Eye On Modesto

COMMUNITY BUDGETS

By Dave Thomas

Good morning.  I appreciate your taking the time to read this, and welcome your comments, both pro and con.

As you can see from the other attachment to my e-mail message, the City of Modesto has run deficit budgets over the most recent 7 years.  Actually, 6 years are known, and 2013 is only estimated.  But 2013 is seriously in deficit. 

There are several reasons for this, but the most easily identified factor is employee compensation.  A City job is worth at least 3.5 private sector jobs. City employee benefits are unconscionably higher than private sector benefits.  There is no reason a Modesto Citizen should be required to provide these enormous benefits, for which Employees pay virtually nothing.  Unfortunately, this situation is true for County, State and Federal employees.

The BEE repeatedly reports that City, County, MID and School employees have not received a raise in X years.  I need you to know that this is total nonsense.  Every one of those employees receives regularly scheduled “step and column” raises.  If you think I am wrong, look at the CAFR’s and see that, despite the lament that the number of employees is down, payroll is up, and it is significantly up.  The BEE recently reported that the median City Employee salary was $99,552 annually, not including overtime or bonus.  This is, as they say, unsustainable.

Despite this obvious fact, ALL our governments refuse to actually reduce salaries and benefits.  If you think this is an overstatement, just read the paper.  Every City union member has received multiple raises, and more are on the way.  Despite the fact that salaries and benefits are out of line, despite the fact that ALL of our governments are woefully underfunding pensions, despite the fact that they are ALL running deficit budgets, they continue to buy the union vote on the backs of the rest of us. 

All of us know that ALL our governments are too expensive; forget waste, fraud, corruption and stupid, payrolls are destroying every government and utility in America.  I am afraid that they are all going to fail, to one degree or another.

If we carry this discussion one step forward, I think we will agree that we are NOT spending too much money keeping our streets in perfect repair; we are NOT maintaining our City trees; we do NOT have clean, safe, needle and glass-free parks: we have NOT solved the plaque of homeless; our schools are NOT producing world-class graduates; our water, electricity, and sewer rates are NOT the lowest in the nation; and our crime rate is NOT reducing.  Friends, we have a problem, and it is NOW and it is LARGE. 

Let me make some guesses as to what will continue to happen if we do not solve this problem.

Your local and State taxes are going to rise like rockets.  Depending on your income and your wealth, the amount of extra taxes could be devastating.  Prop 30 will increase both your State income and sales tax.  Sales tax will be 7.625%.  Your income tax could increase between 21.5 and 29.13%, retroactive to 1/1/2012 .  Californians pay the highest State taxes in America.  And local governments will want even more.

Your Federal income tax could increase by as much as 14%, and most of us will see some increase.  Your Capital Gain tax might double, and your estate tax will increase by 500%. The maximum Estate and Gift tax bracket will become 60% on 1/1/2013!!  And the Feds will want even more.

Both medical care AND medical insurance costs are going to increase by large amounts every year for a decade.  It will be more and more difficult to obtain medical care from MD’s as nurses and technicians take over the majority of patient contacts.  Hospitals will close and their services will disappear from many communities.  “Discretionary procedures” like joint replacement, reconstruction cosmetic surgery will be severely rationed, medical appliances will become both rationed and expensive, and the elderly will not be well served.  Obamacare will be dominated by administrators paid enormous salaries.  And they will want even more.

Utility rates will continue to increase.  The MID debacle at the water plant will cost you dearly!  You are already paying for $187,905,000 of debt for a water plant that is half built.  You will pay at least another $50 Million or so to fix the junk MID calls “Phase 2”.  Consider the facts; divide the money spent by the annual output of this plant, and it comes to $6,264 per acre-foot just for the building.  Some may say that is an unfair way to calculate the cost.  Well, did you know that they have paid interest only on the last $93 Million they borrowed IN 2007!  AND, they are paying as much as 5.5% interest in a 1% interest environment. Your water and electricity rates will increase by at least 20% during the next 4 years.  And they will want even more.

Any product that contains or is transported by petroleum products or fuels will cost significantly more starting yesterday.  This includes virtually everything you eat, tires, many drugs, gasoline, diesel, and most of the clothing you use.  This includes the cost of airplane, bus, boat and train fuels and lubricants.  Heating your home will become very expensive.  The Feds will punish both the petroleum and coal industries with onerous taxation and costly regulation.  And they will want even more.

City debt, including the Redevelopment Agency debt is out of control.  We have upside down “interest rate swap” debt, and debt where we pay 16 years of interest with no payment toward principal.  The City has borrowed far too much.  And they will want even more.

Your property and Mello Roos tax, plus your fair share of school bonds will continue to go up.  School fiscal fiascos and mismanagement will continue to eat away your income.  These monuments to foolishness and greedy school administrators are a disgrace of waste and arrogance.  Despite the facts that enrollments are down over 12% in 4 years, some classes have 9 or fewer students, teacher and administrator pay is rocketing up, utility costs and maintenance costs are rocketing up, our elected school boards refuse to reduce teacher and administrator jobs.  They are actually proud that they have “saved jobs”.  Well, who PAYS for those unnecessary jobs???  Your Mello Roos tax increases every year.  And 71% of our Stanislaus State freshmen require remedial English, math or both.  School Boards have failed, your kids are cheated out of a quality education, and schools are out of money.  And they will want even more.

Finally, virtually every District, City, County, State and Federal entity will propose or actually impose new taxes and fees on you.  They will insist that they want to invigorate the economy, serve you better, and save jobs as well as the children.  You know that is all baloney.  The only jobs they want to save are their own, and they demand your money to do it.  The National Geographic magazine wrote a series on the fall of the Roman Empire.  A paraphrase of their conclusion would be, “The Roman government bled its Citizens white with taxes needed to support their vast, corrupt empire.”  And our greedy, ruthless and powerful governments will want even more, and more and more.

I believe the only solution to this insane fiscal situation is to starve these governments into submission.  Governmental spending is the problem, thus SPENDING must be controlled. The only way to bring employee costs into line is to force the unions to accept parity with the Citizens who pay their wages.  We must remove those elected officials who continue to stuff our hard earned money into the governmental black hole.  We must elect hard-nosed Citizens who will reduce the size of government and treat public money as sacred.  Smaller, less intrusive, less expensive, totally transparent and honest government is the only solution.  If you and I fail to achieve these goals, ALL of us will suffer and our governments will fail.

Thank you for reading, and let me know what you think.  Dave

ModestoDeficitBudgets