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So how fiscally f-cked are major cities?


Hey, "fiscally f-cked" rhymes. It's got a nice ring to it!


The well written below is authored by some Dems. What they fail to mention is that 14 or America's 15 biggest cities are run by Democratic administrations who've spent like drunken sailors, promised union workers lavish pensions (usually in return for getting out the vote) plus overtaxed and regulated business.


So businesses and people are moving to smaller or Southern based cities that are more business-friendly. Meanwhile, the big cities are also getting hammered because the pandemic has made it easier for people to move to places that offer a lower cost of living, less congestion and better amenities. RIP Chicago, NY, blah blah.


Cities Are Headed for Fiscal Trouble Again, Especially if There’s a Recession

New York City’s lessons from the 1970s can help as Covid largess ends and tax receipts ebb.

By Richard Ravitch and William Glasgall, WSJ

Jan. 11, 2023 6:07 pm ET


Years of excess borrowing and slipshod accounting caught up with New York City in the 1970s. It would take tough choices, hard sacrifices, and a federal bailout to put the city on a sound fiscal path. To help the city emerge from its crisis, the state Legislature in May 1975 passed the Financial Emergency Act for the City of New York. The law subjects the city to increased oversight, requiring it to plan for financial shortfalls and adopt a balanced budget in accordance with generally accepted accounting principles, which require accounting for promised payments when liabilities are incurred and discourage one-time maneuvers to achieve balance.


Four months later, President Gerald Ford approved a $2.3 billion revolving loan to help the city to pay its debts and begin its recovery. Since then—through economic booms, recessions and disasters, including 9/11 and superstorm Sandy—New York has never seen a replay of its brush with bankruptcy, and its budgeting remains as close to a model of fiscal responsibility as there is.


Despite this, no other major American state or local government has followed New York’s budgetary lead. While most state and local governments are flush with cash following an unprecedented $5 trillion in federal Covid-19 relief spending, they are nonetheless facing an inevitable fiscal cliff, created by the one-two punch of a possible recession this year and the expiration of hundreds of billions of dollars in pandemic aid by 2026.


These forces will expose states, counties and cities to the risk of financial catastrophe as they are forced to grapple with approximately $2 trillion in unfunded liabilities for public-employee retirement obligations and deferred infrastructure maintenance on top of $4 trillion in municipal bond debt. Much of these costs remain hidden in so-called balanced budgets through the use of maneuvers such as using one-time revenues to pay recurring costs and not fully funding pension obligations. These costs pose a severe risk to the entire U.S. economy as well as states and localities, which employ almost 20 million Americans. The bankruptcies of Detroit, Puerto Rico and several California cities following the Great Recession all involved excessive borrowing to achieve balance. It could happen again.


The need for Congress and the executive branch to avert this impending crisis is why we have launched the Richard Ravitch Public Finance Initiative at the Volcker Alliance. In normal years, Congress showers state and local governments with about $1 trillion in cash and tax benefits—equivalent to 4% of U.S. gross domestic product—yet the feds have demanded surprisingly little in continuing high-level oversight of state and local budgets.


This shortage of oversight makes it difficult for federal authorities to help avert fiscal crises that could cost the U.S. economy and taxpayers tens of billions of dollars. To address this, Congress should take action. State and local governments should be offered incentives to adopt generally accepted accounting principles for budgeting.


At the same time, federal lawmakers and regulators should take a more active role in overseeing the largely deregulated municipal-bond market, demanding more transparency so investors and citizens can see if state and local governments are borrowing wisely. The recently passed Financial Data Transparency Act, which requires the Securities and Exchange Commission to develop machine-readable data standards for information that municipal bond issuers provide to the public, is an important step. But more is needed. Until Congress comes to terms with the risks states and municipalities are running in their budgets and borrowing, the nation will remain unprepared for rough financial times ahead.


Mr. Ravitch, a Democrat, served as New York’s lieutenant governor (2009-10) and chairman of the Metropolitan Transportation Authority (1979-83). He is a director of the Volcker Alliance. Mr. Glasgall, a financial journalist, is the alliance’s director of public finance.



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