Why Stockton Is Bankrupt – Union Pensions The vast majority of the articles about Stockton, CA, going bankrupt either don’t mention why or they come up with somewhat preposterous explanations. Such as we see here, from the Los Angeles Times: Stockton residents braced for a fateful City Council meeting on Tuesday night that could result in the city declaring bankruptcy. The prospect of insolvency was generating national headlines Tuesday… The working-class port city — where much of California’s agricultural exports set sail — lived largely on credit during economic boom times. The city borrowed millions of dollars for ambitious, eye-catching projects in the mid-2000s. Up went a sports arena, hotel and promenade. The city booked a Neil Diamond concert as a kickoff to better times. Houses in sprawling tracts sold quickly and with high mortgages… Really? Booking a Neil Diamond concert is to blame? Compare and contrast that explanation with some of the reasons detailed in this Wall Street Journal editorial: Down and Out in Stockton The latest city to confront bankruptcy and how it got there. June 26, 2012 … Unions are blaming Wall Street and the foreclosure crisis for the city’s woes. Like many other cities in California’s inland regions, Stockton suffers from a high foreclosure rate, which has depressed property tax revenues and helped push the city’s unemployment rate to 15%. The city of 290,000 also borrowed millions for projects that urban planners hoped would goose the economy and tax revenues—such as a $129 million waterfront development, a $68 million arena for minor league hockey, and a $35 million city hall that has since been repossessed. Still, debt financing is not the city’s main cost driver. That would be labor costs, specifically retirement benefits. The city has a little over $300 million in general-fund backed debt, but an $800 million unfunded liability for pensions and retiree health benefits… Pension costs are about 40% of what the city pays on worker salaries and are also growing. The average firefighter costs the city about $157,000 a year in pay and benefits and can retire at age 50 with a pension equal to 90% of his highest year’s salary plus nearly free lifetime health benefits. The city has laid off a quarter of its police officers, 30% of its firefighters and 43% of general city staff to pay for these generous benefits. Yet the city still faces a $26 million deficit on a $180 million budget… In other words, Stockton has laid off a quarter of its police, 30% of its firefighters and 43% of general city staff in order to pay for their generous benefits to retired cops and firefighters and city workers. Unions have made few concessions save agreeing to give up sick leave payouts and scale back pensions for new hires—when there are any. City officials could freeze worker pensions and reduce benefits going forward, as San Jose did via ballot initiative earlier this month. However, such a move would set off an expensive and protracted legal battle with the unions, which a city on the edge of bankruptcy can hardly afford… Yes, Stockton is really in a bind. But it is a bind of their own doing. And it has almost nothing to do with their building projects and everything to do with far too generous pensions and benefits given to their public sector unions. http://sweetness-light.com/archive/why-stockton-is-bankrupt-union-pensions
The city made committments to it's workers. The time to complain about it was while they were negoiating those commitments. Now, those workers and retired workers are owed what they were promised.
How do you do it when the money isn't there? Giving into the unions for this kind of pension is crazy The average firefighter costs the city about $157,000 a year in pay and benefits and can retire at age 50 with a pension equal to 90% of his highest year’s salary plus nearly free lifetime health benefits.
Maybe they shouldn't pay their bondholders, or other bills. What they owe to their workers is just as important as every other obligation they have. Whether or not you think the salary/pension is too high is irrelevant. That's a debate that should have been had before they agreed to pay it. Unions=Workers
Granny don't put much stock in Stockton... Judge rules Stockton, Calif., to enter bankruptcy April 1, 2013 The people of Stockton will feel financial fallout for years after a federal judge ruled Monday to let the city become the most populous in the nation to enter bankruptcy.
They should never have promised these benefits. I do not know if it is fair to hold an entire city accountable for the mistakes politicians made decades earlier. Plain fact is that elected governments are irresponsible with money, and make all sorts of promises that will be hard for the government to keep long after they are out of office.
Grandpa says: "You should pull out your stock and keep it in your stockings. You may hang your stockings up above the fireplace on Christmas Eve for Father Christmas to fill them with dividends and bonus stock."
True! And although I am not 100% opposed to some state assistance but do anti oppose the pure and complete form that Carl Marx envisioned, I do feel CA especially the city of San-Frisco finical woe are directly related to its unhealthy love affair with Marxist socialism and its semi covert official support of Communism. There are other reasons for CAs serious financial problems (what an understatement). Most are directly related to its alterative to Americanism. read Americanism as capitalism. Nevertheless thats material for another thread. ........................................................................................................................... Philosophically speaking I feel in theory communism and/or with Marxist socialism is by a considerable margin the most fair of all mans governments both ethically and morally. So it may be surprising to some I would never suggest that our nation change from capitalism to socialism/communism. Why the seeming contradiction? Easy. Capitalism, which is in nearly every conceivable way opposed to the real life application of Socialism/Communism paradoxically provides the only system of government that actually provides a means to say all the above, even to the extent of overthrowing his own government without fear of punishment by the state. Not to mention the other superior real life advantages of a Capitalistic system. reva
Sarcasm eh? The debt is not transferable. I would guess any active court case especially of state or city bankruptcy is rendered static by the presiding judge. The laws change so often and in quanity it changes from year to year or? reva
Oops~ I am NOT a morning person and have been forced into the morning person lifestyle by domestic commitments (lol).. The 'Oops'ie is that I posted the unedited version of my reply, so I will again try to post an edited version. Of course before I revisited the page the wonderful(ly dumb) 20 min limit for editing had expired.! Sarcasm ? Anyway (just in case your reply was semi-serious) ; IMO, the debt is not transferable. I will admit that is a guess since laws vary so much from state to state etc. I would guess any active court case that involved non-citizen/non-individual bankruptcy actions would be rendered 'static' (not changeable) by the presiding judge. reva
n/p , i post unedited in early morning as well Yes we can not know how this will go but truth is that the entire system is wrong and this is a systemic issue not so much mismanagement - although they overdid it with benefits. It would be far better if there was state unions with compulsory membership and also compulsory funding of their own funds , no government involvement , no need for Obamacare or taxpayers paying benefit , let unions run their funds as they like , pay as many benefits as they can afford and retire when they like.
Is this a case of America writ small? You effectively had a group of politicians who took the easy road over time, never considering where the money would come from to pay for all the future obligations they were making the City of Stockton responsible for. If this tale has a moral, it would be that there needs to be a better mechanism for measuring such indebtedness that the average voter can understand and access. Now there would be something I would support!
