Why A Whip Trick to Save Lakota Helps America: 20 cities facing bankruptcy

After a few people saw my Whip Trick to Save Lakota video, (Click to review,) I started to receive several comments, one particular from a guy who lives on the other end of the country.  The problem of public sector workers taking too much money from the tax base isn’t specific to Lakota by any stretch of the imagination.  The entire structure of the public school system in virtually every community is a ridiculous scam that should have been called out a long time ago, but hasn’t essentially because nobody wanted to be called names for not supporting a public school.  Here is what the comment writer sent me:

“This goes on where I live too. In the face of declining enrollment, they (public schools) still beg for more money. They know they’ve got teachers on the way out, and they’re probably planning to use this money to jack up the salaries of the departing teachers in their last few years because their pension is probably based on their last few years of salary. It’s got nothing to do with quality education. It’s got everything to do with cozy retirement. Watch for them to get re-hired after “retirement” too!”

I referenced in the video A Whip Trick To Save Lakota the course of Detroit, and how unmanaged costs in Cincinnati, especially in affluent districts like Lakota will eventually lead to the same fate where the once wealthiest city in America has become the poorest in a span of 40 short years.  The unions destroyed Detroit, the private sector unions pushed businesses out of the city, especially in manufacturing taking those jobs with them—the public sector unions just continued to increase taxes to pay for their unmanaged wage increases.  For instance, in Detroit the average teacher pay has been $71,000 per year.  CLICK HERE TO READ MORE.  The end result is that high taxes pushed away those who didn’t want to pay the extra money, or couldn’t pay any additional money, and the city essentially died.

I also mentioned the upcoming bankruptcy of Chicago.  That city also has an average teacher salary of $71,000, which is what happens when nobody puts on the breaks and manages the salary ranges.  The unions are not management, and they will not regulate themselves, as is evidence.  School boards for years in virtually every community across the country have responded to union pressure by simply rubber stamping every pay increase that has come across their desks.  CLICK HERE TO REVIEW.   According to an analysis by the Manhattan Institute, several Chicago pension funds are in worse financial shape than the worker pensions in Detroit. One is only 25 percent funded. There are about a dozen major California cities having systemic problems paying their bills.  Any and all of the cities listed below are likely to suffer the same fate as Detroit.   CLICK HERE TO SEE THE SOURCE ARTICLE.  The list is based on bond ratings and other data, of the top 20 cities to watch for financial troubles in the wake of Detroit.  A large number of those unfunded pensions are public workers such as police, firefighters, and teachers who were promised too much by politicians who simply didn’t have the stomach to endure the constant threat of strikes and mob pressure invoked by public sector labor unions.  The fault of these failures are on all the people who were involved in the process of not saying “NO” to years of tax increases by a greedy class of public employee who simply took too much money, far more than their jobs were actually worth.

1. Compton, Calif.
Compton has teetered on the brink of bankruptcy after it accrued a general-fund deficit of more than $40 million by borrowing from other funds, depleting what had been a $22 million reserve.

2. East Greenbush, N.Y.
A New York state audit concluded that years of fiscal mismanagement — including questionable employment contracts and illegal payments to town officials — left East Greenbush more than $2 million in debt.

3. Fresno, Calif.
Fresno had the ratings of its lease-revenue bonds downgraded to junk-level by Moody’s, which also downgraded its convention center and pension obligation bonds due to the city’s “exceedingly weak financial position.”

4. Gulf County, Fla.
Fitch Ratings warned that Gulf County’s predominately rural economy is “narrowly focused,” with income levels one-quarter below national averages and economic indicators for the county also comparing unfavorably to national averages.

5. Harrisburg, Pa.
Harrisburg is at least $345 million in debt, thanks largely to municipal bonds it guaranteed in order to finance upgrades to its problematic waste-to-energy trash incinerator.

6. Irvington, N.J.
Irvington has a violent crime rate six times higher than New Jersey’s average, with Moody’s citing “wealth indicators below state and national averages and tax-base and population declines due to increased tax appeals and foreclosures.”

7. Jefferson County, Ala.
Jefferson County, home to the city of Birmingham, has been dealing with the collapse of refinancing for a sewer bond. It filed for bankruptcy protection in 2011 over a $3.14 billion sewer bond debt.

8. Menasha, Wis.
Menasha defaulted on bonds in 2007 it had issued to fund a steam plant which has since closed and left the city permanently in the red and, as of 2011, had $16 million in general fund revenue, but had $43.4 million in outstanding debt.

