Cities going broke

I have mentioned several times in the recent past that government groups are in financial trouble because of the way they negotiated with public unions. I pointed out that in too many cases the negotiators were elected by the unions and then sat across the table from each other to discuss benefits. Stockton, CA recently filed for bankruptcy and much of their problem can be traced to such union negotiations. Police officers are allowed to retire at age 50 with a 3% factor pension plan. This means they receive 3% of their final wages for each year they worked which means if you had 30 years service you could retire at 90% of salary. When you take into account that after retirement you no longer have to pay payroll tax or contribute to your pension these people earned more after retirement than they did before. Other employees were allowed to retire at age 55 and had a 2% pension factor. If you had 35 years of service you retired at 70% of your salary. Remove the cost of payroll tax and pension contributions and your at 80%. All employees were also guaranteed free health care for life after they retired and the city paid the full cost of the health care premiums. Finally the wages of city employees were much higher than equivalent jobs in the private sector. Here is a run down. Summary of Personnel Costs General Fund All Funds Base Pay $66,200,500 50.40% $112,605,522 52.52% Additional Pay $8,809,527 6.71% $11,020,547 5.14% Retirement $27,246,636 20.74% $40,118,476 18.71% Health/Dental Benefits $22,885,726 17.42% $40,717,520 18.99% Other $6,208,555 4.73% $9,926,203 4.63% Total Personnel Costs $131,350,944 100.00% $214,388,268 100.00% Stockton is only the beginning as cities, counties and state employee programs across the county are in similar straights. FDR said that public unions should not be allowed because they would end up negotiating with the same people they elected and he was right. Cities