The Upcoming Crisis !!!!!

I have forwarded this information to numerous news organizations, financial sites, budget planners and everyone I can think of with no reaction or interest whatsoever.  So any reader of this blog can reflect on this upcoming situation without having to wade through anyone else's take on the matter.

School districts, cities, towns and all municipalities are fast approaching the time for establishing their budgets going forward.  It is well established that this will involve substantial cutbacks.  The major result of which will be layoffs.  Many have read articles about cities such as Philadelphia,  Providence, R.I. and others being compelled to greatly reduce the level of teachers.  Other headlines address all kinds of city and town employee cutbacks.

Employers of teachers and city & town workers do not pay an unemployment tax on their payroll as the typical employer does.  Rather, they reimburse the state Unemployment Division dollar for dollar for benefits paid out to eligible individuals.  This will result in direct charges to the employers for up to 26 weeks of benefits per laid off person  This so-called "Reimbursing Employer" arrangement is beneficial during times of low, stable unemployment - but can really clobber budgets when layoffs are high.

So what does this really mean?  Well, normal employers have seen their "contribution rate" increase since their accounts have generally paid out more in benefits than they have contributed in taxes to the unemployment fund during the Great Recession..  Actually, this has already caused some states to limit the longevity of benefits to make their states more "business friendly".  Basically, to try to cut the burden of unemployment payroll taxes to make it appear that business costs are less compared to other states that have not done so.

But the hit on school districts, cities and towns has not really even occurred yet.  This will come in July and August of 2011 when the layoffs occur and the claims are filed.  A teacher without a contract for the upcoming school year will not have "reasonable assurance" of returning to their position and therefore will be eligible for unemployment benefits.  A laid off city, town or municipal employee will also be immediately eligible.

Just contemplate the impact.  If these thousands upon thousands of individuals collect unemployment - with the former employers being charged dollar for dollar for benefits paid - we are talking very, very large sums.  Huge expenditures.

Just take an example of a laid off teacher receiving $300 a week for up to 26 weeks - all being billed to the school district.  Multiply this by all the laid off school teachers nationwide.  The total will be massive.  And I'm just talking about the direct costs to the school districts.  (Of course, a similar scenario exists for cities, towns and municipalities).

How does this impact payment of property taxes?  Let's say a home-owning household is headed by two wage-earners, one of whom is a teacher or public employee.  If one is laid off, how do they pay their property taxes?  In a family with a single laid off teacher wage earner - how do they pay property taxes, mortgage or any other bills for that matter?  With relentlessly increasing food and energy bills?  Will they be in a position to contribute towards our 70% consumer spending driven economy?  Or will they, by necessity, contribute unwillingly to our national debt?

Our government is not even close to even recognizing - much less answering these types of questions.  Our elected officials are myopically preoccupied with matters that mean little.  It's not a matter of "failing to see the forest for the trees", but rather being totally blind to the obvious.  A state of complete and utter non-preparedness.  When the government and the media that should make an attempt to make it accountable cannot comprehend a coming crisis - then the citizenry is left to bear the brunt of the results.  I guess we learned nothing from Katrina and the financial crisis.  We might as well go by the name FEMA and congratulate our leaders by saying "good job, Brownie".