Even if the City of Stockton is able to avoid bankruptcy, it won’t escape becoming the new poster child for fiscal incompetence. That’s not entirely the city’s fault; the recession hit Stockton especially hard. At one point, it led the nation in home foreclosures and is now second only to Las Vegas.
However, the city also is paying the price for what, in retrospect, were some woefully misguided fiscal decisions by Stockton’s leaders.
As The Sacramento Bee recently reported, the city went on a spending spree in the early 2000s, borrowing money to build an arena for its hockey team and a stadium for its Single A baseball team.
Even before that, in the 1990s it approved a benefit plan that granted employees health care benefits for life, even if they’d put in as little as one month of service. Pension benefits also were enhanced to unsustainable levels.
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Stockton has since gained some concessions from unions, though police and other employee groups have taken the city to court in an effort to enforce pay raises and other benefits the city agreed to but can’t afford.
Now, the city faces a $20 million deficit. As a result, the Stockton City Council was scheduled to vote Tuesday night to suspend $2 million in bond payments. The city is also no longer paying departing employees for unused vacation and sick time, and the council is expected to enter into a mediation process aimed at helping jurisdictions restructure debt and avoid bankruptcy.
Granted, Stockton is an extreme example — acity where seemingly everything that could go wrong did go wrong — but it nonetheless points to how important it is for government agencies to look at the longterm implications of the decisions they make.
Take pensions, for example. Stockton was by no means alone in agreeing to pension benefits that were unsustainable over time. Up and down California, agencies have been describing pension liabilities as ticking time bombs that will result in their financial ruin.
In San Luis Obispo County, many local agencies have either already adopted or plan to adopt two-tier pension systems that will provide newly hired employees with less generous benefits when they retire. That will result in millions of dollars in future savings. That’s huge — and it’s only one example of an institutional change that can help local agencies remain financially sound into the future. There are others.
For example, the cities of Arroyo Grande and Grover Beach are considering the consolidation of their police departments. That makes perfect sense from a financial standpoint: Why have two chiefs, two administrations, two headquarters, if one will do?
Yet jurisdictions typically have been loath to surrender any local control, even if it means a substantial savings for their citizens. That’s nonsense.
While consolidation is not a done deal — the details are being worked out — we commend the cities of Arroyo Grande and Grover Beach for their willingness to discuss the idea.
We urge other local agencies to look at similar opportunities for savings, if they haven’t already done so.
Bottom line: It may be too late for Stockton to avoid going broke, but there’s still time for other cities to learn from its mistakes.