Just weeks after Detroit filed the largest municipal bankruptcy in the history of America, it now appears that eight more U.S. cities may be headed in the same direction.
Detroit became the largest city in America’s 237 years in existence to file Chapter 9 bankruptcy, which its public employees’ unions are now fighting. And if they succeed in preventing the Motor City from winning approval, this will undoubtedly result in disaster for taxpayers all across the country.
Just think what unions and their lackey Democrats in legislatures in states across the nation could do if they were able to prevent cities from filing bankruptcy – thereby avoiding defaults on their pension and health care obligations.
Congress enacted the Chapter 9 bankruptcy code in 1937 long before the lavish pension and health care plans for current and retired public employees became so out of control. And long before public unions became so widespread.
While the unions and Michigan’s Attorney General, Bill Schuette will claim that that the pension benefits, according to the state’s constitution, shall be a contractual obligation and shall not ben diminished, Detroit’s emergency manager and his lawyers will argue that Michigan’s pension clause does not protect unaccrued benefits.
If the unions prevail, democratic politicians will move to further protect worker benefits in their state constitutions at the expense of the taxpayers who will be forced to fund them.
Following Detroit into this abyss could be the following:
Baltimore, with 22 percent of its residents living in poverty, is losing 5% of its residents annually and is facing a nearly $1 billion deficit and an annual budget shortfall of 15%.
San Francisco’s 2012-13 budget deficit stood at $480 million with 2013-14 estimated to reach another $642 million, and its annual budget shortfall reaching 5.5%.
San Jose’s deficit through 2012 was $115 million with an annual budget shortfall of 4.6%. This in a city that has already laid off police officers, firefighters, closed libraries and an community centers, leading mayor Chuck Reed to claim the city is in an emergency situation.
Los Angeles’s 2012 deficit of $457 million also initiated huge cuts in police and fire resources, while also reducing the Parks and Recreation programs, and even reduced programs for the homeless by 10%.
San Diego, which last year successfully fought its public employees unions over extravagant pension plans, still had a deficit of $56.7 million. Through thousands of fire station blackouts the city saved $11.5 million, and reduced Parks and Recreation hours to 20 per week. San Diego also cut 80 full-time positions which saved another $6.5 million. The city also proposed a 6 percent pay cut to its employees and permanently cut 120 full-time positions.
Cincinnati ended 2012 with a $60 million deficit and once again experienced a 20 percent annual budget shortfall, which caused Mayor Mark Mallory to make known his intention to file for bankruptcy. And making matters even worse what that Moody’s has now downgraded the city’s credit rating.
Camden, NJ ended 2012 with a deficit of $28 million and also saw a 20.2% annual budget shortfall, causing a sixth of its employees to wind up in the unemployment line and the police force being reduced by 50 percent. The city also cut its fire department by 33.3%.
Washington, DC’s deficit by the end of 2012 reached $322 million while Mayor Vincent Gray was quoted as saying, “My budget will inflict some pain, it’s a touch budget and I won’t represent it as anything else.” However, with the city’s “living wage” policy which pays a minimum wage of $12.80 per hour, rather than the national minimum of $7.25, his budget cuts are not expected to help the city avoid a train wreck. In fact, many working taxpayers are now migrating to Maryland and Virginia, which will make matters worse for DC.
As I’ve written over the last several years, shielding public pensions from bankruptcy will only continue to give a green light, and therefore a blank check to free-spending cities that fear their labor unions.
Democratic politicians have caused this problem by delivering to their union constituents lavish and outrageously high pensions and health care plans. Over literally decades they have hoisted upon taxpayers unsustainable obligations for nothing other than votes.
Cities across America will be closely watching for the outcome in the Detroit case. If Detroit succeeds in bankruptcy court, public unions may well finally be brought under control and their partners in crime – the Democratic Party – may lose large segments of the voting population.
If Detroit fails in its attempt to finally deal with its debt and cause, there may be a mass exit from the city as well as from other cities, leaving no one to pay for the lavish plans.
Spero columnist John Mancino is an entrepreneur and political activist in California.
The views and opinions expressed herein are those of the author only, not of Spero News.