Is Another California City Crumbling Under High Pension Costs and Burdensome Salaries?
Desert Hot Springs in California has warned that burdensome salary and pension costs may cause it to file for bankruptcy protection.
The problems in Desert Hot Springs came to light last week when a new finance director reviewed the city’s records and discovered a $3 million shortfall the result of higher-than-expected pension and salary costs, especially in the police department. “It’s obvious we can’t continue with salaries and pensions that are in the stratosphere, no matter how much love there is for our police department,” said Russell Betts, a council member.
In a report issued last week, the new finance director said bankruptcy was a real option under consideration. 70 percent of the city’s budget was consumed by police costs, most of which were spent on salaries and pension payments to the California Public Employees’ Retirement System, or Calpers. What is happening in Desert Hot Springs, and San Bernardino, are not going to be highly unusual events when Calpers continues increasing costs and many of these cities have cut costs down to where there is nothing else left to cut.
An outside consultant’s report earlier this year warned Desert Hot Springs that its pension costs were dangerously high. Calpers is America’s biggest public pension fund, with assets of $277 billion. It has argued strenuously in court that pension payments cannot be touched, even in a bankruptcy.
