By Dan Walters
November 29, 2015
- Bankruptcies and scandals showed danger
- Pension burdens one major factor
- Auditor to monitor local governments
The bankruptcies of three cities and high-profile financial scandals in a couple of others demonstrated the operational vulnerabilities of California’s municipalities.
A coincidental series of events just this month underscore that vulnerability, to wit:
▪ The California Public Employees’ Retirement System board is shifting to lower assumed investment earnings.
It will force state and local governments to cough up more money on top of the hefty increases in “contributions” that CalPERS has already imposed to cover investment losses.
Cities are particularly at risk because they have, proportionately, the highest pension burdens, having bowed to pressure from powerful police and fire unions for high salaries and the highest pension benefits.
▪ Meanwhile, CalPERS is moving to slash pensions of officials in two scandal-ridden cities, Bell and Vernon. One has been collecting $550,000 a year in retirement.
▪ State Auditor Elaine Howle established a new program to identify local governments “at high risk for the potential of waste, fraud, abuse or mismanagement …”
Six cities made the initial list, with the most troubled being Richmond in Contra Costa County, the only one to flunk all five criteria of risk.
▪ Howle issued the list just a few days after the Richmond City Council gave its city manager, Bill Lindsay, a four-year contract extension with compensation totaling nearly $400,000 a year, more than twice what the governor is paid.
One credit rating organization has dropped Richmond’s debt to junk bond status and another to nearly that level.
To read expanded column, click here.