December 31, 2007

The Never Ending Story

This story just keeps repeating itself over and over. Of course the falling tax revenues will really be a double whammy for 2008 and 2009 after hears of inflated real estate values which is really going to hit the county the worst as they are the ones who get their hands on that money first. When will the voters hold politician accountable for these actions? Better yet when will we stop them from taking these actions in the first place as they seem unable to muster the will the say no to the unions? If we do not stop the runaway spending on government union employees and silly pork projects that are 3x over budget before they start, there will be hell to pay in the next 10 years. We have yet to see what direct effect this will have on Lakewood but we suspect the same pattern of activity. This "never ending story" will have an end sooner rather than later unfortunately and it will not be a good one. And just like the bursting of the housing bubble it may start and spread much quicker than you think and will also spread much deeper into areas you would not expect, just like the sub-prime mortgage debacle (which we still dont know the full extent of).

Pols engaged in much selective perception in 2007
Article Last Updated: 12/30/2007 10:28:21 PM PST

If the unremarkable year of 2007 becomes known for anything around Los Angeles, it may be for the irresponsibility of public figures.

That doesn't necessarily mean the many actors who chose to act illegally and foolishly - that's pretty much a standard every year - but the selective perception of local and state governments when it came to looming problems.

The state

At the state level, legislators and Gov. Arnold Schwarzenegger ignored what anyone could have foreseen - that the housing crisis would put a severe squeeze on future revenues from property taxes.

But instead of anticipating the downturn in fortunes, Schwarzenegger and legislative Democrats blithely passed a spending plan for 2007-2008 that painted a rosy financial picture. They even predicted a $4 billion reserve that would never be possible.

The real news rolled out just weeks ago, when the reserve was adjusted to a $14 billion deficit, a fiscal emergency declared and a special session of the Legislature called to sort out the financial mess. Never mind that it was a mess created by ignoring what anyone could see.

The city

The lack of foresight demonstrated by Los Angeles city officials will also contribute greatly to establishing 2007 as something best forgotten. Like state politicians, Los Angeles' mayor and City Council failed to adequately plan for the financial future despite clear warning signs.

First, there was the phone tax. The longtime tax had been challenged in court and was likely to be ruled illegal, thus ending an annual $280 million revenue stream, long before city officials suddenly leapt into action with an "emergency" ballot initiative for the February primary election.

Yet even with the fate of those many millions in the balance, city leaders signed off on a 23 percent wage increase for the nation's highest-paid work force over the next five years, not even counting the numerous annual "step" increases for most employees. City officials justified the raises by saying the city could afford them, and the employees deserved them.

But just weeks later they suddenly realized that there was a $300 million deficit looming and they would have to start cutting back services.

And what if voters fail to open their wallets again to support the City Hall money pit by passing the new and expanded phone tax? Prepare for cuts to service - not to the size of the bureaucracy or paychecks, and certainly not to the lavish pay of politicians, their perks or staffs. It will come in the form of hiring fewer cops to protect the public despite promising that higher trash fees would pay for them.

The county

Los Angeles County officials may have not gotten into the same budget mess as the state and the city - not yet, anyhow - but they are also not off the hook for making decisions that will have financial implications down the road.

Property tax revenues collected countywide soared to $4.6 billion in the past five years due to the hot real-estate market. County supervisors happily spent the money on creating an even bigger budget with pay raises, bonuses, pension and health-benefits improvements for the 100,000 county employees.

But when the full brunt of the cooling housing market - plus all those foreclosed properties not paying taxes in the next few months - hits, the county may well be committed to its higher spending plan but with far less revenue.

Things are only looking bleaker for the economy next year. The housing downturn is predicted to slow revenue growth to only 1.3 percent in 2008, though financial commitments to employee contracts are much higher. And if there's a recession, well, things will go from bad to worse quickly. But because of this year of irresponsible financial choices, the city, the county and the state will be in a money bind.

And guess who they will turn to in an effort to bail them out - again?

Lakewood Accountability Action Group™ LAAG | | Lakewood, CA
A California Non Profit Association | Demanding action and accountability from local government™

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