Mayor warns Detroit is going broke, so are states and other cities

Detroit Mayor Dave Bing photo:mlive.com

10% pay cut needed to avoid receivership in 70 days

Stephen Pate, NJN Network, Charlottetown, Prince Edward Island, Canada, August 12, 2009 with story from

Dave Bing the Mayor of Detroit is warning city unions that unless they take a 10% hair cut Detroit will run out of money in 70 days. The unions are pushing back telling the mayor to borrow on future revenues.

The same story is being played out across the United States as municipal and state governments run out of cash. The recession has hit sales and income tax revenues hard. Ever harder hit have been property tax revenues which have plummeted from falling property valuations and the millions of abandoned homes with no owners to pay tax.

US municipal politics was built on predictable revenue streams from water, property, income and sales taxes. The revenue base is getting smaller with 16 million unemployed, the bankruptcy of GM and other large companies and reduced consumer spending.

The cities and states did not see it coming and have built decades over spending with patronage appointments and patronage spending. Too many state and municipal employees are in place because they worked for the right party.

Patronage appointments are seemingly incapable of dealing with the crisis on a fiscally sound basis and financial chaos is beginning. Patronage hires are not accustomed to fiscal restraint considering their qualifications are influence peddling.

Recent estimates place 40% of state and municipal governments in crisis. California has the largest deficit and has been cutting all spending. The latest to get hit are the California State universities and colleges, one of the finest and respected systems in the USA.

The LA Times reports massive cutbacks are coming this fall “To close its massive budget deficit, the state has slashed funding to its 110 community colleges, the 23-campus California State University and the 10-campus University of California, one of the nation’s leading research institutions.” LA Times

Mayor warns Detroit is going broke

DETROIT, Aug. 11 (UPI) — Detroit Mayor Dave Bing warned union workers the city is going broke and layoffs or pay cuts are the only way out of the fiscal crisis.
Mayor warns Detroit is going broke

DETROIT, Aug. 11 (UPI) — Detroit Mayor Dave Bing warned union workers the city is going broke and layoffs or pay cuts are the only way out of the fiscal crisis.

After an hour-long meeting with about 50 union leaders, Bing said, “you are talking about running out of cash in the next 60-70 days.”

He said a 10 percent pay cut by Aug. 28 would keep the city out of receivership. If the city goes officially broke, however, “all bets are off,” he said.

Bing predicted 1,000 of the city’s 13,000 workers would lose their jobs even if unions agreed to pay cuts, The Detroit News reported Tuesday.

Union leaders reacted angrily to Bing’s position. Henry Gaffney, president of the Amalgamated Transit Union called for Bing to “do your due diligence.”

John Riehl, president of the American Federation of State, County and Municipal Employees Local 207 said the mayor was “bluffing.”

“The city can always borrow money on anticipated revenues and get loans. That’s just business as usual,” he said.