"Next"? It has arrived in Jefferson County, Ala., which includes Birmingham. Like Orange County, Calif., a few years ago, Jefferson County made risky investments in a desperate attempt to achieve a growth of assets commensurate with the cost of an infrastructure project. When San Diego was in the process of earning the sobriquet "Enron by the sea," firemen could retire at 50 with 90 percent of their pensions -- almost full pay for not working during half of their expected adult lives.
Credit Suisse estimates that state and local governments have a cumulative $1.5 trillion shortfall in commitments for retiree health care. But it is the pension crisis that most dramatically illustrates Lowenstein's thesis about the slow accretion of power by the unions. Pensions "are a perfect vehicle for procrastination; in the financial world, they are the most long-enduring promises that exist." Human nature -- the propensity to delay the unpleasant -- rears its ugly head: When pension benefits come due, the people who promised them, thereby buying labor peace and winning elections, are long gone.
Vallejo's unions contend that the city is solvent enough to meet its obligations. But last Friday a court disagreed, holding that the city is eligible for bankruptcy protection. A lawyer for Vallejo says the unions will have to negotiate a "plan of adjustment." Other cities are watching, perhaps including the one across the bay.
San Francisco recently reported that 184 of its employees made at least $30,000 apiece in overtime in the first half of this year. A nurse at the county jail made $128,000 in overtime, putting him on track to top his total 2007 compensation of about $350,000. Nice work it you can get it, and you can get it many places.
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