Bankrupt And Bewildered

Sometime this week, the city of Stockton, California will file for bankruptcy.   I’m sure the people of Stockton — all 300,000 of them — are a bit bewildered by their current grim reality.

Not too long ago, Stockton was on the move.   It built a new marina and hotel and promenade to attract tourists.  It built vast tracts of housing in an effort to lure bargain-hunting workers from the Bay Area.  It offered generous pay and benefits to its workers, including allowing them to retire at age 55.

Then the crash came.  The vast tracts of housing sit largely vacant, and Stockton has the second-highest foreclosure rate in the country.  The hoped-for boom in tourism and convention traffic never materialized.  Stockton boasts the second-highest rate of violent crime in California and a 17.5 percent unemployment rate.  The city has been cutting payroll for years, including a 25 percent cut in the police force and a 30 percent cut in the fire department payroll.  Public employee pay and benefits have been reduced.  Yet still the city faces a $26 million budget deficit and $417 million in liability for retirees’ health care.  When mediation talks with public employee unions and creditors failed, bankruptcy became the only option.

If I lived in Stockton I’d have one question:  how did city government fail so colossally?  Stockton looks like one of those cities where bones were thrown to everyone:  big dream city projects for the pro-development crowd, big pay and health care benefits and pensions for the public employee unions, big promises of progress and better days ahead for voters, and pats on the back and big salaries for city leaders.  Now that it has turned to ashes, city residents are left in a crime-ridden, devastated city that has to do untenable things like totally eliminating healthcare benefits for city retirees.

I guess, therefore, I’d have a second question:  where is the accountability for the city leaders who allowed the city to stroll, dream-like, into this predicament?

What Of Walker’s Win In Wisconsin?

Wisconsin Governor Scott Walker became the first American governor to survive a recall election last night.  In a rematch of a 2010 contest, he gathered more than 53 percent of the vote and beat Milwaukee Mayor Tom Barrett — by a margin slightly better than that Walker achieved in 2010.

As is often the case with such events, people want to draw sweeping inferences from this one event.  We’ll see many articles about what this means for the future of the public employee unions that brought about Walker’s recall election after he pushed through reforms of public employee collective bargaining rights, for Republican governors in other states, and for President Obama’s reelection prospects.  It’s a natural human tendency, I think, to want to see a broad pattern in isolated events — but often those perceived patterns don’t really exist.

Public employee unions aren’t going away.  They lost in their bid to unseat Walker in Wisconsin, but they defeated another public employee collective bargaining law in Ohio.  Where’s the pattern in that?  Members of public employee unions, like other members of private-sector unions, believe in collective bargaining rights.  One reason they objected so strongly to Walker’s reforms is that they believe the reforms improperly interfere with fairly gained, bargained-for rights and benefits, won after hard-fought negotiations in which union members may have given in on other issues.  In their eyes, the fact that taxpayers and people in the private sector might view those rights and benefits as overly rich is irrelevant, because they are stalwart believers in the collective bargaining process that achieved those rights.  Public employee unions in other states aren’t going to roll over just because the unions did not prevail in Wisconsin.  If they did, it would undercut the entire idea of public employee labor unions.

I also doubt that Walker’s win is going to charge Republican governors in other states with enthusiasm for taking on public employee unions and pushing sweeping reforms — at least, no more so than is absolutely necessary to achieve balanced budgets and govern responsibly.  Walker prevailed, but his actions precipitated a bruising political battle, sidetracked his term with a recall campaign and election, and ultimately resulted in more than $60 million in campaign spending, much of it by organizations outside of Wisconsin.  It’s therefore no surprise that Walker was playing the pipes of peace after yesterday’s result.  Although politicians love to talk about “fighting” for voters, one way or another, most of them are inveterate compromisers who aren’t looking to pick a knife fight, especially when they know they can’t count on advocacy groups supporting their efforts to the same extent that occurred in Wisconsin.

