Muni sweeps: Show me the money!

April 20, 2011

I forget that the last recession was in the mid 2000’s.

We had a short, intense credit boomlet in between that and the crash of 2008.

The hangover from the housing and financial bubble has been tremendous.

Deficits, caused by the financial crisis,  are still a serious problem in muniland.

Remember that states must balance their budgets annually.

Here is a spreadsheet with the shortfall numbers for fiscal year 2012 from the Center on Budget and Policy Priorities.

The total shortfall for all states in 2012 is ~ $112 billion or approximately 17.6% of projected budgets.

Poor Nevada leads with the highest percentage at 45%.

But it’s sunny California that has the biggest dollar shortfall at $25 billion. More serious times ahead.

Reform muniland pensions

There has been substantial abuse of pension systems. Politicians for decades have granted increasing benefits to employees. And workers have used various tricks to vastly increase their benefits. All this has contributed to the unsustainability of muniland pensions.

It’s time to rein in the system. Here are some excellent policy prescriptions from Michael P. Riccards who is the executive director of the Hall Institute of Public Policy in New Jersey.

Reforms have become the new watchword for pension control. First, a public employee should be allowed to contribute to the pension fund, and get credit for only one job based on the average of his or her normal annual salary (not overtime) over the five highest years. Jurisdictions and agencies in this state commonly award favorites with a huge number of overtime days to jack up the final base.

He or she should not be able to accumulate other pension contributions from other state jobs. Some state and local employees hold two or three, or even more, publicly funded jobs. Pensions should be based on one position only.

If a person retires from the state and comes back into public service, there should be no additional pension credit.

Frankly, people should not hold two or more public positions in the first place, even if they are not on pension — that practice was prohibited in 1787 in the national government by the federal Constitution.

Sick days are for sickness, not for a final payout. Vacation days should not be accumulated beyond one week on top of the normal vacation period. The practice of police chiefs and superintendents of schools, for example, retiring with six-figure buyouts of sick and vacation days, in addition to their generous pensions and medical care, is a gross abuse of public service.

In addition the state needs to pay more attention to its very generous medical coverage policy, which covers retired state employees as well as current ones.

Tighten the reins.

Michigan prepares an army

Planning ahead is the Boy Scout way. Bloomberg reports:

Michigan is giving hundreds of financial professionals and public employees a crash course in advising troubled municipalities, building an army of emergency managers that may become a model for other U.S. states.

As many as 400 accountants, lawyers, school employees and city workers will start classes in Lansing today on topics including “Dealing with the Unionized Workforce,” navigating municipal bankruptcy and negotiating contracts for sewer, water and other utilities.

Happy muniland news

Yes, occasionally I can find some positive news in muniland. I do try hard.

From Georgia we hear of a lovely collaboration between the Department of Transportation and the Garden Club of Georgia who have teamed up to provide travelers with a beautiful display of wildflowers along Georgia’s highways.

And our Georgia roadsides have embraced the wildflower philosophy. Not only are the flowers stunningly beautiful, but they also require less mowing and maintenance. So the gorgeous colors are “green” too!

It never made sense to me why highway departments paid to mow giant areas adjacent to highways. Maybe just habit. And habit is hard to change until conditions force a change. I hope to see more of these types of collaborations as budgets tighten.

Little sweeps

IpreoMuni: Muni New Issue Calendar

OK Policy BlogBill would raise taxes for 1 million low-income Oklahomans

CNBC: Will Small Investors Get Lured Into Munis?

Markit: Negative Outlook for US Spills into Munis (10Y CDS)

Governing: Rainy Day Funds: Did the Lifeline Work?

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