Bankruptcy_Not_Just_a_Personal_Problem

Bankruptcy Not Just a Personal Problem J. A. Heard COMM/215 11/23/09 D. Olson Bankruptcy Not Just a Personal Problem Bankruptcy is not just a problem for consumers but the concern of State and local Governments, business entities, and churches as well. In California alone there is a 12.3% jobless rate that accounts for nearly two million citizens applying for unemployment benefits. The increase in unemployment has not only caused an increase in foreclosures but also it has caused a decrease in property taxes and a decrease in sales placing a huge burden on State and Local Government. The churches are also suffering by realizing a lack of donations caused by a struggling economy. With two million people out of work, mismanagement of finances is less significant than the loss of income. Without the ability to pay mortgages and bills, bankruptcy becomes the only option left for many consumers. This economic downturn is due to the recession the country is experiencing and is affecting cities across the nation from remaining solvent. I was not aware that a city could file for bankruptcy until recently. The city of Vallejo filed for bankruptcy in May 2008, due to a $16 million deficit in its $78 million general fund budget. Slammed by the decline in property and sales taxes, Vallejo's general fund shrunk to $65 million for 2009-10. Bankruptcy not only affects the creditability of the city, it drastically impedes its ability to providing services people depend on for survival. It directly impacts the city’s capacity to preserve public safety due to forced layoffs of civil servants. Police officers, paramedics and firefighters are just some of the service providers impacted by the recession. The city of Vallejo cut its police force by 18% that immediately allowed a 25% increase in crime. The response time for the fire departments in Vallejo has gone from five minutes to 25 minutes, which means one and two alarm fires are at risk of developing into three alarm fires. Not only is property at risk lives are at risk as well. The reduction in paramedics is equally frightening. Imagine suffering a cardiac arrest, stroke or a diabetic seizure with a response time for a paramedic taking as long as 30 minutes. In most cases the response time is too long to ensure the patient a chance for survival. Chronically ill individuals and the elderly are at greatest risk. The entire country faces similar setbacks and there is no immediate relief in sight. Absorbent wages and over funded pension plans were initially thought to be the major contributing factors to the downfall of the city of Vallejo; however the economic climate of lost jobs and foreclosures resulting in lost property taxes presented a much bigger problem. Guaranteed revenues that the city depended on from property taxes to fund its general budget disappeared as the result to real estate bubble bursting. The state of California is suffering from both lost revenues from property taxes and matching employee taxes resulting in the state acquiring a 43 billion dollar deficit. Not even churches have escaped from the dilemma of the current recession and are teeter on the verge of bankruptcy. A sagging economy results in reduced donations causing churches to fail to meet their obligations. This situation prevents the churches from accessing the equity in their property because banks are unwilling to lend when donations drop by 10% for three consecutive months. The Catholic Church is the largest non-governmental institution in American and depends totally on donations from its members to function. The Catholic Church cannot sustain on fewer contributions and expect to support its vast empire. *The U.S. Catholic Church is also the largest operator of private schools in the United States. Catholic owned and operated hospitals likewise account for 17% of all hospital admissions in America. Catholic Charities USA, spends an estimated $2.3 billion annually to operate soup kitchens (1) for the homeless, childcare services for the under privileged, refugee resettlement facilities, and housing for the elderly. If the economy does not improve soon the Catholic Church will have to liquidate assets and cut programs. Numerous other religious organizations find themselves facing the same financial issues and if forced to reduce their social services will place even greater burden on the government further slowing recovery of the current recession. Although bankruptcy is an option it further exacerbates an already bleak situation. Today bankruptcy cases flood Federal courts. Private Citizens are up against a wall financially, faced with a situation that many of them had nothing to do with. Honest, responsible people are finding themselves upside down in dept due to the collapse of the real estate industry that was out of their control. The Government attempted to remedy the situation by implementing a Stimulus Package intended to produce more jobs and curtail unemployment. Unfortunately, the large corporations that accepted stimulus funds automated their operations and began moving goods and services without generating new jobs. This phenomenon is visibly evident by the stock market recently trending upwards and unemployment trending upwards at the same time. Two-thirds of all stimulus funds are gone and only 4.8 billion dollars remain to turn this economy around. Businesses accepting future stimulus funds must guarantee new jobs; however this is too little too late. The economic climate is forcing a change in this country based on the way businesses pool their resources to resolve this dilemma. Private industry must no longer outsource jobs to foreign countries but rather create job opportunity at home. The effort of curtailing this recession is a humongous task, a task that the Federal Government cannot handle alone. Everyone must all do a part. Private industry must find a way to once again employ U.S. citizens or else everyone will all suffer the same fate of filing bankruptcy. History reflects that America grew on the shoulders of private industry and must return to the basics to survive this recession. This recession in is on the brink of a major depression that must be avoided at all costs. Bankruptcy is not just a personal issue, it is a national problem. If America considers itself a world leader, it must lead by example; resilience, fortitude and recovery are the characteristics necessary to survive. References (2002). THE ECONOMIC STRAIN ON THE CHURCH. Business Week, (1)