Bankrupt California cities slash public services to fund six-figure pensions

A local newspaper headline announces bankruptcy in Stockton, California.(REUTERS / Kevin Bartram)

Source: Russia Today

http://rt.com/usa/news/california-bankrupt-taxpayers-pensions-874/

As some California cities face bankruptcy, public services are being slashed so unusually high pensions can stay on the books. Stockton’s former police chief rakes in a pension of more than $200,000 a year, while also working another job.

­Former Stockton Police Chief Tom Morris retired with a $204,000 pension after just eight months on the job. While his California city became the largest in the US to file for bankruptcy, he moved to another city and makes an additional $76,066 salary at a new job.

The former police chief retired at age 52, and was among four of the city’s chiefs who held the job for less than three years, while retiring with an average of 92 per cent of their final salaries.

But Morris’ unusually high pension is not an isolated incident. City councils across California have allowed public safety employees to retire after working for 30 years and collect 90 per cent of their top salaries. But while raking in a sizable pension, they often take jobs elsewhere, while still in their early 50’s.

Two former police chiefs in San Bernardino receive similarly high pensions. Keith Kilmer receives $216,581 annually, while working another job. His predecessor, Michael Billdt, who has no college degree and was accused of trying to bribe an officer to withdraw a union grievance in exchange for a dropped investigation, receives $205,014.

“We have some safety retirees that are actually earning more in retirement than they earned when they were working, because they were able to manipulate the system enough in that last year that they could crank that last year’s income and then get 3 per cent times their 25 to 30 years,” said Kathy Miller, the city’s vice mayor, in an interview with Bloomberg News.

And these pensions are significantly higher than normal – an average annual payout from the California Public Employees’ Retirement System is $36,780.

While Stockton decided on Morris’ exceedingly high pension before going bankrupt, at a time when its finances seemed promising, it is now struggling to confront rising pension costs while also dealing with increasing unemployment and declining property and sales tax revenue.

While local California governments continue to pay six-figure lifetime benefits for some retirees, they are slashing local police and fire services to make up for the costs. They are also cutting library hours and other public services to keep up with the payments.

“We didn’t have very many people looking out for the taxpayers when these deals were negotiated,” San Jose Mayor Chuck Reed told Bloomberg News. In the past 10 years, his city increased retirement spending from $73 million to $245 million.

Stockton, which filed for bankruptcy protection on June 28, continues to fund expensive employee pensions that it can’t afford.

In 2007, the city borrowed $125 million with a bond issue in order to pay for enhanced pension benefits. But when the market crashed, Stockton's assets lost one third of their value, and the town still owes $124 million on the bonds.

Meanwhile, San Bernardino, which filed for bankruptcy on August 1, had already lowered its retirement age for public safety workers from 55 to 50. In the past year, the city was forced to use 13 per cent of its budget to pay for its pensions, an increase from 9 per cent in 2007.

Lowering the retirement age took a strike at San Bernadino's budget that may have contributed to its bankruptcy filing.

But after they are made, pensions are usually set in stone, which causes a dilemma when cities like Stockton, San Bernardino and Mammoth Lakes go bankrupt.

“You don’t want [employees] in a vulnerable position where [the pensions] easily could be lost, but then you also have to make sure that you have a fair system that can make adjustments if a city’s finances are tanking,” said State Controller John Chiang.

But while Stockton’s former police chief is living the life with a quarter million dollars coming in a year, the broke city has been left in the dust as it struggles to continue funding the young retirees' income.

20,000 teachers get pink slips in CA

Source: Press TV
http://www.presstv.ir/detail/170337.html

California has put an estimated 20-thousand teachers on notice that they will lose their job unless the state budget improves.

Teachers across the state are protesting the layoffs, saying the cuts will devastate California's already failing school system.

The layoff notices come as California leaders struggle to find a way to fill a 27 billion dollar budget deficit

State officials say the only way to deal with the deficit is to impose massive cuts across the board, including education.

But over the past three years, the state has already cut 20 million dollars from education and laid off an estimated 40-thousand teachers and school employees.

Experts say these reductions are a main reason why California no longer has a leadership position in education in America.

The state is also expected to limit the amount of money available for higher education.

It's estimated that public universities will lose more than a billion dollars if the deficit is not filled.

But the universities have already seen a triple-digit increase in fees over the past few years and many are already being priced out of college.

Los Angeles has the second largest school district in America.

