New evidence from the bankrupt city of Vallejo seems to confirm the points made by critics of municipal bankruptcy, such as E.J. McMahon of Manhattan Institute. Writes Ed Mendell on the influential calpensions site:
In my Wall Street Journal column on Vallejo from March 2010, I argued: "Vallejo's unwillingness to go after existing pensions and wage other fights necessary to put the city on stable financial footing sets a bad example. Other cities will now find it harder to use the threat of bankruptcy (or bankruptcy itself) to get unions to agree to rein in pension costs.""Vallejo got court approval to exit from bankruptcy last week with a plan that includes a sharp increase in pension payments to CalPERS -- the opposite of what many expected when the city declared bankruptcy in May 2008. ... The city negotiated new labor contracts with four unions while in bankruptcy. In an early agreement that one council member called 'insane,' the bankrupt city approved a new contract that gave police a 7 percent raise in July of last year."
There's no quick fix for cities. That much is clear.
What's needed is a city sufficiently desperate, AND with a manager sufficiently AWARE of the deep reductions needed to stabilize it's finances and equalize expenses and revenue, to demand via bankruptcy a 50% cut in accrued pensions. Once a CA court grants that reduction, Unions will see the downside of a too hardline stance.