History of California public employee pensions

The Spring 2010 issue of City Journal carries an article on the history of California public employee unions, their political influence, and the cost of pension obligations to the unions: “The Beholden State.”

Related earlier postings:

4 thoughts on “History of California public employee pensions

  1. If a city runs out of money but isn’t allowed to declare bankruptcy, what happens?

  2. Good question. Bankruptcy is intended to protect creditors by ensuring equal treatment, ie every class of creditor gets the same number of cents in the dollar owed. Absent that, you will probably have some very unfair distribution of available funds.

  3. Lawrence: Bankruptcy protection is available to cities, though the law hasn’t been widely applied since the 1930s. Prior to the 1930s, a retiree who had moved to Florida to enjoy his pension would be able to sue to seize a city’s assets, such as parks or schools, in the event that the pension checks did not show up. No bankruptcy protection is available to states, as far as I know.

    If a city runs out of money and stops paying, without declaring bankruptcy, it is in default. Pension holders and bondholders can sue.

    The most significant asset owned by state/local governments in California are the roads. Probably the best long-term solution would be for the governments to hand over the streets to retired public employees. The public employee unions could then install congestion pricing and charge citizens to drive around Los Angeles, the Bay Area, San Diego.

  4. Giving the public employee unions the roads is a brilliant
    idea as that would finally produce enough outrage among
    the private class to overturn the power of the public class.

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