More than 7-thousand L-A teachers have been issued layoff notices as the district struggles with a more than 400 million dollar deficit.

David Goldberg is an L-A teacher and a member of the California Teachers Association.

Goldberg says working together is the best way to improve the state's education system.

For their part, state leaders say the layoffs and cuts will only occur if the budget does not improve.

Leaders say California residents can prevent the layoffs by voting to approve a series of tax extensions.

They say these extensions would generate more than 12 billion dollars toward reducing the deficit.

US home prices dip for 4th month in row

As foreclosed homes flood the markets, prices could tank even further.

Source: Press TV
http://www.presstv.ir/detail/162028.html

A double-dip in the US home prices appears to be underway in America's biggest cities, endangering an already fragile economic recovery in the country.

Home sale prices fell 1.6 percent for the fourth consecutive month in November 2010, the Standard & Poor's/Case-Shiller Index, which tracks the real estate market in 20 major US cities, showed.

The housing market got a boost early last year with the help of tax incentives. But after the US government's initiatives ended, sales dropped sharply.

Falling home values result in what economists call a negative wealth effect. In this scenario, people's financial confidence is shattered as a result of lost equity in their homes.

Currently, there are more than ten million households in the United States who owe more on their homes than they have equity.

Some economists predict the US housing price, which is a key indicator of the country's economic vitality, will drop by as much as 20 percent this year.

According to their reports, the decline in home value is greater than it was in 1928 to 1933 during the Great Depression -- a severe worldwide economic depression in the decade preceding World War II.

In addition, unemployment has remained stubbornly high and millions of Americans are still at risk of foreclosure.

US economy losing to rising powers

US President Barack addresses a Joint Session of Congress while delivering his State of the Union speech

Source: Press TV
http://www.presstv.ir/detail/162006.html

Painting a grim picture of the financial trials in the US, President Barack Obama has called on authorities to gear up in order to meet challenges from rising economies.

In his State of the Union address before Congress on Tuesday, Obama said America is at the risk of losing out to rapidly developing economies, such as China and India, in the global market.

Listing areas where the United States had fallen behind the rest of the world, the US president said Americans had lost to South Korea in internet penetration, to Europe in infrastructure and to China in trains and airports.

He then called for a return to the American traditions of innovation and risk-taking to keep up with the rising powers from the East.

We need to “out-innovate, out-educate and out-build the rest of the world,” the US president pointed out.

Obama also spoke of investments in education and research as the way to provide a more sound economic base and accelerate employment and development in the country.

“Over the next 10 years, nearly half of all new jobs will require education that goes beyond a high school degree. And yet, as many as a quarter of our students aren't even finishing high school,” the US president warned.

But finding the money for programs to create a competitive economy is the problem.

That is why during his nationally televised speech, Obama urged rival politicians in the Republican and the Democratic camps to ditch partisanship for a unified push for a better future.

"We will move forward together," he said, "or not at all."

In other comments, Obama also urged US colleges to allow military recruiters and officer training programs back on campuses.

The president also proposed a three-year partial freeze on civilian programs and a $78 billion cut in military spending.

On the war in Afghanistan, he said that a tough fight is ahead, but repeated his plans to bring some US troops back home in July.

However, he pledged to continue attacks on what he called 'al-Qaeda' in Pakistan.

California bankruptcy chatter alarms investors

Source: Press TV
http://www.presstv.ir/detail/161839.html

Some analysts are saying that bankruptcy could be California's best bet for getting out from under a crushing budget deficit of 25 billion dollars.

But current U.S. law prohibits states from declaring bankruptcy, which is why some are pushing for a change.

This call for a change in the bankruptcy law comes as California's financial future looks even more bleak than it did the previous year.

The state's budget deficit continues to increase while the unemployment rate shows no sign of dropping.

Declaring bankruptcy could be the best path for the state to get out from under it's crushing debt and move toward recovery.

Economists say other California municipalities are already taking advantage of bankruptcy protection.

The city of Vallejo and Orange County both filed for bankruptcy and are emerging with an improved financial situation.

But economists say there's a big difference between a city and a state.

That's why California Treasurer Bill Lockyer is already dismissing the idea of filing for bankruptcy, saying it would limit the state's ability to create jobs and to secure future investments.

And economists say California already has the lowest credit rating in the U.S.

However, proponents of the bankruptcy option say it will give California leverage when dealing with the public employee unions.

The state has a massive unfunded pension liability and the threat of bankruptcy might encourage unions to agree to reduced packages.

