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Pension Meltdown
Pensions Leading Another California City to Bankruptcy

Another one bites the dust? This time, the California city in question is Desert Hot Springs, a small community just outside the Los Angeles area, which is on the verge of bankruptcy due to over-promising on public sector salaries and pensions, and over-estimating its revenues to cover them.

Facing the prospect of running out of money in just a few months, the city was forced to take drastic action, slashing salaries and benefits for city employees. Sadly, even this may not be enough, because pensions, which are still untouchable by California law, account for the lion’s share of the city’s problems. The NYT reports:

In Desert Hot Springs, for example, for every dollar that the city pays its police officers, another 36 cents must be sent to Calpers to fund their pensions.

The average pay and benefits package for a police officer here had been worth $177,203 per year, in a city where the median household income was $31,356 in 2011, according to the Census Bureau. All of this had gone largely unnoticed until becoming the center of debate during the recent municipal election.

Now the city is so broke that some worry that it may be forced to disband the police force entirely, as it did in the 1990s.

As in all these pension meltdown stories unfolding across the country, the lesson is clear: when powerful public employee unions meet actuaries wearing rose-tinted glasses, the end result is a ticking time bomb for the municipalities involved.

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  • Fat_Man

    If the average pay and benefit package is $177,203, and 36 cents per dollar goes to pension, then the average cop is taking down $130,296. Even allowing $2,000/mo for health insurance, their take home must be about $9,000/mo. I’ll bet they could find people to take those jobs for a lot less.

  • Anthony

    The fate of government pensions is important because they are cornerstone of retirement income: see World Braces for Retirement Crisis – David McHugh & Elaine Kurtenbach (Associated Press).

  • Corlyss

    How did such a small community get in such a fix? Here’s some data:

    Percentage of residents living in poverty in 2011: 25.6%

    Percentage of households with unmarried partners:
    This city: 12.1%Whole state: 7.2%

    Hispanic – 13,251 (51.4%)
    White alone – 8,682 (33.7%)
    Black alone – 1,874 (7.3%)

    Crime rate: more than double that of city-data city averages.

    Source: City-data

    They better think of something else besides disbanding the police.

  • stevewfromford

    When public employee unions bribe or threaten politicians (through contributions or activism) this is the predictable result. $177K for a policeman in a puny burg like Desert Hot Springs? Only in the la-la land of fiscal unconcern that drives the unions!
    If and when a Republican takes the Presidency the best and most important first move he should make is to rescind JFK’s executive order allowing public employees to form unions.
    Kill SEIU before it impoverishes us all!

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