New York should send a huge thank-you card to Stockton, Calif.: In becoming the largest US locale to file for bankruptcy, the West Coast city last week provided a valuable lesson on the consequences of free rides for labor.
The folks who should pay the most attention: New York’s unions.
Stockton’s financial woes, to be sure, were manifold. The housing collapse hit it hard, driving foreclosures up and property values down. Local stimulus plans — including nearly a quarter of a billion dollars in borrowing for a waterfront project, a minor-league hockey arena and other undertakings — fizzled (much as President Obama’s $800 billion stimulus boondoggle has failed to deliver).
But the biggest lead weight of all for Stockton was the pricey perks its pols granted the city’s unionized public employees.
Extravagant pension plans and health care for retirees in particular ate up a mind-numbing and ever-growing chunk of revenues. Stockton had to lay off nearly one of every three firefighters, one in four cops — and almost half of its administrative workforce.
And even that wasn’t enough: With a $26 million hole in its $180 million budget, and millions more in unfunded liabilities, the city could no longer stave off doomsday.
Now, all of Stockton will suffer — and the filing won’t even cure the city’s problems. But among the biggest losers, ironically, will be those to whom the grand promises were made in the first place — union members.
Indeed, most tragic is the toll on some retirees. No, they won’t lose their pensions, but many will endure painful changes in their medical plans under the city’s bankruptcy budget. One retired cop called the news “a life sentence,” because his scaled-down health coverage will leave him unable to afford chemo for his brain tumor.
Stockton is hardly the only jurisdiction to face a recent day of reckoning. Just last year, 13 localities went belly up.
Places in New York likely face similar fates. Counties like Nassau, Suffolk, Rochester and Erie have been struggling, as have towns like Yonkers.
Even America’s largest city, New York — which already flirted with bankruptcy back in the 1970s — may be headed for rocky times down the road: The city’s pension costs have soared seven-fold over the last decade alone, with no end in sight.
And yet, when Gov. Cuomo this year proposed modest pension tweaks — meant only for employees not yet hired — the unions went ballistic.
New York labor bosses may think they’re doing members a service by standing firm against even minor reforms.
But if they drive towns and counties to bankruptcy, it may be their own members who suffer most.
By illustrating — painfully — how that works, Stockton may have just done New York a big favor.