But economists say bankruptcy would not address the main reason California is in fiscal turmoil.

Republicans are expected to introduce the bankruptcy legislation within the next 30 days.

Experts say even if the bill was passed, it would take at least two years before states would be able to file.

US cop killers gun down 11 policemen

Two police officers have been gunned down in a shootout in a home in St. Petersburg, Florida, January 24, 2011.

Source: Press TV
http://www.presstv.ir/detail/161819.html

At least eleven police officers have been shot dead in the United States in the past 24-hours alone marking a dramatic rise in US police fatalities.

In the US state of Florida, two police officers were shot dead and a third sustained injuries while on an attempt to detain a criminal in the city of St. Petersburg on Monday.

Police had been in hot pursuit of the gunman - named in an aggravated battery warrant - for weeks, CNN quoted police spokesman Chuck Harmon as saying.

The officers eventually managed to locate the felon inside a house and went there at about 7 a.m. local time (1200 GMT) in response to a call, he added.

A burst of gunfire erupted in the home's attic where the man had been hiding and two of the officers were shot dead. The villain's body was not discovered until one-third of the house was torn down by a backhoe.

Meanwhile on Sunday, four officers were shot in a Detroit police station after a man walked in and opened fire on the cops. The attacker, identified as Lamar Deshea Moore, was shot to death by the police while his motive remains unknown.

Earlier in the day, a police officer had been shot during a traffic stop in Indianapolis. He is in a critical condition in hospital.

Separately, two deputies were shot in Port Orchard, Washington, near Seattle and a third one was shot on Sunday night during a traffic stop in Lincoln City, Oregon.

Two police officers were also gunned down along with a suspect in northern Miami last week. The policemen were killed when authorities raided a home in search of violent criminals.

During recent years, the number of police fatalities in the Unites States has seen a dramatic increase.

In 2010 alone, 160 police officers lost their lives in the line of duty, marking a 37 percent increase from the 117 deaths last year.

Most of the killings were reported in the US states of Texas, California, Illinois and Florida.

Superstorm likely to hit California

Source: Press TV
http://www.presstv.ir/detail/161328.html


Federal officials say California has more to fear than earthquakes. Officials are warning that something called an Ark storm could be so overwhelming that much of the entire state would become flooded. This super storm would drown entire cities and turn valleys into rivers. Mark Jackson is the chief meteorologist with the National Weather Service office in Los Angeles. Jackson says the Ark storm is plausible mainly because it's already happened before.

He says historical data shows a massive storm system hit the state in the mid-1800s.

Scientists say computer models based on previous weather data suggest California can be hit with a storm system so powerful that the state's levees and flood control systems would be overwhelmed. And the damage would be the far worse than what was caused by Hurricane Katrina.

California focuses much of it's preparedness efforts toward earthquakes, like the Great American Shakeout drill held each year. But Jackson says an Ark storm poses just as much of a threat, if not more.

Infact, scientists estimate that an Ark storm would cause roughly five times the amount of damage than any so-called “Big One” earthquake.

Scientists say there are two main reasons why this Ark storm report was released.

One, they want the government agencies to start working together now to prepare a worst-case scenario and two, they're hoping this information will lead to the creation of an Ark storm warning system similar to the scale of those used for hurricanes.

California economic recovery unlikely in 2011

Source: Press TV
http://www.presstv.ir/detail/160065.html


California's economy is the eighth largest in the world, eclipsing even large countries like Russia.

But decades of mismanagement have allowed the state to sink to a budget deficit of 25 billion dollars.

That's the largest deficit in the U.S. and is more than the entire budget of most states. Throughout the economic recession, California has been among the worst performing states.

It's unemployment rate has been consistently higher than the rest of the nation and now has the lowest credit rating in the United States. For California residents, this rapid decline has been difficult to live through. Jim Panetta says it's nearly impossible to get a job in the state.

Panetta says as a resident, it's frustrating for him to see so much attention paid to politics instead of toward the people.

Economists are hopeful that a change in leadership might help
California obtain some recovery.

Governor Arnold Schwarzenegger left office this month, after failing to achieve any significant improvement in the economy.
Economists say Schwarzenegger just didn't have the political
experience to get the job done. But residents are doubtful that a new governor will bring new hope to the state.

California's new governor, Jerry Brown, released a new budget proposal this week but economists say it's to soon to say whether it will have any major impact on the state's massive deficit.