Stockton, Calif., a hard-pressed industrial city of nearly 300,000 people in the agriculturally lush Central Valley 80 miles east of San Francisco, is grabbing national headlines because it might become the largest U.S. city yet to enter Chapter 9 bankruptcy.
First, it must go through a 90-day mediation process mandated by a new California law designed to put the brakes on an expected wave of municipal bankruptcies. But the city is out of cash, and other cities aren’t far behind.
Stockton’s situation epitomizes the reality of local government in California today: City governments don’t exist to provide services to the public, but function mainly to dispense high salaries and pensions to the people who work for the government.
Ninety-four of Stockton’s retirees, for instance, receive six-figure pensions, placing them among a rapidly growing list of 15,000 California public retirees in the $100,000 pension club.
No wonder that 81 percent of Stockton’s general-fund budget goes to pay for employee costs, including a generous health care plan that pays the entire medical costs for city employees and spouses for life.
As is typical in California, the city’s police and firefighters can retire at age 50 with 90 percent of their final year’s pay, cost-of-living adjusted — and that’s before the pension-spiking gimmicks that often push their retirement pay above the pay they received while working.
To make ends meet, the city floated $124 million in pension-obligation bonds, which is the equivalent of taking out a home-equity loan to pay the current mortgage.
These Ponzi schemes, as the new city manager referred to them, cannot go on forever, even in California, which prides itself on its exceptionalism.
For all these costs, one would think that Stockton residents are receiving gold-plated services: but alas, the city is decrepit. It’s a historic city with grand old neighborhoods and a prestigious university, but one finds trash everywhere, an unresponsive city government that closes its offices every other Friday (a common employee benefit), a soaring crime rate, and empty buildings throughout downtown — despite tens of millions of taxpayer dollars to finance a minor-league baseball stadium and urban renewal projects.
Democratic leaders insist that all is well and that right-wing union haters are behind the press attention. But running out of money focuses the mind. The policies Stockton has embraced are not exceptions.
Of late, Los Angeles officials have been mentioning the b-word — bankruptcy — and problems are brewing in wealthy cities as well as poorer ones. It’s not just California, either, as cities including Providence, R.I., and Harrisburg, Pa., struggle to pay their bills.
Employee expenses are soaring, and we’re well past the point where a rebounding economy will fix everything. It’s not just a question of finances, but of the quality of public services.
Some liberal Democrats, such as San Jose Mayor Chuck Reed and San Francisco Public Defender Jeff Adachi, understand that unless pensions and overall public-employee costs are soon reduced, the state’s public services will continue to erode.
Stockton is a perfect example: the police union there would rather see massive layoffs than negotiate reductions in pay and benefits, even as the city struggles with a record-high murder rate.
Stockton is in worse financial shape than most cities, but anyone who thinks it’s an aberration hasn’t been paying close attention to their own city’s wastrel ways.
Expect other dominoes to start falling unless politicians of both parties confront the unions that care so little about the public or the cities for whom their members supposedly work.
Steven Greenhut is vice president of the Franklin Center for Government and Public Integrity, a regular contributor at PublicSectorInc.org, and a contributing writer for City Journal California.