(FinalCall.com) – Anywhere from 50 to 100 cities in 2011 may be declared bankrupt. This bold prediction, made by financial analyst Meredith Whitney last year in media reports, coupled with mounting debt facing cities and states has financial budget officers and legislative officials on state and local levels in a panic. States are frantically implementing austerity measures, cutting important programs that leave the most vulnerable residents even worse off.
Camden, N.J. cut one-half its police force and one-third of its firefighters in a city known for high crime and where more than 40,000 of its 80,000 residents live in poverty. Oakland reduced its police force by 10 percent, leaving fewer than 700 officers in a city with a population of over 400,000.
Tulsa, Okla. could potentially lay off 147 firefighters whereas Trenton, N.J. avoided having one-third of its fire department axed due to receiving a $13.7 million grant from FEMA. Layoffs in sanitation departments from Bessemer City, Ala. to New York City have resulted in hardships for many. Cuts in city services is just the tip of the iceberg, observe analysts.
“The deficits that these tax cuts help create are being used to justify a host of austerity measures that will harm Americans of all races, but will hit Blacks and Latinos the hardest,” said Brian Miller, executive director of United for A Fair Economy in a Jan. 14 press release for its annual State of the Dream report.
“With 42 percent of Blacks and 37 percent of Latinos lacking the funds to meet minimal household expenses for even three months should they become unemployed, cutting public assistance programs will have devastating impacts on Black and Latino workers,” continued Mr. Miller. Cuts have also adversely affected other underserved groups.
“We’ve seen a lot of cuts to programs that keep the elderly and disabled in their homes and out of institutions. The bottom line is that many, many of these state budget cuts really have a deep impact on states’ most vulnerable residents,” Phil Oliff, policy analyst for the Center on Budget and Policy Priorities told The Final Call.
Analysts report states have spent as much as half a trillion dollars more than they have collected in taxes and have been barely “getting by” on federal stimulus money.
The New York Times reported, “policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.”
This mounting financial crisis has led to cuts in health care, education, police and fire services and social service programs. Some local and state governments are in such dire conditions there are murmurings from some the situation is a similar yet eerie precursor to the eventual debt crisis engulfing Europe and the subprime mortgage debacle that hit the U.S.
California is facing a $20 billion budget deficit and Illinois potentially $15 billion. According to the Center on Budget and Policy Priorities, to date some 44 states and the District of Columbia are projecting budget shortfalls for fiscal year 2012, which begins July 1, 2011 in most states.
“Titanic and Sinking: The Illinois Budget Disaster,” a forthcoming report scheduled for release Feb. 1 paints an ominous picture stating that by the end of the 2010 fiscal year, the shortage of ready cash for the state was “so severe” and the state was more than seven months behind in paying its bills. What does this mean for middle income, lower middle income and the working poor?
“States provide aid, they provide money to local governments to the extent that, that money if it shrinks…could have a major impact on local budgets for cities and that can lead to things like layoffs of police, firefighters and cuts to city services,” notes Mr. Oliff.
In Illinois, there were delays in state employee health insurance reimbursements, forcing some to pay medical providers upfront and delays in payments to pharmacies, funeral homes and social service providers, continued the Titanic and Sinking report.
The Center on Budget and Policy Priorities also noted that due to steady decline in tax revenue and budget reserves largely drained, the vast majority of states have made spending cuts that hurt families and reduce necessary services.
The center notes cuts in 46 states plus the District of Columbia since 2008 have occurred in all major areas of state services, including health care (31 states), services to the elderly and disabled (29 states and the District of Columbia), K-12 education (34 states and the District of Columbia), higher education (43 states), and other areas.
In Arizona preschool for 4,328 children was eliminated along with funding for schools to provide additional support to disadvantaged children from preschool to third grade as well as aid for computers, classroom supplies and books.
Additional cuts in services included:
* The South Carolina Department of Juvenile Justice lost almost one-fourth of its state funding, resulting in over 260 layoffs and the closing of five group homes, two dormitories, and 25 after-school programs.
* California is eliminating cost-of-living adjustments to cash assistance programs for low-income families and cutting child care subsidies.
* Colorado is cutting payment rates for mental health providers and eliminating funding for residential treatment for an estimated 626 patients each year in the state’s mental health institutes.
Cuts to state services not only harm vulnerable residents but also worsen the recession and dampen the recovery by reducing overall economic activity. When states cut spending, they lay off employees, cancel contracts with vendors, reduce payments to businesses and nonprofits that provide services, and cut benefit payments to individuals, notes the CBPP. City governments are finding themselves in financial binds because they are not being paid by the states.
Over 230 mayors from around the country met with Pres. Barack Obama, federal lawmakers and cabinet members at the 79th winter meeting of the United States Conference of Mayors in Washington, D.C., Jan. 19-21 with job creation strategies being among the top priority for discussion.
“The jobs picture for cities and suburbs remains extremely challenging,” said Elizabeth Kautz, mayor of Burnsville, MN and conference president in a Jan. 19 press release. According to an economic report released by the Conference of Mayors and Global Insight, “nearly one-third of the nation’s 363 metro areas will still have an unemployment rate higher than 10% at the end of 2011.” The report also notes that 42 percent (152) metropolitan areas will not gain back their pre-recession job levels until after 2014.
Dr. William Darity, arts and sciences professor of public policy studies and professor of African and African American Studies and Economics at Duke University told The Final Call the high poverty rate is a direct result of the current economic crisis and what he calls, “the continuing problem of trying to provide support to folks who are suffering in the midst of this crisis when states are facing huge budget deficits.”
While local, state and federal legislators, economists, financial analysts and the like, struggle to steer a sinking ship, one must look no further for guidance, counsel and advice than to the Honorable Minister Louis Farrakhan. His quintessential book, “A Torchlight for America,” though published in 1993, offers perfect guidance for today.
Min. Farrakhan lays out a detailed and systematic solution to America’s economic woes in the chapter titled “Rebuilding the Economy.” Reducing the federal deficit and budget debt, job creation and job growth are but a few of the areas where the Minister offers divine guidance.
He writes: “We need, first of all, a new state of mind among leadership in government and the business community. A new state of mind that sees the right to work as central to having a free, just and equitable society — as central to promoting family values. The government and private business should work together to ensure that every American has a job.”