The Right Opinion
Broke-Ifornia
This week, the city of San Bernardino, Calif., went bankrupt. It followed hot on the heels of Vallejo and Stockton, Calif. And they'll be followed, no doubt, by Los Angeles -- and then, shortly after that, by California.
Let's take a look at the numbers. San Bernardino has an annual budget of $258 million; it is running a budget deficit of $45 million. Where does that money go? To the unions, largely. About three-quarters of the general fund goes to personnel; 78 percent of that 75 percent goes to public safety employees, the most lucratively compensated of all government workers. The city retirement fund amounts to 13 percent of the general fund. San Bernardino, like most other California cities, is heavily taxed. The average wage-earner makes about $30,000 per year, and the city suffers from nearly 17 percent unemployment.
The statistics are strikingly similar in Stockton. Sixty-eight percent of the general budget each year goes to city retirees and compensation for workers. Their budget deficit was $26 million; the year before, it was $37 million; the year before that, $23 million. Retirement costs constituted some 17.5 percent of the budget. The unemployment rate in Stockton clocks in at over 20 percent. Estimated per capita income? Just under $20,000.
Then there's Los Angeles. Los Angeles faces a $238 million shortfall; it faces a grand total of $27 billion in unfunded pension liabilities. How much of the budget do union pensions consume? A full 15.4 percent of city expenditures. As for the unemployment rate, it's north of 13 percent, and average income is at $26,000.
Noticing a pattern? Deficits as far as the eye can see. Rotten economic situations. And union pensions that take up a substantial chunk of the budget.
Now, it's not as if these politicians didn't know what was coming. In both Stockton and San Bernardino, the politicians tried to cut city budgets at the last minute, laying off workers and renegotiating union contracts. But it wasn't nearly enough. That's because the government workers unions have plagued these cities for decades.
Local politics is uniquely susceptible to organized forces. The smaller the community, the easier for an organized minority to wield power. In these municipalities, unions wield outsized clout, essentially hiring politicians to hand over rich concessions from taxpayers. When things go south, the politicians aren't held accountable -- they simply declare bankruptcy, throwing the entire issue to an unelected bankruptcy judge.
What's more, despite the bankruptcy declarations, union pensions probably won't be touched. Those are contracts that were signed, sealed and delivered long ago; the benefits have already begun to vest. In San Bernardino, the city has already declared it won't touch those massive retirement benefits out of fear of legal action.
So what are these cities to do? They become Detroit. Forced to pay these pensions, they raise taxes; all those who make money flee; those who are left have less services and pay more into the system. This is what liberalism wreaks on cities. No city has ever gone bankrupt from spending too little cash.
California has yet to learn its lesson, however. Gov. Jerry Brown plans to spend more and more money on the unions, and then ask Californians to tax themselves at a higher rate to pay for it. There's only one problem for the governor: It's against the law to compel the earners to stay in the state. And they'll get out as soon as humanly possible.
California is going the way of Stockton and San Bernardino. The only difference is that when the state does go bankrupt, the federal government will undoubtedly try to step in. But what happens when the federal government goes bankrupt for pursuing Californian policies?
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22 Comments
Capt. Call in New Mexico
Thursday, July 12, 2012 at 1:18 AM
What happens? We scrounge for whatever we can get on which to live. That is, unless we starve to death first!
Ct-Tom in NC
Thursday, July 12, 2012 at 8:24 AM
"Forced to pay these pensions, they raise taxes; all those who make money flee"
Problem is, it's hard to flee when your mortgage is way under water and nobody in his right mind wants to buy your house, anyway. This is a horror perpetrated on taxpayers and retirees alike by slimy politicians who knew exactly what they were doing.
There has been talk of this coming calamity for at least 25 years that I know of. Now it has arrived. There is no excuse!
wjm in Colorado
Thursday, July 12, 2012 at 10:00 AM
It is not only our Northern and Southern Borders that need protecting, the rats leaving Greecifornia are doing the same thing to neighboring States, for Example, look at what they have done to Las Vegas Nevada, another epic failure. They have invaded Denver and Boulder, and are doing their incredible damage there. Tucson AZ is going the same route. If these treasonous clowns continue in power, there is going to be some serious @ss kicking coming.
JG in Oklahoma
Thursday, July 12, 2012 at 12:54 PM
Who is John Galt?
JTG in Indiana
Thursday, July 12, 2012 at 2:08 PM
They're all looking for the federal bailout. Who else can print money? It would be another example of "it's too big to fail." GM, like California, should have been forced to go down the same to divest itself of unions and all the baggage that decades of poor labor agreements created.
Mike in Bremerton, WA
Thursday, July 12, 2012 at 2:51 PM
"Vested Benefits" can't be changed ...right? Well, Chief Justice John Roberts has "shown the way" to fixing it. The city/county/state governments should do a separate computation of what a fair retirement should have been, absent union/politician finagling. A fair retirement might be 1.5% to 2% per year times the final year BASE PAY (no OT, etc.). Compare the difference between the vested amount and the fair amount, and tax the difference at 95%! Use the returned tax money to help keep the retirement systems from being so much in the RED.
Since the vested benefits aren't changed ....and there is only a new tax (which Justice Roberts says is Constitutionally okay...) - then this should be a great legal solution!!
pete in CA
Thursday, July 12, 2012 at 4:31 PM
In 1964 I looked at becoming a fireman, police officer or CHP. Don't remember now what the annual wages were then, but decided I couldn't support my family (just my wife and I at the time) without taking a second job. As time went by I noticed more and more cop cars outside of construction sites. The cops had actually taken second jobs, and when they were assigned day shifts, they just went to work on there second jobs while listening to their radios.
Many made a good living doing that.
I ended up working as an aircraft mechanic. When United declared BK after 911, the BK court judged "renegotiated" their pension plans for pilots, flight attendants, mechanics, and all the other assorted unions involved. I don't get as much as I would have but I do get something.
If a BK judge can do that for the private sector unions, why can't they do that for public sector unions also?
(%of average annual base pay X # of years on the job)/12 = monthly pension benefit. Group insurance plans will be offered ala obamacare, kaiser, or whoever.
The best place to see this implemented would be leadership by example by our Congress.
XCpt in The Web
Thursday, July 12, 2012 at 5:26 PM
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XCpt in The Web
Thursday, July 12, 2012 at 5:27 PM
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XCpt in The Web
Thursday, July 12, 2012 at 5:29 PM
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XCpt in The Web
Thursday, July 12, 2012 at 5:30 PM
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XCpt in The Web
Thursday, July 12, 2012 at 5:30 PM
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XCpt in The Web
Thursday, July 12, 2012 at 5:32 PM
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XCpt in The Web
Thursday, July 12, 2012 at 5:33 PM
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XCpt in The Web
Thursday, July 12, 2012 at 5:37 PM
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