I’ve been warning of the U.S. state and local pension debacle for some time, and especially how the government is coming after you – the taxpayer – for a bailout.
Just last week I spoke about the dire financial situation in Puerto Rico, and how years of out-of-control spending inspired the biggest governmental bankruptcy in U.S. history.
But it’s only going to get worse.
Come to find out, some U.S. state residents are taking matters into their own hands and they’re leaving in hopes of greener pastures.
I’m talking about The Great State Migration.
And I’m not one bit surprised: Citizens are fed up with how states pick their pockets through higher taxes, fees, and needless regulations. They’re hightailing it for a new state with better job opportunities, lower costs of living and lower taxes.
The latest shoe to drop is Connecticut, a state struggling with a weaker economy and soaring budget deficits. While they were busy raising taxes, top earners in the state saw the writing on the wall and relocated elsewhere.
As a result, Connecticut tax revenues from the top 100 taxpayers dropped nearly 50% in 2016 from the same period a year earlier. This equates to nearly $200 million.
You read that right: A staggering $200 million drop in tax revenues!
But it gets worse.
The lost revenue magnifies the state’s budget problems. In fact, Connecticut’s projected deficit for the new fiscal year jumped 35% to $2.3 billion.
And contending with their own budget woes, city leaders in Hartford, Connecticut, have taken a step toward bankruptcy by soliciting proposals from law firms specializing in Chapter 9 protection.
And while they could use a cash infusion from the state, I wouldn’t hold my breath!
Unfortunately, Connecticut and Hartford are just the latest examples, with more to come.
And that’s because of enormous underfunded state and local pension liabilities, estimated at $3.85 trillion this year in a report by the Hoover Institution.
That’s not a typo: That’s trillion with a “T.”
Worse yet, that figure is up $434 billion in the last year.
The bottom line: Years of overspending and accounting gimmicks are coming home to roost. And the solution is for the government to dig deeper into your pockets, while it cuts pension benefits.
But just how are governments going to maneuver their way out of this?
They’re not.
When governments get their backs against the wall, historically they turn first against their own citizens by raising taxes, loading up on fees, and even outright confiscations.
That’s why savvy investors are pickier than ever when it comes to where they put their money. Right now, I have my eyes set on physical gold and silver when the time’s right.
Good investing,
Mike Burnick
William Riley May 20, 2017
If I point these facts out at public forums, and run for a Congressional seat from either Party, and am elected, here is what happens. As soon as I get to Wash DC a Party leader will make an appointment top talk with me. He will congratulate me and then point out that I am not personally responsible for the deficit spending, and the $20 Trillion cumulative annual Federal Budget deficit. He will point out that Pres Obama spent $8 Trillion of that deficit and never lost popularity. So if I want to hold that Congressional seat I need to follow Party Leaders and go along to get along. If I do so The Party will pump lots of money into my re-election campaign.
If I do not, the Party may choose another path.
Fred May 19, 2017
Where should I move – which states are the most conservative in their pension funding? I currently live in MD. Where can I find a list of un-funded obligations by state?
Joe May 19, 2017
Where have you been? This has been going on for more than two decades!
Jug May 19, 2017
I am surprised that it is CONNECRICUT. I truly believe it should be NEW YORK, taxes are very e high – property taxes especially, a house worth $300K taxes levied in NY are around $10K per year and similar value house in MD the taxes will be around $2,8K per year.
Sooner than later there will be BIG uproar in NY state and politicians are just busy lining up their pockets. Three politicians are already facing JAIL sentence and believe there will be more. I am sure people are also leaving NY state for good.
The TAX control/reduction should be a national issue. Politicians understand only one language – ELECTIONS. Defeat is the only answer for corrupt politicians.
Catherine Rawson May 18, 2017
Mike, I feel like you’ve left something out. Where do we go to escape the governmentS (at every level) from turning our pockets inside-out and shaking us by the feet to find the last penny (as Russia did in the Ukraine and elsewhere in the 1920’s), including our horded gold and silver? Is there a ” safe haven” within this country? I think not. Then where do we go, and how, so that we are not endlessly pursued by enemy-of-the-people #1, big undisciplined, unscrupulous government? Please tell us the rest. Catherine
John F Thomas May 18, 2017
The citizens of this country are responsible for our situation due to their inability to really get engaged with the government political system and getting sucked into devastating bailout
Methods of handling our governmenntak inability to act inteillengy. I have yet to see ALL of our so called representatives reducing their paychecks to aid in our governmental resonsibilities to. Reduce our Greeley spending habits. This situation DEMANDS honest solutions in every
Governmental department to operate on a bare bones income. Gut the goodies from your spending plans and learn to operate within your income, and stop this stupid idea that the tax payers as you answer to solid fiscal operations!! In short tighten YOUR SPENDING HABITS,,
Roy May 18, 2017
It amazes me the stupidity of voters here in New York -probably other places. Look at NY City. Probably the most expensive place to “live” in the US, and they keep voting for DiBlasio, Cuomo, and the other Democrats. Reasons:
the wealthy there don’t care – they got theirs. The illegals which are now no doubt the majority there now, want to keep the god times of freebies for all coming. The others who will tell you about all the theaters, restaurants, and places they can’t afford (OK, museums are free) have been conditioned to rent parking garages at about $500 a month and apartments at $2,000 – $3,000 per month, endless traffic tie ups and arrogant attitudes where the first two rules of survival there are don’t look at anyone and don’t talk to anyone, and stress on the streets and jobs in too many cases – these are the people who just don’t have the courage or smarts to change their lives for betterment elsewhere. Oh well, best they all stay there among themselves. A special kind of “culture” in NYC.
