Thursday, July 12, 2012
Everyone knows Stockton is bankrupt. Even if you only spend the amount of time it takes Boris Becker to father a child out of wedlock to review the state of local government finances it is obvious that Meredith Whitney will be proven correct and Stockton will be followed by a wave of municipal bankruptcies that will engulf the US. The only real question is when.
A variety of reasons and excuses will be provided by commentators and politicians for the financial quagmire most local governments find themselves in, but the primary cause of the vast majority of these bankruptcies will be the totally unsustainable compensation packages enjoyed by public employees. (See here for a brief case study on San Jose).
In the case of Stockton, which does not appear to be significantly out of line with many other municipalities in California and indeed the U.S., two thirds of full time police officers and above earned over $90,000 per annum in 2010 not including benefits. Many police officers routinely earn in excess of $125,000. Not only that but police officers can retire at 50 with a pension set at up to 90% of their final years salary and get free healthcare for life.
This extraordinary compensation is for a position that requires no more than a high school education in a community where the median household income is $50,000 and most residents do not have gold plated retirement and healthcare plans.
To put the Stockton debacle in context the interim City Manager said that even if the city were to eliminate all departments except for police and fire, it would still face a deficit.
While declining employment and tax revenues brought about by the recession are undoubtedly impacting local finances not even the most optimistic economic recovery scenario will enable governments to pay what has been promised and even if they could begs the question why residents should be paying people, who after all work for them, so much more than they themselves are making.
Posted by William Occam at 12:25 PM