First, Stockton, California files for bankruptcy.
Yes, public employee benefits (specifically pensions) are causing trouble in this case. It will be interesting to see how Calpers tries to finesse this one. In the case of Vallejo, even though many said it would be a test case for altering benefits of current employees at the very least (as opposed to new entrants), no such thing occurred. Stockton may be different.
Mish points out another story that is related: the Univ. of California system is having pension issues as well. It doesn't help that there are lots of very-highly-paid employees in this system, and no, not all of them are the tenured profs:
If UC President Mark Yudof, 67, serves for seven years, he would receive an annual pension of $350,000 — in addition to regular benefits he accrues through the UC Retirement Plan, according to university documents.
The university caps employee pensions at the IRS limit of $250,000, but that ceiling does not apply to the "supplemental retirement benefits" promised to Yudof.
So one has increasing salaries (in the absence of snagging in larger reach and less work – i.e., higher productivity – of online teaching, you've got
Baumol's cost disease with tenured profs…. and don't get started on the panoply of "administrators" who administrate nothing productive themselves)…and a student body that doesn't have the demographic growth levels to keep up the level of spending on higher education.
When the higher education bubble pops, it could take professor pensions, too.
And a different side of the public pension mess as it relates to universities:
Sandusky may be able to hang onto his state pension (about $60K/year). It can be tough to yank public pensions from people, even when convicted of criminal activity that is related to their public position. There are people who have been convicted of corruption in their public positions, and still manage to collect their pensions. It is state-dependent as to which, if any, criminal convictions can get a pension rescinded. In some places, there's pretty much nothing that would do it.
The kicker, also, is that if one isn't the IRS, one cannot garnish pensions directly. To be sure, once it's turned into cash, it's fair game for plaintiffs to try to get, but ask the Browns about how well they've been able to get any of O.J.'s NFL pension money.
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