Richard Daschbach May 17, 2017
MAKE AMERICA THINK AGAIN
anthony barbuto May 17, 2017
i used to live on Long Island, NY, back in the 1970s. At THAT time, the taxes were going thru the roof. Part of the blame were the civil service unions ( oh sorry they are “associations”)…After the “Ninny” John Lindsay, Mayor of NYC, made parity a reality with the police, sanitation and fire unions ( ooops…associations)…their pay skyrocketed. Out in Long Island the civil service wanted the same. Local legislators said..” show us WHY we should raise your wages…what ELSE are u going to do?”….The police said they would all get degrees in law and or police science. Once they did that the salaries went over $100,000 per cop. So, you have police, sanitation and fire making ridiculous wages, you have local cops making the same…the taxes on LI went ape and many business and middle class people moved out. With wage earners moving out who is going to pay those huge salaries when these people retire?…..the people on welfare?….I don;t think so. Look at Detroit. You pushed out the middle class…who is going to pay for the retirement of their civil servants?….who is going to pay for the retirement of the UAWs?….NO ONE, so the city is bankrupt..With more jobs available in retail at min wage….you are making $19-20,000 per year. Can these wage earners afford to pay $5000 and up for local taxes to pay for these retiring ” civil servants”?….”You aint seen nothing yet”. America is in the toilet…soon, some one will flush the lever…and the 1929 depression is going to look like Christmas..!…You can’t keep spending , spending ,,,throwing tax money away. You are losing the people who were contributing…the middle class. The Middle Class is dying….Making $19,000 a year, you are a serf!! I met a retired NY city sanitation Manager. HE retired making $180,000 a yr. He said his biggest problem were the workers. They were ONLY making around $100,000 per year after 2 years. They wanted to know why they were not making more?…..Do you see this insane picture?….People making $20,000 paying for civil servants making $100,000 per year?????……it is not sustainable…
john May 18, 2017
100k a year in NYC is a poverty wage.
Steve May 17, 2017
So, what will be the first domino to fall: a state, a pension plan, student loans, car loans, the European Union, Italy, etc. And where is safe harbor: bank credit (savings account), block-chain, fiat money (paper dollars), silver, gold, artwork, diamonds?
H. Craig Bradley May 17, 2017
I TOLD YOU SO
The continuation of the sovereign debt crisis at the state and local levels ( including underfunded large public employee pension funds) is a trend in progress. There is nothing the Federal Government (Congress) can or will do about it either. Some big blow-ups on tap during President Trump’s tenure, in all likelihood. He should position himself to deflect the blame that is sure to be directed his way by inept Democratic State Political leaders.
H. Horrace Newberry May 17, 2017
I Feel fortunate to live in the State of Texas where low taxes & good economic policy combine to afford a good outlook for the present and near future for it’s citizens. Texas would, without a doubt, succeed to become it’s own sovereign republic again, rather than endure such treatment from the federal government… especially if the timing is right… that is to say: after the Federal government begins to lose control of it’s own vital fractions… the military, etc.
Mark O HARA May 17, 2017
How about, when will Don signal our next market selloff?
Stephen Ettinger May 17, 2017
I have a question for Mike B.
This is I am sure one of the first times you are going to get this question Mike. Everyone is screaming to us the readers to get defensive, hunker down, as the Market is way over heated. The Casey Rport does the same as you. Dr. DRey – doom and Gloom says the same. – Watch out, and hedge as every penny is going to be sucked out of our nahds. SO HERE GOES – MY QUESTION????????????
In 1981 during the Regan Administration, a group of men got together, and made a deal with Reagan which he signed into law. I did the research. The law was designed to raise taxes. The bill they created was called the Tax Equity and Fiscal Responsibility Act known in Washington Circles as TEFRA. This is the Treasuries Secret Weapon to pay off the National Debt. It gives the Treasury the right to take up to 50% of your retirement savings electronically without you even knowing it. Qualified accounts like my IRA, a 401K 403B profit sharing defined benefit plan and the like can be confiscated or slashed significantly if the State of the Union becomes that dire. It is a law and on the books and has not been repealed. Per your analysis and many others, we are there and headed for worse. How can I shelter these retirement accounts I have in place now for 30 years without losing the funds that could be confiscated based upon a national emergency declaired by the treasury?
D. M. Stewart May 17, 2017
Mike: Where are they migrating to or are they migrating to gold and silver instead of a new domicile? What will stop the government from confiscating gold or silver if they have the power to confiscate anything else?
Howard Moechnig May 17, 2017
If these states have a death tax they lose that as well when the rich leave their state, which can add up pretty quickly to large sums of money.
FU May 17, 2017
You clown and your right-wing/libertarian tax-cutting criminals deserve to be sent to the guillotines … and just might rightly be so in due course. The criminally destructive tax-cutting in the 30+ years that brought about monstrous debts at all levels(local, state, federal).
mjk90620 May 18, 2017
Why don’t Democrats set up their own welfare states and leave us self sufficient people alone?Stealing from others through govt isn’t compassion,it’s theft.
Bob May 17, 2017
Consider the possibility of a cap on government retirement benefits as a potential alternative.
The taxpayers are likely to vote against politicians who raise their taxes, and the politicians know this. The taxpayers also resent government pensions that are more than the taxpayer earns each year. By capping retirement benefits to a flat figure, potentially, $60,000 a year, the taxpayers AND the government retirees receiving less that $60,000 would support such a measure. Now run the figures. Surprise!