In May/June of 2010 when Cleveland county was preparing the budget for FY 2010/2011 the following was a statement from the County Manager David Dear.
“The county unemployment rate is currently 14.3%. Retail sales have continued to decline and local housing starts are currently very depressed. Despite declining revenues, this budget focuses on maintaining overall public expenditures at current levels.”
That included the issuing of $22 million in limited obligation bonds.
Julie Crawshaw from Money News reported today Dec 27th:
“U.S. Senator Tom Coburn warned Americans this Sunday of an apocalyptic economic future, with Great Depression levels of unemployment and a destruction of the country’s middle class.”
Sen Coburn told Fox News that unemployment could reach 18%, and:
“if we didn’t take some pain now, we’re going to experience apocalyptic pain, and it’s going to be out of our control.”
Is a perfect storm brewing just over the horizon for Cleveland county and NC?
Greg Brown from MoneyNews.com reports:
“Meredith Whitney, the former Oppenheimer analyst whose dead-on predictions on the banking crisis vaulted her to fame, said on CNBC that she stands by her controversial new call: Massive unrest across the country as the municipal-bond market sells off.”
Other analysts have disagreed with Whitney’s assessment, however in June of 2010 Warren Buffet agreed that a US Bond Market meltdown was on the way.
In December Alan Greenspan, who served as Fed chairman from Aug. 11, 1987 to Jan. 31, 2006, said:
“A bond-market crisis is likely unless we do something about the budget deficit,”
In the CNBC interview, Whitney estimates that 32% of State funding is provided by the Federal Government. And the state’s in turn make up 40% of municipal [county] budgets.
Cleveland county leaders claim to run a “balanced” budget. But if 40% of our budget comes from Raleigh, are we truly running a balanced budget?
Moody’s Aa3 debt rating for Cleveland County Public Facilities Corporation, the issuer of $22 million dollars worth of “limited obligation” bonds, is one level away from being downgraded from low risk to “Medium” risk.
”A limited obligation bond, or revenue bond, differs from a general bond in that a limited obligation bond is not linked directly to a municipality’s tax revenue. Limited obligation bonds are payable from the facility for which the bond was originally issued.”
Cleveland county formed the Cleveland County Public Facilities Corporation to issue $22 million in limited obligation bonds to build the LeGrand Center at Cleveland Community College, and the new Shelby Middle School.
Why a limited obligation fund? Because Cleveland county did not want to raise our taxes to pay for it. Instead, they opened a new credit card, under a different name, based on new ”revenue” it received from Raleigh.
But where is Raleigh getting the money? The Center on Budget and Policy Priorities reported on December 16th that NC’s projected budget deficit for FY 2012 is almost $4 billion. Raleigh has a buddy that owns a printing press, called the Federal Reserve.
The $800 billion ”Stimulus Package” (properly known as the American Recovery and Re-Investment Act of 2009) is currently financing the construction of the new Shelby Middle School and the LeGrand Center. http://www.ncrecovery.gov/opportunities/recoveryzoneBonds.aspx
So the Fed’s print the money and give it to the states, and the states doll it out to the counties. Cleveland county created the Cleveland County Public Facilities Corporation to issue $22 million in bonds with stimulus money; what’s the problem?
The problem is the Stimulus money runs out in June of 2011.
The Daily Beast reported in December about NC’s fiscal status:
“Like so many other states, North Carolina is finding it tough to pay for its health care system for low income residents, and that could lead to unpaid time off for state workers. The state could find itself on the hook for $500 million in Medicaid if federal funding isn’t renewed.
NC Senator Linda Garrou-D Forsyth said:
“I would hope (we won’t have furloughs), but I would not be surprised,”
Sen. Garrou-D-Forsyth is co-chairwoman of the Senate’s budget-writing Appropriations Committee.
Ironically, Mrs. Garrou’s husband, John Garrou, C0-Chairs NC’s Legislative Commission on Global Climate Change.
Funding bills have been introduced for the Legislative Commission on Global Climate Change that include:
- H 1803/S 1224, Study NC Programs that Impact Environment.
- H 1804/S 1225, Energy Policy Council Green Energy Study.
- H 1805/S 1222, Funds to Assess/Monitor NC Climate Change.
- H 1806/S 1221, Establish NC Commission on Climate Change.
- H 1807, Supporting Comprehensive Federal Climate Change Legislation.
- H 1808/S 1223, NC Climate Adaptation Strategy.
- H 1809/S 1220, Study Carbon Offsets and Carbon Sequestration.
When the states start lining up for their bailouts, and the Federal Reserve begins printing trillions of more dollars in state bailouts, higher inflation is inevitable. Does Cleveland county have a plan in place if high inflation ensues, and staple items at the grocery store and gas pump start rising dramatically? Or for the increase in public assistance that would be needed if the biggest employer, State Employees, have to be furloughed?
In March 2010 David Dear submitted a report that stated:
“It is expected that the State of North Carolina will have an approximate $1 billion shortfall. The shortage at the state level will determine what other mandates will be sent down to counties.”
If Mr Dear is concerned about “shortages” from Raleigh at a $1 billion state deficit, what will the ”shortages” look like with a $4 billion deficit as The Center on Budget and Policy Priorities has estimated? To quote Mr. Dear, “What other mandates will be sent down to counties” from Raleigh? Furlough’s? Benefit cuts? Medicaid cuts? Releasing prisoners from jail early like California is? Retirement Plan cuts? Social Unrest?
Gaspee Gazette attempted to contact Mr. Dear to comment on this story by email and phone. As of the publishing date he has not responded.
Are the citizen’s of Shelby, and Cleveland county ready for some truth…or are we going to continue pretending that none of this exists? That this is America, and it can’t happen here.