Vallejo Bankruptcy

By Steve Poftak
June 3rd, 2008

Reductio ad absurdum can be a dangerous form of rhetoric.

But the city of Vallejo, CA is an example of the impact of overly generous and underfunded public pensions. It declared bankruptcy to get out from under its obligations.

The notorious rightwing mouthpiece, Money Magazine, details the situation, noting that:

But the practice of retroactively boosting public sector pensions without any serious debate or approval by taxpayers has got to stop. As the Vallejo debacle illustrates, the stakes are simply too high.

Historically, the justification for these types of pension enhancements has been that public sector workers are forgoing the salaries they would have otherwise received in the private sector, in exchange for better retirement benefits.

But that no longer seems to hold true. According to the federal Bureau of Labor Statistics, the hourly salary (before benefits) of public-sector professionals (including teachers and lawyers) was $31.51 in December 2007, virtually identical to the $31.75 for private-sector professionals. Public-sector service employees (including many blue-collar jobs) averaged $16.72 an hour in salary, compared to $9.87 for private-sector employees.