"The Stockton Syndrome" Underfunded Pensions

California laws granting immense union monopoly power to union officials is creating cracks, fissures, and collapse across the state.  One manifestation of the growing problem is a pension crisis coming to a head as the city of Stockton faces pending bankruptcy. The Investor Business Daily notes:

As one California city slogs toward bankruptcy, others may soon try to avoid the same fate by passing pension reforms — that is, if a pro-union state government will let them.

The financial problems plaguing many of the nation’s [Big Labor Boss-run] cities are taking a particularly heavy toll on Stockton, Calif., a blue-collar port city that struggles even in good times.

Stockton is also a cautionary tale on how not to run a city. It seems to have committed just about every fiscal sin known to local government.In those infrequent years when things were good, it spent (and promised) like there was no tomorrow. Now tomorrow has come, and the city is broke. Its spiffy sports arena and its new $35 million high-rise city hall won’t help it pay its debt.

That debt includes, but is not limited to, a $400 million liability for its retirees’ health care. It also has had to cut its police force by almost a third.

The only reason it isn’t [bankrupt] now is a recently passed state law requiring a 60-day mediation period, which is set to end in late April.  That mediation law was passed by union-friendly Legislature to protect the retirement benefits of public-sector union workers.

What the unions fear most in bankruptcy is its effect on contracts. If the bankruptcy court so decides, cities can be freed from their collectively bargained obligations. This is what a city in Stockton’s situation needs to save itself.

The state’s Public Employee Relations Board has filed a lawsuit to remove a San Diego pension reform initiative from that city’s June ballot. San Jose is also slated to vote on a reform measure in June, but union allies in the state Legislature are trying to delay the vote with a state audit of the city’s pension projections.Their reform plans are serious responses to a real crisis. They see the Stockton syndrome, and they can see how to avoid it. The real question is whether the public-sector unions that wield so much power in the state will let them save themselves.





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