Why U.S. Cities Are Going Bankrupt - Global Public Square Blogs
Take for example San Bernardino. It was running a $45 million deficit (on a $130 million budget.) But its creditors - workers and retirees - were unwilling to help out. The best the unions were able to do was to offer what they thought was a major concession: allowing newly-hired public safety workers to retire with 90 percent of their salary at the age of 55 - instead of 50, which had been the earlier deal!
That won’t work in a chapter 9 bankruptcy. An independent judge brings all parties to a table where an agreement has to be reached - no matter how painful. And, we need some of those painful decisions - not just at the federal level, but at local and state levels as well. At its heart, the bankruptcies you keep hearing about these days aren’t about taxes being too low or spending on city services being too high - they’re about pensions.
California’s pension-related costs rose 20-fold in the decade since 1999. This frightening trend is true almost everywhere in America. And it’s simply not sustainable. A recent Pew research survey found that the gap between state assets and their obligations for public sector retirement benefits is $1.38 trillion. It rose by 9 percent in 2010 alone - and it will likely keep rising until these obligations are renegotiated.