San Bernadino

San Bernardino, CA a city of 200,000 filed for bankruptcy. Experts say this trend will continue across the state as more and more cities find they are unable to meet their legacy requirements. These cities have promised pension and health care benefits that they cannot afford. I have talked about this many times in the past and it is happening to private companies, but more so to public groups like Municipalities, Counties, School Districts and States. Unlike the federal government which is the worst offender these entities cannot print their own money. To explain how this happens you look back over the past thirty plus years to how public unions have negotiated contracts. The cities union leadership backs a particular candidate for city council and using their influence they get that person elected. Then they sit down across the table from that person and negotiate their contract which includes pension and health care. About one third of the people in this town are living below the poverty level but there are 440 retirees who have pensions above $100,000 per year. One former sheriff gets $290,000. Over the past ten years the city has sold bonds to have money to put into the pension fund and it is still short. Wert said the county's retirement obligations will increase dramatically over the next five years. In 2010-11, the amount was $6 million. For 2011-2012, it will grow to $23.6 million and then to $43.5 million and $66.5 million the next two years. By 2014-2015, the county's costs will escalate to $85.1 million. We have witnessed this same back scratching in the salaries of CEO’s. A is a CEO and on the board of directors for B’s company. B in on my board and we each agree to give each other a big raise. CEO salaries used to be 20 times what the average employee made and today they are 500 times. The state representatives negotiate with state workers, the county workers with the elected county commissioners, the city workers with the elected city council members and the teachers with the elected school board. Scratch, scratch, scratch.