As for President Obama, he largely stayed out of the Wisconsin recall election fray and will be able to depict it as a one-shot, one-state result that doesn’t have broad national significance.  How do you glean national trends from an election rematch that produced pretty much the same result as the initial 2010 election between Walker and Barrett?  If there is a lesson there, it is that voters stuck with Walker, despite all of the controversy and protests, in a contest that involved extraordinary spending by both sides.  But how many of those Walker voters cast their ballots because they object, in principle, to recall elections under such circumstances?  How many were motivated by special concerns not found in the national electorate?  I’m just not convinced that the Wisconsin results in June are going to predict much with respect to national results in November.

The Wisconsin recall election is an interesting mid-year event that may be the start of a trend — or it may not.

Recalls, Rematches, And Redos

Next Tuesday, June 5, Wisconsin voters will go to the polls to vote in the “recall” election of Republican Governor Scott Walker.  Political junkies, in Wisconsin and nationally, will be watching the results carefully.

The recall election is the result of a petition drive that began after Walker pushed through reforms to address Wisconsin’s fiscal problems — reforms that public employee unions didn’t like, but that appear to be working and allowing the state and local governments to get their budgets under control.

The recall election is a rematch of the 2010 gubernatorial election between Walker and Milwaukee Mayor Tom Barrett.  Huge amounts of money — much of it from out of state — is being spent on the election.  Interestingly, Barrett’s chief objection to Walker doesn’t seem to be the merits of the reforms that produced the recall election.  Instead, he has raised other, minor issues and seems most troubled because he thinks Walker has been “divisive.”  If a politician has been successful in dealing with seemingly intractable problems, however, he’s likely to have upset some people. Why should that disqualify him from finishing his term and standing for reelection at that point?

The Wisconsin election just shows why recall elections are a bad idea and should be reserved for rare circumstances — like criminal activity by the incumbent.  Recalls should not be had just because a segment of the population disagrees with the incumbent’s approach to issues.  Elections should have consequences, and when they do the losing side shouldn’t be able to force costly redos that just distract from the public business.

The polls are indicating that Walker will survive, and national Democrats are downplaying the notion that the Wisconsin election reflects the national mood come November.  I don’t think they need to worry about that.  Wisconsin has been mired in a bitter brew of its own making over the past few years, and I’m sure that many voters just want to bring an end to the constant fighting and let Walker finish his term.  I’d be cautious about drawing too many national inferences from the Wisconsin results.

Day Of Reckoning

Tomorrow is Election Day in Ohio, and the hoo-hah about Issue 2 finally will end. Unless there has been catastrophic polling failure — or Ohioans have been misleading pollsters for chuckles and giggles — Issue 2 will be defeated and the old collective bargaining rules applicable to public employees will be reinstituted.

Both sides have poured huge sums into the Issue 2 campaign, and anyone who regularly watches the news has seen more Issue 2-related ads than they care to remember.  The ads haven’t exactly been objective treatments of the relevant issues, either.  We had some friends in from out of town over the weekend, and after seeing countless Issue 2 commercials they were totally mystified about what Issue 2 was.  The only thing they knew for sure was that a yes vote or a no vote would effectively mean the end of civilization as we know it.

Whichever way tomorrow’s election goes, I suspect we haven’t seen the last of public employee-related initiatives on the Ohio ballot.  Those who want to cut government spending naturally are going to want to focus on public employee salaries, benefits, and jobs — and this election has shown that public-sector unions won’t be shy about mounting petition drives and spending significant sums to protect those salaries, benefits, and jobs.

The Rhode Island Lesson

Supreme Court Justice Louis Brandeis once described the states as “laboratories of democacy” — that is, in our federalist system, individual states were free to experiment with different policies and diverse approaches to common problems.  The idea was that, from the results of those experiments and the testing in state “laboratories,” sound policies could be distinguished from unsound.

Brandeis’ concept is playing out in Rhode Island, and in this case, the experiment has produced results that should give every other state pause.  As this New York Times article explains, Rhode Island and its cities are in desperate financial straits because the pension obligations owed to public employees have become crippling and are consuming ever-larger shares of governmental budgets.  A combination of rank politicking, ridiculously over-optimistic investment return projections, shrinking tax revenues, and longer-lived retirees have forced Rhode Island and its municipalities to choose between meeting its pension obligations and providing essential government services.  One city, Central Falls, has already declared bankruptcy, and the state itself has had to take special measures to try to protect its bond rating.

