The Lessons Stockton Teaches
There are at least two lessons in the bankruptcy filing of Stockton, Calif., former boom town gone bust:
1. Don't give local government workers pay and perks that residents who pay for them can only dream of receiving in their private-sector jobs.
2. Keep local government out of economic development and redevelopment, which often are just forms of local central planning and corporate welfare that usually fail to achieve their goals.
Stockton is a northern California city of nearly 300,000, making it the largest in the nation to go bankrupt. Probably no one has more clearly described what's gone wrong there than City Manager Bob Deis.
"Stockton," Deis explained in an interview with Time magazine several months ago, "overcommitted to long-term obligations that even under the best of times the city could not afford."
Topping the list of overcommitted obligations are high wages and lavish retirement and health insurance benefits. Symptomatic of the problem is a 56-year-old city worker — no, make that retired city worker — quoted by Reuters in a news article on the Stockton bankruptcy.
She is just 56 years old and already retired. Where but in government do people in their 50s routinely get to retire ... and with taxpayer-funded health insurance? This Stockton retiree was worried the bankruptcy would force her to pay for her own health insurance, as the city's new 2012-2013 budget calls for eliminating retiree medical benefits.
Elimination of this perk years ago might have helped the city avoid bankruptcy and bond defaults.
Then there are economic development and redevelopment. Central economic planning failed in the Soviet Union, is failing in Cuba and is being abandoned in China. But all across California and the nation, local officials apparently believe in it by launching into development and redevelopment projects. It doesn't occur to them that if a project needs government backing, it probably will fail. The nation is still waiting for Amtrak to make its first profit.
Stockton has $700 million of debt, much of it to pay for various economic development and redevelopment projects. Go to the Stockton city government's economic development Web site and you'll read, "Economic development is one of Stockton's main focuses during this time when so many of Stockton's citizens are facing financial challenges."
You'll see the city has Enterprise Zone, Advantage Stockton, Brownfields and Financial Assistance for Businesses programs. You'll see a list of four separate redevelopment project areas, and you'll be able to find a list of completed projects. They include Stockton Arena, Stockton Ballpark, Downtown Marina and The Hotel Stockton. The millions of dollars of city loans and other subsidies have done nothing to keep the city out of bankruptcy.
Fortunately, people are waking up. Even people in government.
Nearly the first thing that Gov. Jerry Brown did on taking office in 2011 was to propose an end to the state's hundreds of redevelopment agencies to free up money for schools. Lawmakers passed a bill killing urban redevelopment districts, and Brown signed it one year ago.
Voters in San Diego and San Jose voted by overwhelming margins earlier this month to rein in their cities' retirement benefits. Stockton's bankruptcy shows why those people did the right thing . .. and why other cities should consider doing the same |
