Broke-Ifornia

By Ben Shapiro
Wednesday, July 11, 2012

This week, the city of San Bernardino, Calif., went bankrupt. It followed hot on the heels of Vallejo and Stockton, Calif. And they'll be followed, no doubt, by Los Angeles -- and then, shortly after that, by California.

Let's take a look at the numbers. San Bernardino has an annual budget of $258 million; it is running a budget deficit of $45 million. Where does that money go? To the unions, largely. About three-quarters of the general fund goes to personnel; 78 percent of that 75 percent goes to public safety employees, the most lucratively compensated of all government workers. The city retirement fund amounts to 13 percent of the general fund. San Bernardino, like most other California cities, is heavily taxed. The average wage-earner makes about $30,000 per year, and the city suffers from nearly 17 percent unemployment.

The statistics are strikingly similar in Stockton. Sixty-eight percent of the general budget each year goes to city retirees and compensation for workers. Their budget deficit was $26 million; the year before, it was $37 million; the year before that, $23 million. Retirement costs constituted some 17.5 percent of the budget. The unemployment rate in Stockton clocks in at over 20 percent. Estimated per capita income? Just under $20,000.

Then there's Los Angeles. Los Angeles faces a $238 million shortfall; it faces a grand total of $27 billion in unfunded pension liabilities. How much of the budget do union pensions consume? A full 15.4 percent of city expenditures. As for the unemployment rate, it's north of 13 percent, and average income is at $26,000.

Noticing a pattern? Deficits as far as the eye can see. Rotten economic situations. And union pensions that take up a substantial chunk of the budget.

Now, it's not as if these politicians didn't know what was coming. In both Stockton and San Bernardino, the politicians tried to cut city budgets at the last minute, laying off workers and renegotiating union contracts. But it wasn't nearly enough. That's because the government workers unions have plagued these cities for decades.

Local politics is uniquely susceptible to organized forces. The smaller the community, the easier for an organized minority to wield power. In these municipalities, unions wield outsized clout, essentially hiring politicians to hand over rich concessions from taxpayers. When things go south, the politicians aren't held accountable -- they simply declare bankruptcy, throwing the entire issue to an unelected bankruptcy judge.

What's more, despite the bankruptcy declarations, union pensions probably won't be touched. Those are contracts that were signed, sealed and delivered long ago; the benefits have already begun to vest. In San Bernardino, the city has already declared it won't touch those massive retirement benefits out of fear of legal action.

So what are these cities to do? They become Detroit. Forced to pay these pensions, they raise taxes; all those who make money flee; those who are left have less services and pay more into the system. This is what liberalism wreaks on cities. No city has ever gone bankrupt from spending too little cash.

California has yet to learn its lesson, however. Gov. Jerry Brown plans to spend more and more money on the unions, and then ask Californians to tax themselves at a higher rate to pay for it. There's only one problem for the governor: It's against the law to compel the earners to stay in the state. And they'll get out as soon as humanly possible.

California is going the way of Stockton and San Bernardino. The only difference is that when the state does go bankrupt, the federal government will undoubtedly try to step in. But what happens when the federal government goes bankrupt for pursuing Californian policies?