A Few Recent News Items and Observations on the High Cost of State and Local Government

HOW EVEN SMALL-TIME POLITICIANS TAKE ADVANTAGE OF TAXPAYERS: TO BE A CITY EMPLOYEE OR AN ELECTED OFFICIAL IS BLESSED—because you may receive extraordinary health insurance benefits.

Selections from “Many Small Cities Pay Officials Hefty Benefits,” by Catherine Saillant, Los Angeles Times, July 5, 2011.

Council members in Laguna Hills [a city of 40,000 residents in Orange County, California] receive medical benefits worth an average of $24,300 a year . . .

A Times analysis of perks and benefits received by elected city officials across California found . . . that some of the most generous benefits go to part-time council members in some of California’s smallest cities. . .

Residents in Thousand Oaks [pop.  123,500] protested this year after learning that . . . [a] 1997 resolution had given lifetime [health-care] benefits to any [City] council member who served at least five years and was at least 50. . .

Providing medical benefits to council members, once considered unusual, is now the norm. The Times analysis found that more than two-thirds of the state’s 482 cities provide some coverage, mostly to part-time politicians who meet only a few times a month. . .

The Times analysis found a few cities that provide medical benefits not only for elected council members, but also for residents appointed to part-time commissions and panels.

The City of Industry [population just 129], for instance, covers health benefits for its five-member council and 10 planning and redevelopment commissioners. In 2009, the cost of providing healthcare for all 15 part-timers was $364,815.

Mayor David Perez said he sees no problem with the arrangement, which has been in place since the city was incorporated in 1957. When he battled prostate cancer two years ago, he paid no medical bills.

“It’s a good plan,” said Perez, who turns 65 this year. “Our employees and the electeds, well, we are blessed, let’s put it that way.”

CONTRACTING OUT CITY SERVICES COULD SAVE MONEY

Selections from “Citing pension costs, Costa Mesa, Calif. plans to lay off nearly half its employees,” by Peter Whoriskey, The Washington Post, March 19, 2011.

Nearly half the city workers in Costa Mesa [population 110,000], received layoff notices last week. Street sweepers. Firefighters. Mechanics. Payroll clerks. Animal control workers. In all, about 210 of the city’s 472 employees, many of whom have worked there for decades. . .

The cutbacks are necessary because the escalating costs of providing pensions for police, firefighters and other unionized employees are draining the city’s revenue, city leaders say.

City Council members say the rising costs of pensions compelled them to issue the layoff notices. The idea is to outsource many of the functions of city government to private firms or other governments. Firefighting, for example, could be contracted out to Orange County at a savings of millions of dollars. Private firms could take up payroll services and street sweeping.

USING POLITICAL POWER TO ENRICH PUBLIC OFFICIALS AND EMPLOYEES AT THE EXPENSE OF TAXPAYERS

From Shakedown: The Continuing Conspiracy Against the American Taxpayer (2011) by Steven Malanga, p. 19

“For fifty years, public unions, health-care lobbyists, and social-services advocacy groups have doggedly been amassing power in state capitols and city halls, using their influence to inflate pay and benefits for their workers and to boost government spending. The bill for that influence is now coming due, and it is overwhelming state and local budgets.”

STATE AND LOCAL GOVERNMENT PROFLIGACY IS A WIDESPREAD PROBLEM

The financial woes of small cities in California are typical of a widespread problem in state and local government across the length and breadth of the United States. A recent study at Stanford University estimated unfunded pension liabilities of the state of California come to around $500 billion [over $40,000 per California household].  See “Analysis of California Pensions Finds Half-Trillion-Dollar Gap,” by Mary Williams Walsh, New York Times, April 6, 2010. Other states are even worse off; e.g., the Illinois state pension system is underfunded by as much as 55%.  See “Illinois Pension Crises Eludes Easy Solutions” by Michael Corkery, Op-Ed, The Wall Street Journal, March 16, 2011.

Some states have under-funded long-term liabilities to employees for post-retirement health care. Medicaid obligations of the states for health care of low-income people are a large and increasingly burdensome expense and liability. Usually, these various long-term liabilities are not reported adequately, if at all, in state and local government financial accounting and reports.

Even for expenses that are included in state financial reports, many states and cities are running huge budget gaps with expenditures that far exceed revenues, something that, unlike the federal government, states and local governments cannot continue for long. While the budget problems in California, New Jersey and Wisconsin have been well publicized of late, many other states have similar serious financial problems. For example, Illinois, Nevada, and Massachusetts all have budget gaps exceeding 40%. See “The Worst 2011 State Budget Gaps.”  www.cnbc.com.