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‘Big 3’ U.S. Cities Facing Fiscal Crisis As Unpayable Retiree Benefit Debts Soar

Fiscal Crisis: New York, Los Angeles and Chicago, America’s three largest cities, have much in common. For one, they’re all very cosmopolitan. For another, they’re governed almost exclusively by Democrats. And finally, all three of the nation’s pre-eminent urban areas are teetering on the edge of fiscal disaster.




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In a recent report, “The Financial State Of The 3 Largest U.S. Cities,” the government financial watchdog Truth In Accounting (TIA) revealed just how bad these major cities’ finances really are.

TIA graded all three cities for their fiscal peformance, using the familiar academic measuring stick of grades A through F. Only one, Los Angeles, didn’t get an ‘F’. It got a ‘D’. But it’s safe to say, without dramatic changes, all face fiscal crisis.

As befits its stature as America’s largest and most influential city, New York’s financial problems are by far the worst of the Big Three.

Due mostly to soaring unfunded retirement liabilities, “New York City’s elected officials have made repeated financial decisions that have left the city with a debt burden of $185.5 billion,” the analysis said. “That burden equates to $64,100 for every city taxpayer.”

New York’s Debt Mountain

The city owes — wait for it — $312.2 billion total for related retirement benefits and health care funds. But of that amount, it still must find a way to make up a $156.4 billion shortfall.

No other city comes even close to that. It goes without saying that the current far-left Mayor Bill De Blasio isn’t solely responsible for this mess. He’s merely the most recent weak link in a long chain of New York’s mayoral financial failures. It’s a well-established model: Give in to public employee unions, and kick the financial can down the road.

As you might have guessed by now, Truth In Accounting gave New York a grade of ‘F’. But that’s only because there wasn’t a lower grade to give.

For New York, this is nothing new. Back in 1975, a fiscally insolvent New York City had to massively restructure its finances and get bailed out by its creditors and the federal government. Is Big Apple Bailout, Part Deux, on the horizon?

As we noted, it’s not just New York that’s in trouble among the Big Three. Los Angeles, the nation’s No. 2 city in population, struggles with its own financial hole related to retirement benefits — though nowhere near as large as the one that threatens to swallow New York.

L.A.’s Bad Decisions

“Los Angeles’ elected officials have made repeated financial decisions that have left the city with a debt burden of $7.7 billion,” TIA said. It owes some $60.6 billion in retirement benefits, but hasn’t funded $8.4 billion of is public employee pensions and $2.7 billion of its retiree health care benefits.

So every Angeleno owes the equivalent of about $6,200 to pay off all the liabilities. But while the numbers aren’t huge, as in New York, L.A. nonetheless comes in for harsh criticism: “Residents and taxpayers have been presented with an unreliable and inaccurate accounting of the city government’s finances,” the TIA report noted.

As we noted, L.A. gets a D grade, just barely passing. Bravo.

Finally, there’s the “City of the Big Shoulders” — and even bigger spending — Chicago. The city has $42 billion in debts, but only $9.5 billion to pay it off. So it’s broke. Its per citizen tab for its government’s profligacy is high, like New York’s: $36,000 per taxpayer.

Bad Grades For Spendthrifts

That’s a lot of money to owe. No surprise, Chicago, like New York, gets an ‘F’. But there is a glimmer of hope: “In 2017, the Illinois General Assembly approved legislation that gradually and significantly increases the amount of money Chicago taxpayers must contribute to the city’s pension plans.”

So maybe Chicago, after a few more years of tightening its belt, will join L.A. with a ‘D’ grade.

The point is, all suffer from the same ills. Progressive governments love to spend big. And they hate to say no to big city unions, which have the power to shut down vital services or even kick politicians out of office. So for years, the pension problems have gotten worse. And spending has only risen.

Fiscal Crisis: The Cause Is Spending

More spending is no longer an option. Cities will soon face existential dilemmas, such as “do we keep picking up the garbage and clean the streets, or do we slash spending on services to pay ever increasing amounts for retiree benefits?”

It’s a brutal choice, and even such well-heeled cities as New York, L.A. and Chicago don’t have resources to do both. Unless these cities learn to show some fiscal discipline, we may once again, as in the 1970s, see a major U.S. city go belly up. Or a state, like Illinois. Or a commonwealth, like Puerto Rico. It won’t be pretty. And it will be painful.

And remember: these are big cities, with mostly thriving economies. But dozens of large-to-medium-sized cities across the country face similar problems. The point is, it’s not just the federal government that has a spending problem and serious retirement-related debt problems. Chances are, your city or state isn’t far behind.

YOU MIGHT ALSO LIKE:

Bankrupt Public-Employee Pensions: The Next Big Financial Crisis?

Chicago’s Next Really Bad Idea: A Guaranteed Basic Income

The States’ Unfunded Pension Nightmares


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