Local Government Fiscal Emergency: Fresno, CA

Tax revenue at state and local governments has plummeted. With house prices in California down substantially, it is even more dire for municipalities there. The result will be widespread budget cuts and, where possible, income tax hikes. Budget cuts alone won’t get you there.

Below is one specific example in Fresno, California. They are taking money from their reserve fund to make ends meet. That is not sustainable. They are an example of the fiscal emergency coming to a local municipality near you.

I guarantee you this will have a negative impact on the economy and on house prices and foreclosures, a major reason I still give a double dip even odds.

  1. Anonymous says

    Anyone following municipal governments sees that City governments all over the US have been spending far too much money .. mostly because of labor unions that have driven up the cost of labor to the point that government labor is 25%-40% more expensive than private sector labor. Additionally, labor unions typically hobble their employers with “work rules” which ultimately decrease the productivity of their staff, and force City governments to hire more people in order to insure that the necessary jobs get done.

    And then there are the pensions that have become so painful that most CA Cities are seeing pension fund contributions in the 25%-30% of the General Fund being consumed by post-retirement costs.

    Most CA City governments have made no effort to provide on-line services, so there are no savings in that department.

    Most of the big CA Cities are now seeing public safety employee salaries in the $150-$250K range, and some of the top earners now in the $300K range. These people are guaranteed pensions of upwards of 90% of their high years salaries–meaning that police and fire employees will be receiving from $2M-$3M up to $8M in pension payouts (over a 30-year) retirement. None of the CA Cities have moved to cap salaries, or to delink pensions for salaries. It is a death spiral, to be sure.

    Unfortunately, most City Councils are more amateurs, than not. Many have taken big buckets of union money, so they are disinclined to do anything about this. In the long run, the downturn is a good thing, since taxpayers are now being given more information about government management (meaning mismanagement) of the financial affairs of the various levels of government than we have seen in decades.

  2. fresnodan says

    Well, as bad as that is, at least they have not had their first 100 degree day of the year yet. I predict a very hot year for Fresno

  3. Damien Hoffman says

    This is a great post, Ed. Nice work. I am citing you at our cite.

Comments are closed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More