Bill would let Indiana cities declare bankruptcy

[rambone]

Ed Charbonneau of Valparaiso is sponsoring a bill to allow Indiana cities declare bankruptcy and the State would takeover finances from there to oversee the course of the bankruptcy. The Governor backs the idea. If the State emergency manager can't fix the budget, the city would be allowed to seek Federal bankruptcy protection (bailout money).

Bill would let Indiana cities declare bankruptcy

 

[jedi]

Yup read abou this in the Hammond Times last week I think. The City of Gary is the one that is really pushing for this since they are so far in the red.

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[Leadeye]

What the leadership of those cities want is to tap into that direct federal connection for cash. Keep thier corrupt organizations fully funded and in power. Probably be much like the NYC default in the 70s, lots of noise.

 

[dross]

This is happening all over the country. I just heard a stat that in California, out of every dollar spent, 80 cents goes to employee benefits and compensation.

They have no way out but bankruptcy. Part of the correction is going to have to be reneging on promises made by politicians in the past. State government workers just aren't going to get what the liars told them the would get twenty and thirty years ago.

It's gettin' real interestin' out there.

We have to ask ourselves a question: As current taxpayers, many of us non-voting children twenty, thirty, forty years ago when these pie in the sky promises that would never work were made, are we responsible for them? Do we and our children somehow have to make good for people who earn more on average than the taxpayer's money who pays their salary, while they enjoy better retirement, safety from termination, more holidays, and fewer weekly hours?

I don't think we owe them that. I think we need to reset the system to something realistic, regardless of the promises of dead or retired politicians.

 

[Eddie]

I find this aspect disturbing: The State wants to "allow" local governement to file bankruptcy. The State controls how much tax money gets turned over to local government. Wouldn't this allow the State to turn off the flow of tax dollars to a local government, force it into bankruptcy and then take over?

 

[Leadeye]

The state wants to have some say in the process rather than skipping directly to the federal level. After the bond market closed to NYC in the 70s they went to the treasury to buy the bonds or at least backstop them.

 

[phylodog]

This is happening all over the country. I just heard a stat that in California, out of every dollar spent, 80 cents goes to employee benefits and compensation.

They have no way out but bankruptcy. Part of the correction is going to have to be reneging on promises made by politicians in the past. State government workers just aren't going to get what the liars told them the would get twenty and thirty years ago.

It's gettin' real interestin' out there.

We have to ask ourselves a question: As current taxpayers, many of us non-voting children twenty, thirty, forty years ago when these pie in the sky promises that would never work were made, are we responsible for them? Do we and our children somehow have to make good for people who earn more on average than the taxpayer's money who pays their salary, while they enjoy better retirement, safety from termination, more holidays, and fewer weekly hours?

I don't think we owe them that. I think we need to reset the system to something realistic, regardless of the promises of dead or retired politicians.

What if you had accepted a crappy job 40 years ago in part because it offered good benefits and a decent retirement and now they were threatening to take it away? Would you not feel slighted by that?

I don't have a dog in the fight, my pension is largely self funded, just playing devil's advocate.

 

[SemperFiUSMC]

What if you had accepted a crappy job 40 years ago in part because it offered good benefits and a decent retirement and now they were threatening to take it away? Would you not feel slighted by that?

I don't have a dog in the fight, my pension is largely self funded, just playing devil's advocate.

Don't disagree. However if you accepted someone's promise and didn't have the goods in hand you are relying on their ability and willingness to make good on the promise now and into the future. Add in all the park spending, cultural centers, irrelevent deputy mayors and staffs, and all the other corrupt government spending, and there's no way you can juggle all those balls at the same time.

One of the reasons I decided many years ago not to retire from active military service. I wanted to be in control of my life. The only way to do that was to self fund my retirement, which I couldn't afford to do on what I made.

The bottom line is that promises were made that reasonable people with junior high school math skills and a present value calculator should have known were not achievable. Instead they accepted the promise at face value, and we are where we are.

 

[Kirk Freeman]

What is the alternative? Other than confiscation of all assets I do not see an alternative. Renegotiate police and fire pensions? Service cuts? Make these conditions for bankruptcy?

What if you had accepted a crappy job 40 years ago in part because it offered good benefits and a decent retirement and now they were threatening to take it away?

I would propose that those individuals would go to the front of the line at the creditors meeting.

 

[radonc73]

I agree if you signed up for your promised benifits you should get them. Redoing or even eliminating the unions would be a step in the right direction. This is not a private business we are dealing with, why are we at the mercy of the unions in our Gov. anyway?

