How cities like Vallejo can solve fiscal crisis and avoid bankruptcy
March 3, 2008
According to the California Foundation For Fiscal Responsibility (CCFR), Vallejo is not facing a municipal fiscal crisis alone in California, it is just the first city to run out of cash. The root cause is promised increases in wages and benefits for government employees that are not supported by tax revenues.
Looking for answers, Vallejo leaders have chosen to reduce services and increase fees to close an $8 million shortfall. The unions have reluctantly agreed to accept smaller raises than provided by their current contracts and they have agreed to personnel cuts. The city is asking bond holders for more time to pay which only increases future interest costs. Spending on infrastructure and much needed road maintenance will be curtailed indefinitely. CFFR recommends immediate adoption of the following steps toward fiscal responsibility:
1. Stop Illegal Payments for Extra Pension Benefits Related to Services Rendered Years Earlier
2. Adopt a Second Tier Pension Plan for New Hires
3. Reduce Compensated Absences
4. Discontinue Allowing Employees to Purchase Years of Service
City of Vallejo nears bankruptcy
February 20, 2008
NBC11 reports that, according to City Councilmembers, the City of Vallejo is on the brink of bankruptcy. In a report to the City Council last week, City Manager Joseph Tanner said the city faces a $10.1 million general fund operating deficit for the current fiscal year and a negative available fund balance of $5.9 million on June 30, 2008.
An emergency plan would cut city salaries to 5 percent lower than June 30, 2007 starting on March 28. Police and firefighter salaries under the existing labor agreements would be reduced 15 percent, by 8 percent for the electrical workers and 5 percent for confidential, management and un-represented employees.
Thirty general fund positions would be eliminated, 16 of which are currently filled and will require layoffs.
Other vacant positions could be filled by transferring employees but the reductions would reduce the general fund positions from 494 to 411, or by 17 percent. A single fire engine company would be closed each day on a rotating basis and there would be a three-month temporary reduction in truck company staffing from four to three.
What can we say…call your Congressman?
California Legislative Analyst Office releases pension and health benefit report
January 7, 2008
The Public Employees Post-Employment Benefits Commission—appointed by leaders of the California Legislature and Gov. Arnold Schwarzenegger—released an over-300-page report this morning on pension and retiree health benefits policy for state and local governments in California.
A first-of-its-kind statewide survey identified at least $118 billion in unfunded retiree health (also known as OPEB) liabilities, as self-reported by state and local governments in California, and an unfunded pension liability for all public systems of $63.5 billion. This means that, while pension liabilities are 89 percent funded statewide, retiree health liabilities generally are not funded at all. The bipartisan commission concluded that “prefunding OPEB benefits is just as important as prefunding pensions,” and “the ultimate goal of a prefunding policy should be to achieve full funding.”
For links to the commission’s report, press release, and other materials, visit the LAO Retiree Health Care News and Reports Web site at: http://www.lao.ca.gov/retireehealth/RetSummary.aspx?id=358
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