The city’s audit committee, charged with monitoring Stockton’s fiscal recovery, meets today. Fiscal activist Dean Andal frames the issue:
“As we have discussed the City’s bankruptcy plan and future 10 year budget projection is precariously “balanced” with several unrealistic assumptions:
“1. An annual 2% health care cost of living increase. I looked this up and the last four years (since ObamaCare passed), annual health care costs have been consistently increasing an average of 3.7% virtually every year. This is in a down economy where employers have been cutting back on health care, so it is likely to be higher in the near future.
“Nonetheless, is Stockton going exceed its health care cost increase by almost double in the first year of its vaunted “recovery plan?” This number should already be available in the City’s draft budget for 2014-15 to be adopted on July 1, 2014.
“2. An annual 2% salary COLA. This is about what the inflation rate is and I’m doubtful that will continue for the next 10 years like the city expects. But under the most optimistic read of the City’s plan and assuming that the inflation rate stays below 2% – the City should NEVER sign a collective bargaining agreement that exceeds a 2% increase for any employee for the next 10 years. If they do, they will bust their budget under their own projections.
“Of course, if inflation exceeds 2% over the next ten years, that will be a net pay cut for the city employees.
“If these two budget assumptions are even slightly breached, then the City will either go into budget deficit (leading again to bankruptcy) or will violate its promises and use the 2/3rds of the Measure A money targeted to law enforcement for other purposes. Or both.”
I hope not. I hope, if medical inflation starts busting the bank, the city has a contingency fund. To base a tax promise on rosy assumptions then drop the bomb on voters is how CalPERS rolls. It would cement a culture of distrust and cynicism for years to come.