Thursday November 15th, 2012 • Posted by Craig Eyermann
What happens when public employee unions begin calling too many of the shots in government?
Reuters reports on the backstory of the city of San Bernandino, California’s bankruptcy, which features a lot of politicians blaming everyone else for their dilemma:
How out of whack did things become? Reuters describes how the city’s retired public employees became members of the Top 3.6% of individual income earners in the U.S. (and Top 12.9% of American households):
What happens when public employee unions begin calling too many of the shots in government?
Reuters reports on the backstory of the city of San Bernandino, California’s bankruptcy, which features a lot of politicians blaming everyone else for their dilemma:
Yet on close examination, the city’s decades-long journey from prosperous, middle-class community to bankrupt, crime-ridden, foreclosure-blighted basket case is straightforward — and alarmingly similar to the path traveled by many municipalities around America’s largest state. San Bernardino succumbed to a vicious circle of self-interests among city workers, local politicians and state pension overseers.
Little by little, over many years, the salaries and retirement benefits of San Bernardino’s city workers — and especially its police and firemen — grew richer and richer, even as the city lost its major employers and gradually got poorer and poorer.
Unions poured money into city council elections, and the city council poured money into union pay and pensions. The California Public Employees’ Retirement System (Calpers), which manages pension plans for San Bernardino and many other cities, encouraged ever-sweeter benefits. Investment bankers sold clever bond deals to pay for them. Meanwhile, state law made it impossible to raise local property taxes and difficult to boost any other kind.No single deal or decision involving benefits and wages over the years killed the city. But cumulatively, they built a pension-fueled financial time-bomb that finally exploded.
How out of whack did things become? Reuters describes how the city’s retired public employees became members of the Top 3.6% of individual income earners in the U.S. (and Top 12.9% of American households):
In bankrupt San Bernardino, a third of the city’s 210,000 people live below the poverty line, making it the poorest city of its size in California. But a police lieutenant can retire in his 50s and take home $230,000 in one-time payouts on his last day, before settling in with a guaranteed $128,000-a-year pension.The article goes on to describe the cause of San Bernandino’s problems as the result of “back-scratching on an epic scale.” The funny thing is that all the parties, who are now anxious to point their fingers at their partners in this kind of civic racketeering, ignored all the red flags that independent observers brought in to assess the city’s situation were waving years in advance of the city’s bankruptcy, back in 2007 – ahead of the Great Recession.
Forty-six retired city employees receive over $100,000 a year in pensions.And instead of heeding the warnings, the politicians rubber-stamped their public employee unions’ demands and voted to approve extremely generous pensions that were far beyond the city’s ability to pay and still provide essential services, sealing their city’s fate. The money quote belongs to Tobin Brinker, a former city council member: Continued>> The Debt Death Spiral: U.S. City Edition
Almost 75 percent of the city’s general fund is now spent solely on the police and fire departments, according to a Reuters analysis of city bankruptcy documents – most of that on wages and pension costs.
