for indigent funerals. The budget for the current fiscal year, which began July 1, was just $1.9 million. As of now, that’s gone.

North Miami Beach’s proposed cop layoffs spark protest
Katrina Pinillos marched up and down the sidewalk in front of North Miami Beach City Hall, occasionally joining in a “No More Bonner” chant bellowed by nearly 80 people.

For more than an hour on Tuesday, the crowd rallied in front of city hall before the commission meeting, protesting City Manager Lyndon Bonner’s proposed cuts to the city’s police department, including the layoff 24 officers.

“I am angry,” said Pinillos, a Plantation resident whose husband and brother both serve on the North Miami Beach department — and are both facing layoffs. “Who is going to protect the city when there are minus 24 officers? It is the residents who hear the gunshots and see gang oppression,” said Pinillos, who teaches at a North Miami Beach public school. “When they let these officers go, this stuff is going to double.”

According to Bonner, who recently became city manager, there is a $7.5 million shortfall for the 2011-2012 budget.

The New Retirement Plan: No Retirement
Already battered nest eggs took another beating this month with the market’s wild swings. With interest rates essentially at zero since 2008, income from Treasurys and certificates of deposit is pretty paltry. … On top of that, housing prices [leave] homeowners with much less equity to tap.

Here is the survey mentioned in the article: The New Retirement: Working

• The survey found that for many Americans, the foundation of their retirement strategy is simply not to retire, to work considerably longer than the traditional retirement age, or work in retirement:

–39 percent of workers plan to work past age 70 or do not plan to retire

–54 percent of workers expect to plan to continue working when they retire

–40 percent now expect to work longer and retire at an older age since the recession

• Workers’ greatest fears about retirement include “outliving my savings and investments” and “not being able to meet the financial needs of my family.”

• Most workers will continue working out of financial necessity:

–Workers estimate their retirement savings needs at $600,000 (median), but in comparison, fewer than one-third (30 percent) have currently saved more than $100,000 in all household retirement accounts

–Most workers, regardless of age or household income, agree that they could work until age 65 and still not have enough money saved to meet their retirement needs

–Of those who plan on working past the traditional retirement age of 65, the most commonly cited reasons are of need versus choice

–Many workers (31 percent) anticipate that they will need to provide financial support to family members

NY cops preparing for civil unrest
In the aftermath of last week’s riots in the United Kingdom, the NYPD has held a “mobilization exercise” to train police to prepare for civil unrest in the United States, while also launching a program designed to spot signs of potential trouble via social networking websites.

The NYPD Disorder Control Unit brought together police from all five of the city’s boroughs to rehearse what the response would be “should out-of-control riots break out here”.

“Approximately 180 police officers total from each borough’s task force, including the horseback and aviation units, came out for the drill,” reports the Metro.

However, unlike in the United Kingdom where the rioters mainly comprised of teenage kids taking the opportunity to steal iPods and other high-end electrical goods, civil unrest in the United States is far more likely to have a political motivation.

With many Americans now becoming “pre-revolutionary” as a result of their fury at the Obama administration and equally unpopular lawmakers in Washington, potential civil unrest could spring not just from a poverty-stricken underclass, but also the shrinking middle class.

Perhaps that’s why the Department of Homeland Security is increasingly focusing its anti-terror apparatus on white middle class Americans, portraying them as domestic terrorist in a series of PSA videos.

In addition to the riot training, a new NYPD unit has also been set up to “troll sites like Twitter and Facebook for suspicious activity” in order to pre-empt potential flash mobs and other civil unrest.

Social networking websites like Facebook and Twitter came in for harsh condemnation following the UK riots, with Prime Minister David Cameron advocating authorities have the power to shut down access during times of public disorder.

For his part in decrying social media, Cameron was praised by none other than Communist China, which habitually censors the Internet to hide political corruption or prevent legitimate protesters from receiving media attention. The Communist state routinely uses such powers, which Senator Joe Lieberman has called to be introduced in the United States, to cover up atrocities and abuses against its own citizens.

Twitter, Facebook and Youtube are all banned in China and even sanitized government approved versions of these websites are now being shut down for long periods of time so that they can “remove all politically sensitive content under orders from Chinese internet authorities”.

Some thoughts:
It’s painful to think about how totally we blew it. In the 1980s and 90s we had the chance to get borrowing — both public and private — under control and live within our considerable means. We did the opposite, choosing to live big on credit cards, T-Bills and derivatives, and now we’re broke and those least able to cope will suffer through a decade that didn’t have to happen.

Note the progression of these articles: From state/local financial problems, to cutbacks in basic services, to evaporating nest eggs, to civil unrest, to a police state. Look around the world for examples of what’s coming.