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Bankrupt Stockton confronts cost of public employees

Last Thursday, the city of Stockton, California became the largest in U.S. history to declare bankruptcy. Experts say that it’s only the beginning of a very widespread problem.

In addition to absolving the city of its debt, bankruptcy status means that Stockton can now freeze or amend contractual obligations with city workers and contractors. It will also allow the city to reduce a heavy debt load the city incurred in recent years building public works such as a marina.

As financially troubled cities with similar problems look to Stockton’s strategy, both city managers and taxpayers are weighing up the value of public workers against their costs.

Gary Chaison, professor of Industrial Relations at the Graduate School of Management at Clark University, says that during tough economic times, it can really “rankle the public” to see their government workers getting pension plans and other union benefits they themselves don’t have. These pensions, he adds, are largely underfunded.

“There’s a feeling on the public’s part that public employee unions are part of the problem, not part of the solution. And that public officials have to stand up against the unions somehow, and negotiate hard to protect the public interest,” says Chaison.

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Closer to home, the city of North Las Vegas has cut or frozen 800 positions in the last several years. City manager Tim Hacker is currently battling with workers over contracts as police and fire unions take the city to court. As North Las Vegas continues to look at cuts to service, Hacker says it’s necessary to deal with fiscal realities in the present. He says North Las Vegas has a long-standing problem with “kicking the can down the road.”

“We can no longer defer these expenses. We just can’t do it. Frankly it’s a cultural thing that I’ve run into in just the little over eight months that I’ve been in North Las Vegas. That seems to be the default mechanism. I’ve had to look across the table and say you know I’m sorry, but I can’t tie and bind the hands of future managers and council members.”

Public employee union contacts are, say experts and public officials, “unsustainable.” They use the word repeatedly on Friday’s edition of KNPR’s “State of Nevada,” which focuses on the meaning of Stockton for local governments in Southern Nevada.

“Promises made (to public employees) in the past can’t be lived up to in the future, or in the present because they’re unsustainable,” says Chaison.

Former Clark County Manager Thom Reilly agrees, but thinks the focus shouldn’t just be on unions.

“We’ve adopted an unsustainable system. The focus just on unions is the wrong way to be looking. It is self-dealing that results between city and county managers, elected officials and the employee groups that have adopted these unsustainable systems.”

Chaison thinks the public worker crisis in Stockdale may be a harbinger of things to come for cities around the country.

"We really haven’t seen the end of this because public employee pension funds are underfunded to the extent of $2 or 3 trillion. So this is going to hit city after city after city. The reason we talk about Stockton is it’s the largest city so far with 300 thousand workers … so we know there’s going to be more. And we’re really waiting to see when Chicago will drop and when Detroit will drop and then it’s going to turn into some kind of panic, and then a taxpayer revolt, and then a search for scapegoats. So it’s going to be a mess.”

Thursday, July 19, 2012
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