By Amanda Page-Hoongrajok
Part II of of a two part series. Here’s Part I.
The implication of banks’ power over state and local budget management is that money is effectively being transferred from residents of the locality to big banks. Public schools are being shut down, social services to the economically most vulnerable are cut while banks take in millions of dollars in fees and interest payments.
By Amanda Page-Hoongrajook
Part I of of a two part series. Here’s Part II.
Over the past decade and a half, the US has experienced a slew of municipal bankruptcies and defaults. Most notably, the City of Detroit filed for bankruptcy in 2013 and even more recently Puerto Rico defaulted on its debt for a second time. Even non-defaulting municipalities’ finances are being scrutinized – Illinois has been singled out for its underfunded public pension funds. Why are state and local budgets all of a sudden so fragile and does the financial crisis have anything to do with it?
One narrative claims that states and municipalities have simply spent more than their means, particularly on overly generous pensions for public employees. If governments engaged in fiscally irresponsible behavior, imposing an austerity agenda that cut expenditures – such as public school budget allocation and benefits to pension beneficiaries – might be more justifiable.
The approach taken by Roosevelt Institute’s Refund America Project involves a thorough look at municipal income statements, inspecting both the revenue and expenditure side. They conclude the story isn’t about municipalities overspending; it is about big banks leveraging their power over state and local governments to extract money through financial deals. Read more