Another City Spending Its Way to Bankruptcy

I’ve written before about the problems big cities are facing when it comes to Cadillac pensions. San Bernadino, California and Detroit, Michigan declared bankruptcy largely due to this. And now comes word that another California city may follow in their footsteps.

Desert Hot Springs , a resort town of 26,000 warned that it will run out of money by March due to burdensome salary and pension costs. That would make it the third California city along with San Bernardino and Stockton to succumb to that. Amy Aguer, the interim director of finance, said nearly 70 percent of the city’s budget was consumed by police costs, most of which were spent on salaries and pension payments.

Now, part of this problems is the California public employees’ pension program, Calpers. The cost charged for participating keeps going up. Karol Denniston, a bankruptcy attorney in San Francisco said, "Calpers keeps increasing costs and many of these cities have cut costs down to where there is nothing else left to cut." And I’m sure that contributes to the problem, but I really don’t think it accounts for 70% of Desert Hot Springs’ budget.

But the main thing is, if they do go under, who gets paid? Do the pensions get cut in order to pay off creditors? That’s a difficult question to answer. It’s a case of competing promises. The root causes of all of this, though, are those initial promises. Russell Betts, a council member, stated the obvious when he sad, "It’s obvious we can’t continue with salaries and pensions that are in the stratosphere, no matter how much love there is for our police department.” Sure, it’s obvious now, when the problems arise. But if you’d said anything like that years ago, you’d have been labeled as someone who “hates” the police, or public workers in general. “We should be paying our police more than our football players!”, some might shout, even though I’m sure that Desert Hot Springs doesn’t have a national football team. But anyway…

That’s a nice sentiment until you have no money left. I’m not suggesting what Desert Hot Springs should be paying its cops, nor suggesting that such pensions aren’t deserved. It’s just that when you overpromise, sooner or later someone’s got to pay the piper. And even if it’s shared pain between pensioners and creditors, promises get broken.

The solution is to state the obvious before having to break those promises. The problem is that there are too many voters and council members who think that government money is limitless, which is only true until it isn’t. Sure, stating the obvious – that we should live within our means – may get you called ‘heartless’, among other choice adjectives, but it must be said.

That’s kind of like how those of us who were against this huge set of promises we often call ObamaCare were treated. We’re stating the obvious, but we’re being called ‘heartless’, all because we don’t want to go bankrupt. We’re already going bankrupt, that much is for sure, but we’re rather not hang another boulder around our neck while trying to stay above water. As I’ve mentioned before, federal pensions and existing entitlements alone cost more than we take in in taxes. Among the many promises that ObamaCare will not fulfill is that it will reduce the deficit. We can’t afford that.

I feel like I’m council member Cassandra sometimes, warning of danger that is obvious to anyone who would see, but not being believed, in spite of so much evidence surrounding us. Website glitches are sideshows. Economic realities will bury us.

Filed under: Doug • Economics & Taxes • Government • Liberal

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