9. Newburgh, N.Y.
Newburgh was cited by Moody’s for “tax base erosion and a weak socioeconomic profile,” with 26 percent of its population below the poverty line and its school district facing a $2 million budget gap.

10. Oakland, Calif.
Oakland is trying to get out of a Goldman Sachs-brokered interest rate swap that is costing it $4 million a year. According to a recent city audit, Oakland has lost $250 million from a 1997 pension obligation bond sale and subsequent investment strategy.

11. Philadelphia School District, Pa.
Philadelphia’s school district, the nation’s eighth-largest, faces a $304 million deficit in its $2.35 billion budget, and is seeking $133 million from labor-contract savings to prevent further cutbacks.

12. Pontiac, Mich.
Pontiac, where the emergency manager has restructured the city’s finances, was downgraded by Moody’s, reflecting the city’s history of fiscal distress and narrow liquidity.

13. Providence, R.I.
Providence, rumored to be filing for bankruptcy for more than a year, experienced consecutive deficits through fiscal 2012, has a high-debt burden and significant unfunded pension liabilities, as well as high unemployment and low-income levels.

14. Riverdale, Ill.
The credit rating for Riverdale is under review by Moody’s because the city has not released an audit of interim or unaudited data for the year that ended April 30, 2012.

15. Salem, N.J.
Salem is under close fiscal supervision after it issued bonds to finance the construction of the Finlaw State Office Building, which was delayed by construction issues, and its leasing revenues are not enough to cover the debt payments and the maintenance fees.

16. Strafford County, N.H.
Strafford County regularly borrows money to cover its short-term cash needs after it spent two-fifths of its budget on a nursing home, which lost $36 million from 2004 to 2009.

17. Taylor, Mich.
Taylor has a large deficit and is vulnerable due to significant declines in the tax base, limited financial flexibility, and above-average unfunded pension obligations.

18. Vadnais Heights, Minn.
The St. Paul suburb of Vadnais Heights had its debt rating downgraded to junk last fall by Moody’s after the city council voted to stop payments to a sports center financed by bonds.

19. Wenatchee, Wash.
Wenatchee defaulted on $42 million in debt associated with the Town Toyota Center, a multipurpose arena, and has ongoing financial issues due to the default.

20. Woonsocket, R.I.
Woonsocket faces near-term liquidity shortages necessitating an advance in state aid, a high-debt burden and unfunded pension liabilities, with Moody’s citing the city’s continuing difficulties in making spending cuts because of poor management and imprecise accounting.

All those places and many more who are right on their heels to failure, are suffering now because they did not do the hard work of saying NO to tax increases.   It’s not easy saying no, and the most dominant reason that management gives in to the pressure of the public sector unions is that they don’t want to be called names by the mobs who are members, as silly as that sounds.  Most people have an inherit desire to be liked, and it is too much for them to be ostracized by their peers.  Much of the bankruptcy threats listed above simply exist because the people in charge of the money were afraid of being called names by the people who wanted the money.  It all comes down to that.

It is important to understand that the budget problems with the teaching profession is not just centralized in Southern Ohio—but is in fact a nationwide epidemic.  Even though I was never a fan of FDR as a president, he did warn that public sector employees should never be allowed to unionize.  John F. Kennedy, even though many wish to believe he was such a great president made public sector unions legal with an Executive Order seemingly to appease the mob bosses who helped him win the close election against Nixon, and the whole system has went downhill from there in a steady progression of failure.  The root cause of the default was when Kennedy signed Executive Order 10988.  Cities have been on a decline since that action.  Kennedy may have helped put the nation behind the space program, he may have endured a stalemate with Russia in Cuba, and gave some decent speeches, but he was a deeply flawed man who’s womanizing, mob connections, and unethical behavior opened the door to thuggish mobs to ruin America.  He hoped that city councils, school boards, and state law makers would have the stomach to stand up to the new public sector unions–but he was dreadfully wrong.

The only things voters can do now are Vote No against tax increases and force the reductions of the public sector union members as a political power.  Their inability to regulate themselves has forced this issue now, so they have only themselves to blame.  A failure to say NO will not only destroy their lives, but also the communities everyone lives in.  Their life as public workers will come to an end eventually anyway—sooner or later.  If it is sooner than entire cities may not be laid to waste.  But if it is later, as in the examples above, then it is too late to avoid the inevitable.  Bankruptcy will follow, and many more people will suffer because they feared to say NO to the masses that are never happy, and can never be appeased leaping from crises to crises always looking for higher wages from extortion to fill the bottomless pit of their belief in the net worth of their unionized professions.

Rich Hoffman

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