largest municipality bankruptcy yet on the horizon

Hip deep in pension obligations

The real cause of Stockton's deficit, of course, is retirement costs. Last year, banking analyst Meredith Whitney cited the rising cost of municipal pensions as a key factor that could spark "50 to 100" municipal failures, and "hundreds of billions" of dollars in municipal bond defaults across the U.S. As you can imagine, this is a big part of the problem in Stockton. When things were going well, the city council voted time and again to boost the benefits doled out to its public workforce, including:


  • automatic salary increases for city employees, whether tax revenues could support the pay hikes or not;
  • a health-care plan that guarantees lifetime benefits to every city employee (and his or her spouse) -- no matter if the employee spent only a month on the job;
  • pension benefits that have the city on the hook for nearly one hundred $100,000-per-year pensions (and counting).
:palm:
Cities and states, all across America are having the same problem, the state of California, led by Gov. Moonbeam is proposing more taxes on the people because we are broke with a mufti-billion dollar deficit. But of course, not one of them will ask the unions to start paying more for their health & pensions.
 
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