Cities in Default, a Mouthpiece in Denial

by Clyde Weiss  |  July 13, 2012

The Wall Street Journal
The Wall Street Journal, voice of Wall Street. (Photo by cafemama/Flickr)

Wall Street’s mouthpiece, The Wall Street Journal, never misses an opportunity to blame workers’ benefits – and their unions – for all kinds of economic problems facing the nation. Therefore it doesn’t surprise us – but once again saddens us – to see them try to lay blame on public service workers for causing the latest municipal bankruptcy in California.

The decision of the San Bernardino City Council to authorize a bankruptcy filing this week is unfortunate, but the Journal’s contention that the city’s collective bargaining agreements with its workers are at the root of the city’s financial troubles, is simply wrong.

Public employee wages, benefits and pensions are often blamed by right-wing lawmakers and their media mouthpieces for the financial crisis that many cities and states now find themselves in. But it’s a trick designed by Wall Street tycoons to shift the blame from their own misdeeds that led to the Great Recession in the first place. The fact is that contributions and investment returns fund the overwhelming majority of the cost of pensions. Taxpayers shouldered only 14.3 percent of all pension funding in the 11-year period ending in 2007. Learn more here.

Those who – like The Wall Street Journal – use police, firefighters, librarians and other municipal workers as scapegoats for financial mismanagement, the collapse of the housing market and the subsequent loss of tax revenue, are playing politics at its worst.

Out of 53,000 local government entities in this country, San Bernardino is just one of six that have declared bankruptcy since the Great Recession began in 2007. That’s no epidemic, but it is troubling. Nevertheless, each has its own causes, and public employees are not at the root cause of any of them. A recession caused by the bust in the housing market that decimated tax revenue, plus bad investments and even shady or illegal practices, helped push these communities over the fiscal brink.

In the case of San Bernardino, City Attorney James F. Penman said that possibly falsified financial documents and a loss of redevelopment funding were, together, “the straw that broke the camel’s back.” Whatever else may have contributed to their fiscal ills, the city’s public employees were not the cause of this collapse.

In California’s Central Valley, the city of Stockton filed for bankruptcy protection this June, citing years of fiscal mismanagement and the crash of its housing market. Workers’ modest wages and benefits were not the problem here, unless you want to believe that public service workers should work for free.

California’s High Sierra town of Mammoth Lakes filed for bankruptcy this month not because its workers got pensions, but because it was hit with an unaffordable $43 million breach-of-contract judgment brought by a developer – and because the a nearby ski resort laid off 70 full-time employees last year because it didn’t snow.

In 2008, the California Bay Area city of Vallejo filed for bankruptcy “in the face of dwindling tax revenues, the housing market meltdown and a faltering economy,” The New York Times said. Public workers caused the housing meltdown? Hardly. As the city itself pointed out: “Similar to many other California communities, the city’s General Fund budget has been hit with double digit reductions in sales tax and property tax revenues due to the recession.”

That was exacerbated by state law that “strictly limits increases in property taxes,” The Times pointed out. So, without new revenues to make up for the loss of property taxes, the city’s hands were tied, and services suffered as a result.

Jefferson County, Ala., (which includes the city of Birmingham) filed for bankruptcy last fall, “drowning under $4 billion in debt, the legacy of a big sewer project and corrupt financial dealings that sent 17 people to prison,” reported The New York Times. Again, public service workers were not to blame for this crisis.

And in Rhode Island, the town of Central Falls filed for bankruptcy last August because it failed to set aside enough funds to pay for pension benefits promised to its police and firefighters – not because these first responders had hard-earned pension benefits coming to them.

The Wall Street Journal would like to skip over these facts because they don’t fit into its fantasy of over-compensated public service workers wreaking havoc on innocent taxpayers. If it weren’t so despicable, we’d laugh. Instead, we are fighting back with the truth.

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