 

[rambone]

I agree if you signed up for your promised benifits you should get them. Redoing or even eliminating the unions would be a step in the right direction. This is not a private business we are dealing with, why are we at the mercy of the unions in our Gov. anyway?

As a taxpayer I disagree. Essentially this bailout holds me responsible for what some progressive mayor promised. So we borrow even more money from China? Increase the overwhelming burden on the taxpayers? Worsen the impending collapse of the dollar? NO!

 

[SemperFiUSMC]

I agree if you signed up for your promised benifits you should get them. Redoing or even eliminating the unions would be a step in the right direction. This is not a private business we are dealing with, why are we at the mercy of the unions in our Gov. anyway?

You're a retired city employee. The city you worked for made the committment to pay you. You are due a $1,000 a month retirement check. The city has no money. How do they pay you? Raise taxes? Fire the guy who does what you used to do? If we don't need him why did we need you? What happens when people get tired of the tax burden and start moving out of the city (see Detroit)? Then what? Who pays you then?

Let's take it another step. You're a retired state employee. The state you worked for made the committment to pay you. You are due a $1,000 a month retirement check. The state has no money. How do they pay you? Raise taxes? Fire the guy who does what you used to do? If we don't need him why did we need you? What happens when people get tired of the tax burden and start moving out of the city (see Ohio, New York, Illinois)? Then what? Who pays you then?

Not even the federal government, with its ability to print money, is immune from the laws of Economics. People need to understand the only way to ensure your future is to take personal responsibility for it. Don't rely on pensions. Don't rely on Social Security. Do rely on your own investment in your future, whatever that means to you.

I'm reminded about the saying about all your eggs in one basket.

 

[phylodog]

Still seems fundamentaly wrong to me. If someone works, whether for a private company or a government entity, they work based on terms both parties agree to. I don't think it is unreasonable for someone to hold down a job, long enough to earn a pension, and expect the pension to be paid. It does seem wrong to dangle that carrot in front of someone for 20 or 30 years and then give it to someone else after they crossed the finish line.

If I were told right now that the pension I have been dumping a substantial amount of my paycheck into for twelve years now could be taken away at the drop of a hat I think I would likely make some financial changes. Those who have already retired don't have many options this late in the ballgame.

I dunno, like I said, I don't have a dog in the fight just seems wrong to me. It's a contract, an agreement and something which is supposed to be honored. I was raised to honor my word, not back out when the time came if I decided I didn't like how things were going.

 

[SemperFiUSMC]

Still seems fundamentaly wrong to me. If someone works, whether for a private company or a government entity, they work based on terms both parties agree to. I don't think it is unreasonable for someone to hold down a job, long enough to earn a pension, and expect the pension to be paid. It does seem wrong to dangle that carrot in front of someone for 20 or 30 years and then give it to someone else after they crossed the finish line.

If I were told right now that the pension I have been dumping a substantial amount of my paycheck into for twelve years now could be taken away at the drop of a hat I think I would likely make some financial changes. Those who have already retired don't have many options this late in the ballgame.

I dunno, like I said, I don't have a dog in the fight just seems wrong to me. It's a contract, an agreement and something which is supposed to be honored. I was raised to honor my word, not back out when the time came if I decided I didn't like how things were going.

I don't disagree with a single word you said. The question remains; what are cities with no money supposed to do? They don't have the power of the printing press and no one in their right mind would buy municipal bonds with the purpose of paying pensions. A city can do one of two things - raise taxes or cut essential service funding to cover prior pension obligations.

 

[Leadeye]

Cities can sell bonds to cover any debt as long as the bonds get federal backing. This is the solution sought by NYC in the 70s. Like that problem you can bet that a lot of closed door negotiations are going on with different governmental areas trying to protect thier interests.

I would imagine that the political landscape and trust levels are very different now after the federal government screwed states on thier auto company debt. States don't want to get left out of the process as the feds move in like white knights to rescue the cities. Bankruptcy filing inside the state is a way to keep thier hand in the process. Obie's people have already proven that they are more than willing to bend the states over the table to get what they want.

The talk of city pension changes, like the fire and police layoff are political theatre to keep the issue boiling. Like NYC nobody will know what is really happening until the deal is done.

 

[Eddie]

Still seems fundamentaly wrong to me. If someone works, whether for a private company or a government entity, they work based on terms both parties agree to. I don't think it is unreasonable for someone to hold down a job, long enough to earn a pension, and expect the pension to be paid. It does seem wrong to dangle that carrot in front of someone for 20 or 30 years and then give it to someone else after they crossed the finish line.

