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How not to run a local government

Robert Ehrlich says Stockton, Calif., reveals the perils of favoring public employee unions over taxpayers

Bob Ehrlich

8:00 AM EDT, May 19, 2013

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One of the more enjoyable aspects of my public career was an excellent relationship with public safety unions. Law enforcement, fire and EMT groups were supportive of my races for the state legislature, Congress and governor.

Although not unheard of, such consistent support made for some uneasy moments when national labor organizations (almost exclusively associated with Democratic candidates) were informed about public safety union support for "that Republican Ehrlich." From a personal perspective, it was easy to separate the unique nature of public safety's job description (public protection being the No. 1 job of government) from other public-sector duties. My legislative support typically followed.

These memories are by way of background as we take a hard look at the (mis)fortunes of Stockton, Calif., the largest city to file for bankruptcy protection in the U.S. (Although Stockton is only the most well known of two dozen California municipalities that have mismanaged their finances in spectacular fashion.)

How, you might ask, did Stockton end up in such desperate straits? Well, it seems a bunch of local politicians took to promising a lot of goodies to a lot of people in exchange for a lot of votes. Primary beneficiaries were local public employee unions, who suckered the aforementioned politicians into a series of (beyond) sweetheart salary and pension deals.

How good? In some instances Stockton is paying 50-year old public safety retirees close to 100 percent of what they earned while on the job. Further perks included "Cadillac" health plans and the ability to bank unlimited vacation and sick time that could be cashed out at retirement time. With this gig, who needs a retirement party?

All this in addition to other negligent spending priorities, including the building of a new City Hall (at a cost of $48 million) during a historic economic downturn.

Stockton's cash crunch has resulted in dire consequences. Local police patrols are so reduced that they only respond to an emergency in progress. Result: The city's crime rate has skyrocketed. Many businesses (and people) are leaving, too — a widespread phenomenon in high-tax, high-cost, high-regulation California. And California's loss is Nevada's, Washington's, Oregon's, and Texas' gain; statistics reflect that 36,000 California corporations left the state between 1990 and 2010. Further, the state has lost 3.4 million citizens over the last 23 years, a loss rate faster than any other state. Sound familiar, Maryland?

Even emergency cost-saving measures such as employee layoffs and reducing health care benefits, library, and rec and parks services have failed to stem the flow of red ink. It's all a difficult reminder from your Economics 101 textbook: Over-promising, overspending, and over-taxing always lead to underperformance. In this case, the city's inability to pay its bills and make good on its debt.

All of which has led to an important decision with profound moral, legal and constitutional repercussions. To wit: Given limited cash, which creditors get paid — and how much?

The legal battle pits federal bankruptcy law against California state law. But in dollar (and political) terms, it is a showdown between public employee pension funds and other creditors. And on April 1, a federal bankruptcy judge ruled in favor of the union — which means that Stockton will continue to satisfy its gigantic pension obligations to the California Public Employees' Retirement System (present price tag: $900 million) before it pays other creditors. To date, the city has maintained its payouts while reneging on other debts. (FYI, as expected, outside creditor groups plan to appeal.)

One of the more delicious ironies to Stockton's fiscal plight pertains to the 10th Amendment. You know, the left's least favorite constitutional provision, usually invoked by conservatives in order to protect individuals and states from federal jurisdiction. But today it's the usually left-leaning unions screaming bloody murder about states' (and local) rights. Their view: Stockton's politicians freely signed contracts they could not afford — deal with it. And pay us.

Hard lessons abound. But one stands out: Everybody loses when government insists on spending beyond its means. Today, Stockton is located at the intersection of unacceptable politics and unsustainable spending. It is a national model for what not to do. It is going to be quite difficult to get the city's fiscal train back on track. And, as usual, it will be the taxpayers forced to foot the bill for gross political negligence.

But come to think of it, it was the taxpayer-voter who enabled negligent, free-spending politicians with their votes. In the sorry case of Stockton, there may be no innocent party. Elections really do have consequences.

Robert L. Ehrlich Jr.'s column appears Sundays. The former Maryland governor and member of Congress is a partner at the law firm King & Spalding and the author of "Turn this Car Around," a book about national politics. His email is ehrlichcolumn@gmail.com.