THE FALL OF SAN DIEGO

The Fall of San Diego

The fall of San Diego

Introduction

The city of the San Diego is considered to be the most desirable place to live in terms of its location, climate and its employment market condition. Additionally, the defensive economy of San Diego is the result of its sprouting tourism, telecom and bio tech industries. In past few years, the recession hit American states; however, it has the lowest unemployment rate as compared to other states. It was declared as the 'The Best Place for Business and Careers' in 2002 by Forbes/Milken Institute's list. This was due to the fact, that it has the strongest economy and exclusive beneficial strategies for all new local businesses. Despite its strong economy and all of the facilities it has provided, the city has been confronted with the worst crisis of all the times. These financial crises did not occur all of a sudden, the crisis's seeds were ploughed since three decades (CQ Press, 2006).

Discussion

During 1978, California approved a ballot, in which they amended the constitution of the state and restricted the amount of increment, on property taxes. It stated that, until and unless the owner of the property is changed the property tax can only increase to 2%. As, the property taxes are the real source of the government revenues, the state of California faced a real problems and trade-offs at budget. While the home owners of that time got benefit from the low property taxes, the states like San Diego had to find other ways to generate revenues to facilitate public service. When American states faced the recession, due to high inflation, the tax revolt made life hard for the retired workers of San Diego (CQ Press, 2006). The monthly pension checks from SDCERS were not enough for the retired workers. As, the inflation increased, it led to the higher rate of expected earnings by the investment in the San Diego's national fund. This was the actual flaw in the plan, and it led down to the fall of Sand Diego. Although the investment returns are hard to predict, the performance of SDCERS was estimated by actuaries to be 8% rate of return, however, ever under the normal economic and monetary conditions the surplus of investment s should make below average rate of return. The given surplus was calculated wrong by SDCERS because it was impossible to have this rate of Surplus earning. Hence, any activity done with the help of this surplus money, such as, pension system and expanding existing benefits is considered to be the loan from the system, which will be repaid in future (Dunning, 2011).

The flaw in the calculation was misunderstood; hence the surplus was used inappropriately. IN this way, to satisfy the retired workers, San Diego city council decided to give 50% of the surplus money to the retirees and was named as 13th Check. Though, the purpose of this check was to help the retirees in recession period, it was given to ...