While we’re looking at things from the public employee’s perspective (see item, below), this new report says pension obligations are not what is killing most cities financially.
The report, form the Center for State and Local Government Excellence, says:
- Only a small number of cities overall face serious financial troubles and one-third of them are in California.
- Pensions are a minor factor in financially troubled cities; fiscal mismanagement tops the list, followed by economic problems.
“The underlying problems in financially troubled cities have been decades in the making: population loss, declining tax bases, and other patterns of fiscal mismanagement,” a center press release says.
This diagnosis does not fit Stockton 100 percent. Here pensions are Stockton’s biggest debt, $172 million, not a “minor factor.” And population loss is not a contributing cause because Stockton’s population is growing.
Also, that “fiscal mismanagement” cause is not entirely divorced from pensions. Most city costs are not capital projects; they are employee costs. Fiscal mismanagement usually means public employee over-compensation.
Still, the thesis – broader economic factors and fiscal mismanagement are often big culprits — is valid.
Here’s more good news: thanks to a flourishing stock market and other economic boosts, pension funds are doing much better. Public plans are 76% funded, up from 66% at the end of last year, according to an estimate from J.P. Morgan quoted in this Wall Street Journal article.
When CalPERS reaps good investment returns, it helps fund city pensions, lowering the cost for cities. When its investments tank, the bill to fund Stockton’s pensions goes up. CalPERS investmetn rturn is the crux of Stockton’s recovery. Perhaps the good news will lower the blood pressure of Measure A’s opponents.