- City leaders and unions made a series of deals mostly in the 1990s for health-care-for-life for city workers and there were never the funds to pay for that benefit. As a result, Stockton built up a $400 million unfunded health care retirement liability.
- For every dollar that Stockton spent on employee pay, it spent slightly more than another dollar on employee benefits. Nationally the average is about 53 cents in benefits for every dollar of pay in the public sector, and 40 cents for every dollar of pay in the private sector, so Stockton was an extreme outlier even by public sector standards.
- A special audit commissioned by the new Stockton city manager pointed out that city officials and union leaders had negotiated past employment deals that sought to purposely built "hidden costs" into labor agreements for "obligations that are often difficult for citizens to identify or understand," including various categories of so-called bonus pay which were actually just additional regular compensation.
- Stockton's new city manager, hired in 2010 to sort out the mess, called some of the city's past compensation practices similar to "a Ponzi scheme" because they were created without any plan to ever pay for them.
There's much more, if you want to read the bloody details. They are here, in the staff reports and audits commissioned by the new regime, and they go into great detail not only about the city's volatile revenues, but about the unsustainable employee compensation practices that Meyerson ignores. One could say as much about San Bernardino, too. The cities are just extreme examples of how the current fiscal downturn has exposed unsustainable compensation practices that, as any number of commentators, including most recently Paul Volcker and Dick Ravitch, have observed, are going to have to change.
Stockton and the housing bust
Harold Meyerson has a piece in the LA Times today in which he blames the housing bust, not unions and employee costs, for the recent California bankruptcies in Stockton and San Bernardino, and accuses the press of poor reporting on the issue. But Meyerson's logic is completely backward. It wasn't the housing bust that brought the cities down, but the housing bubble which provided those cities with a spike in revenues that temporarily masked the cities' unsustainable compensation practices. Meyerson simply ignores a host of uncomfortable facts about Stockton, for instance:
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