I mention this unfortunate story because it seems pertinent to Ohio’s impending vote on Issue 2, which relates to how compensation, health care benefits, and pension benefits should be decided for public employees.  As we consider Issue 2, it is important to keep in mind that government does not exist simply to provide benefits for public employees.  I don’t want to see Ohio become another Rhode Island, where pension and health care benefit costs are bringing down local governments or are imposing such all-consuming obligations that roads and bridges may go unrepaired.

I’ve Made Up My Mind On Issue 2

Early voting has has been underway for more than a week now on Issue 2, the issue dealing with public employee issues.  Today I got an email from Ohio’s Democratic Senator, Sherrod Brown, urging me to vote early against the issue.  I’ve going to wait until the election to vote, but the email got me to thinking about Issue 2.

After some reflection, I’ve decided I’m going to vote in favor of Issue 2.  I recognize that there are arguments the other way, but I’ve made up my mind.  Here’s why:  I don’t think the collective bargaining model works with public employees.  In the classic case, workers collectively bargain with bosses who own the business.  The bosses have skin in the game and an incentive to vigorously bargain with the employee’s union.  Our political leaders don’t have the same kind of skin in the game, however.  To the contrary, they may have been elected with the active support and contributions of public employee unions.  I also think that it is not unreasonable to ask public employees to contribute more toward their health insurance and pensions.  Many in the private sector pay 100% of the cost of both of those benefits, without any employer contribution.  Add to that the fact that there is a lot more job security in the public employee world, and I think that public employees have a pretty good deal.

I don’t believe that Issue 2 would solve our governmental budget problems by itself, and I defer to no one in my admiration for police officers and firefighters, but I also think we simply cannot afford to continue to expand the size, scope, and cost of our state and local governments.  Every police officer and every firefighter may be essential — but not every teacher is, and not every clerical worker at the BMV is, either.

If Issue 2 gives our leaders more flexibility to deal with bloated public employee payrolls and to avoid the kind of crippling, long-term pension obligations that are such a problem in states like California — or, for that matter, in countries like Greece — I think that is a good idea.  I’m going to vote for Issue 2 because I think it is the prudent thing to do.

The Issue 2 Onslaught And The Firefighters’ Brigade

In Ohio, you can’t watch a football game without seeing commercials, pro and con, on Issue 2.  The ad onslaught, funded by well-heeled groups on both sides of the issue, has begun in earnest, and the election is still six weeks away.

State Issue 2 is a public referendum on various public employee issues.  A “yes” vote would uphold SB 5, legislation passed by the Ohio General Assembly earlier this year that limits certain collective bargaining rights of public employees, requires public employees to contribute at least 15 percent of their health insurance premiums and 10 percent of pension contributions, and make a number of additional changes.  A “no” vote on Issue 2 would overturn that law.

The big question right now is whether the flood of commercials will advance meaningful public knowledge about Issue 2 and its impact.  Would an affirmation of SB 5 cripple public employee rights and put public safety at risk, as opponents claim?  Or, would the approval of SB 5 give cash-strapped state and local governments the flexibility to save money while maintaining public services, as its proponents contend?

So far, the ads I’ve seen suggest that Issue 2 is all about firefighters and the staff members who work for Ohio’s 33 state senators.  Of course, that is not the case.  Firefighters are attractive subjects of TV commercials, but they represent a small fraction of the public employees who would be affected by SB 5.  According to an article earlier this year in the Cleveland Plain Dealer, there are nearly 650,000 state and local government employees in Ohio; in Cuyahoga County alone there are more than 76,000 local government employees.  In contrast, Cleveland, the largest local government in Cuyahoga County, employs 900 firefighters.

I’d like to see commercials that get beyond firefighters and Ohio Senate staffers and get to the heart of the issues on Issue 2.  Under our current scheme, how do public employees really fare versus those working in the private sector?  How much money could state and local governments reasonably expect to save if SB 5 is affirmed?  What abuses, if any, should cause us to change the current approach toward public employees?  If voters are to be informed about the merits of Issue 2, those are the kinds of questions that need to be answered.