If I were told right now that the pension I have been dumping a substantial amount of my paycheck into for twelve years now could be taken away at the drop of a hat I think I would likely make some financial changes. Those who have already retired don't have many options this late in the ballgame.

I dunno, like I said, I don't have a dog in the fight just seems wrong to me. It's a contract, an agreement and something which is supposed to be honored. I was raised to honor my word, not back out when the time came if I decided I didn't like how things were going.

Part of the problem is the difference between defined benefit plans and defined contribution plans. In a defined benefit plan your employer promises you x amount of dollars per month if you work for a certain number of years. In a defined contribution plan your employer promises to place a certain amount of money into an account for you and then to give that account to you when certain conditions are met. ie: Retirement.

A defined contribution plan is hard to default on; the employer puts the money into the account and then the employee gets the account (IRA, pension whatever).

Defined benefit plans can be more problematic. The employer is supposed to set enough aside to pay for what it has promised to pay out in benefits. Problems can arise when an employer's projections as to how much a fund will earn or how many claims will be made are off. If there are lots of claims or the market does poorly then a defined benefit plan can get into trouble. I have seen some pension funds that got into trouble because a certain person's young relatives all got hired and quickly became disabled and drew pensions.

The bottom line though is what SemperFi already explained; a sad story does not change the rules of economics. An entity that can't print its own money is restricted to spending only so much as it has in its coffers. If it has entered into a contract to provide benefits that it cannot cover then they are required by law to have plan termination insurance under ERISA.

Employee Retirement Income Security Act - Wikipedia, the free encyclopedia

 

[phylodog]

I don't disagree with a single word you said. The question remains; what are cities with no money supposed to do? They don't have the power of the printing press and no one in their right mind would buy municipal bonds with the purpose of paying pensions. A city can do one of two things - raise taxes or cut essential service funding to cover prior pension obligations.

I think my definition of essential probably differs from those typically in a position to make changes.

 

[dross]

Still seems fundamentaly wrong to me. If someone works, whether for a private company or a government entity, they work based on terms both parties agree to. I don't think it is unreasonable for someone to hold down a job, long enough to earn a pension, and expect the pension to be paid. It does seem wrong to dangle that carrot in front of someone for 20 or 30 years and then give it to someone else after they crossed the finish line.

If I were told right now that the pension I have been dumping a substantial amount of my paycheck into for twelve years now could be taken away at the drop of a hat I think I would likely make some financial changes. Those who have already retired don't have many options this late in the ballgame.

I dunno, like I said, I don't have a dog in the fight just seems wrong to me. It's a contract, an agreement and something which is supposed to be honored. I was raised to honor my word, not back out when the time came if I decided I didn't like how things were going.

It IS fundamentally wrong. The wrong, however, was committed by those who lied and convinced everyone that you could get something for nothing, and who wrote a check on my and my child's account without our consent.

Perhaps some of the wrong was committed by those who believed something too good to be true, and decided to remain blissfully ignorant. There have always been voices warning that this day was coming. Some chose not to hear them. I've been listening to political shows for years. I've heard some of these callers call in and argue that the people who warned the sky was falling were just Chicken Littles.

At the end of the day, it doesn't matter if it's right or if it's wrong. It's unsustainable, regardless.

 

[John Galt]

Obama has already proven that the Rule of Law does not exist in his administration by screwing the secured creditors over to appease the unions in the GM and Chrysler takeovers. I have never believed in defined benefits, as promises that are made on the backs of future generations are too easy to ask for and to grant. This is the epitome of fraud, deceit and theft. Why should I accept having half of my labors stolen to provide a retirement and benefit package for someone else when I am currently unable to provide such for myself, due to excessive taxation and regulation? Were people promised things? Apparently, but, don't expect me to be guilted into submission by thinking my morality can be used against me to justify the continued plunder of our labors. These problems are nothing more than the inevitable consequences of Progressive Liberalism and it's going to get REAL fun to watch and since this is now the world we now live in, it's more or less a declaration of every man for himself!
By the way, Austrian Economics predicted all of this too!

 

[hornadylnl]

Yes, it's wrong to promise a worker a pension and then renege on it. But that is no more wrong than the worker demanding the government to use their gun on others to make up the pension money through higher taxes.

It would be interesting to see a survey on those who draw social security. See how many actually understand that their current benefits are at the expense of their own flesh and blood children and grandchildren. Government pensions are no different.

Could you honestly look at your young grandchild and tell them that their future will suffer so that you can receive what someone long dead promised you?