The “good news” keeps right on rolling. As such, I keep wondering which major US city will be the first to declare bankruptcy. Please consider candidate Miami.
Miami Declares Financial State of Emergency
Miami, facing a $61 million fiscal 2012 deficit, declared a state of “financial urgency” for a second straight year, moving toward wage and benefit cuts.
The declaration gives unions for municipal workers two weeks to agree to contracts for the year that starts in October or be subject to actions imposed by the City Commission. Workers including police and firefighters absorbed about $80 million in reduced pay, health insurance and pensions in fiscal 2011.
“In order to balance the budget, sacrifices have to be made by everyone,” Pat Santangelo, a spokesman for Mayor Tomas Regalado, said today by telephone. The city is the state’s second-largest by population, after Jacksonville.
Miami joins at least two Florida cities that also have invoked the fiscal statute, including one that may force reductions on union workers. Hollywood, which made a declaration in May, is set to cut salaries, including for police and firefighters, as much as 12.5 percent. State law gives cities special powers when they declare financial urgency.
Standard & Poor’s cut Miami’s general-obligation bond rating two steps to BBB, the second-lowest investment grade, on June 28 and gave it a negative outlook, partly because of lawsuits from city unions stemming from cuts imposed in August 2010. The legal actions “expose the city to significant liabilities at a time when its available reserves and liquidity are low,” S&P said in a report.
Bankruptcy the Best Solution for Miami
It is time to end these piecemeal negotiations that should not even be happening in the first place. A bankruptcy agreement could dissolve the unions and all their agreements.
Miami is dire straits because of unions, and unions, not taxpayers should suffer the consequences. Bankruptcy is the best solution for Miami.
California Revenue $541 Million Below July Forecast
More budget cuts are coming to California where Revenue Fell $541 Million Below July Forecast.
California revenue fell short of budget estimates by $541 million or 9.2 percent in July, the first month of the 2012 fiscal year, the state Finance Department reported.
The data was similar to figures from Controller John Chiang, who said Aug. 9 that cash receipts for the month missed the forecast by $538.8 million. Chiang said the shortfall may mean further budget cuts are needed.
The next round of budget cuts will be as contentious as the last round, only the amounts will be smaller. Once again I suggest cutting union wages and benefits, ending defined benefit pension plans, scrapping prevailing wage laws, ending collective bargaining arrangements, and making California a right-to-work state. Those things will all do wonders for containing costs.
Note that just a few months ago the state was bragging about beating revenue estimates.
Recession, that’s what. The global economy is headed straight for one, if not in one already. Republicans in California need to get some real concessions before agreeing to tax hikes. I suggest an end to collective bargaining and passage of right-to-work laws.
About the author: Mike “Mish” Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management. His top-rated global economics blog Mish’s Global Economic Trend Analysis offers insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education. Every Thursday he does a podcast on HoweStreet and on an ad hoc basis he contributes to many other websites, including UnionWatch.