Thursday, June 3, 2010

My View

Random thoughts from a warped and fevered mind...

Have you heard of the "Vallejo strategy"? If you haven't, you very well might start hearing more about it in the near future. What is the Vallejo strategy? Vallejo, CA, a city near San Francisco,  filed a Chapter 9 bankruptcy petition in May of 2008. Chapter 9 is the municipal equivalent of an individual filing a Chapter 13 bankruptcy petition to reorganize their debts. What happened to force this drastic action by city leaders? Massive unfunded pension liabilities that the city could not longer afford to pay. These were created when overly generous benefits were awarded to public service unions coupled with unrealistic expectations of how the underlying investments in the pension plans would perform. This perfect storm has far outstripped the ability of the city to meet current needs like trash pick up and police and fire protection as well as fund the pension obligations. The only recourse for the city was to file for protection under the bankruptcy code and attempt to renogotiate pension benefits. As Vallejo Mayor Osby Davis said, "We were robbing Peter to pay Paul, and Peter went broke and there was no one left to rob." Across our country, municipalities are robbing Peter to pay Paul, and eventually Peter will go broke.

If you are cooking alphabet soup on the stove, and leave it unattended, it could spell disaster.

I wrote several weeks ago about New Jersey Governor Chris Christie and his bold efforts to rein in the profligate spending in the New Jersey state budget. Shortly after assuming office, Governor Christie closed a $2.3 billion dollar shortfall in the state budget by enacting immediate spending cuts. He vetoed a tax on millionaires. He has proposed capping property tax increases at no more than 2.5% in a given year, providing much needed relief to property owners in the state. Property taxes in New Jersey have risen 60% since 2000. The Governor's latest proposal to close the budget deficit, estimated to be $10.7 billion next fiscal year, has sparked the ire of the National Education Association and the New Jersey Teacher's Union. His radical proposal? To ask New Jersey teachers to pay 1.5% of their salary toward their health insurance coverage. Currently, teachers in the state pay nothing toward their benefits; they are fully funded by the state. The reaction of the teachers union is indicative of what states and municipalities face when they try to control these costs. The union has spent $5 million on negative ads painting Governor Christie as evil and draconian for asking the teachers to help pay for their benefits. According to Governor Christie, "This is not about a fight with individual teachers. This is about a union that has decided that everyone they represent is entitled to free medical, dental, and vision benefits for themselves and their families from the day they are hired to the day they die." This will shape up to be a public policy debate that will have important ramifications not only for New Jersey, but for municipalities and states across the country.

My psychiatrist told me I was crazy. I told him I wanted a second opinion. He said, "Okay, you're ugly, too."

The disaster in the Gulf of Mexico continues to worsen, and fingers of blame are being pointed in all directions. There is no doubt that the oil spill from the Deep Horizon well operated by British Petroleum will be one of the worst environmental disasters in history. Could this have been prevented? That question will be debated for years, but here is a fact that all should know. Over the past five years, BP has one of the worst safety records of any major oil company. According to inspectors, BP rang up 760 "egregious and willful" violations of safety protocols. Compare that to Conoco and Sunoco, which had 8, and Exxon, which had 1. In fact, BP received a waiver of environmental regulations in 2009 from the Obama administration. Oh by the way, according to ABC News, the top recipient of campaign contributions from BP during the 2008 election cycle was candidate Barack Obama. One has to wonder about the objectivity of the enforcement of environmental and safety regulations for BP. This disaster will be used to curtail further drilling in the U.S. and its coastal waters, furthering our dependence on foreign oil. That is not the right response. As we examine this disaster and its effects, we should start with how the existing regulations are enforced in light of the safety record of each company.

A bus station is where the bus stops. A train station is where the train stops. On my desk, I have a work station...

And that, my friends, is my view.

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