The WSJ today reports some expenditure details of Vallejo, northern California, pop. 117,000. Vallejo declared bankruptcy earlier this year after having unsustainably ramped up public spending in response to unsustainable tax revenues stemming from unsustainable property-values stemming from unsustainable mortgage-lending practices.
Over the last decade, the Journal reports, state and local practices pushed Vallejo’s public-sector wages, particularly in the police department, to ridiculous heights. Plus, following California law, Vallejo allows officers and firefighters “to retire at 50 years of age with 3 percent of their highest salary — multipled by the number of years served,” the paper notes. In 2005, Vallejo hiked officer salaries by 20 percent; including benefits, the total cost of each officer today is nearly $200,000 annually.
Now, Vallejo is cutting back, with deterioration in the city’s quality of life evident.
It’s true that Vallejo competes with Jefferson County, Alabama, to be the worst-managed municipality in the United States. But Vallejo differs from many other U.S. cities and states not in kind but by degree.
Over the past five years, New York, for example, has increased spending on municipal salaries, pensions, and health benefits by 22 percent after inflation. And, as E.J. reports in the post below deck, the city continues to approve similarly outsized increases.
The problem is that in a downturn, these payments are sticky while revenues are slippery. And since it’s hard to cut back current salaries or even future benefits after revenues slide, the city will be tempted to cut back on people, including more police officers than the 1,000-police-officer hiring delay New York has already budgeted, if things don’t get better fast.
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