Local government pensions are making headlines in national papers, with the Wall Street Journal being the latest to report on the swelling benefit costs of municipalities, who on average are spending 15% to 20% of their finances on pension costs. Wages and benefits account for 30% of state general fund expenditures. Providence, Rhode Island is pointed to as an extreme example of soaring costs, as annual retiree costs now take up 50% of the city’s tax collections. Furthermore, Providence was forced to borrow $48 million and its general reserve shrank from $17 million to $3 million in the course of one year. The National League of Cities has estimated that overall cities have cut about 9 percent of their workforces. For the Journal, Steve Malanga, author of "Shakedown: The Continuing Conspiracy Against the American Taxpayer,” writes: “Local governments have contributed to their budget nightmares by expanding hiring and wages well beyond the growth in population and private wage gains during recent boom years. […] And although the main source of revenue for many municipalities—property taxes—kept rising during much of 2008 and 2009 because of multiyear property assessments that stretched back to good economic times, collections are now starting to plummet.” Read the full op-ed here.
And the New York Times recently reported in a rather expansive article about unions in California, as well as Costa Mesa’s actions to outsource its workforce. An excerpt reads:
“But now, with the expenses of past promises coming due, the cost of deferred decision-making is mounting. California alone needs to begin devoting an additional $28 billion a year to state and local public pensions to remedy an existing shortfall, according to one nonpartisan study — and nationwide, estimates of such deficits reach into the trillions over the next few decades.
“We had no idea what we were doing,” said Tony Oliveira, who as a supervisor in Kings County, in central California, voted to increase employees’ benefits, and now is on the board of the state’s enormous pension fund. “This was probably the worst public policy decision in the state’s history. But everyone kept saying there was plenty of money. And no one wants to be responsible if all the cops quit to get paid more in the next town.”
Public employee unions, in their defense, say politicians have unfairly made them into simplistic bogeymen, responsible for problems that have myriad causes.”
Read the full article here.