Government and the ‘B’ word

Plummeting revenues. Crippling liabilities. Gutless, politically expedient leadership. Greedy unions that insist on maintaining fiscally unsustainable salaries, benefits and pensions.

They drove airlines and automakers into bankruptcy. Can the city of Las Vegas and Clark County governments be far behind?

The city and county are taking on more water than they can possibly bail. Officials piled worse news on top of bad during meetings of the City Council and County Commission this month, warning of future budget deficits that could force massive layoffs and service reductions.

The county projects a $129 million budget deficit for the 2010-11 fiscal year, which starts July 1. Department heads were asked this summer to propose 5 percent cuts and could muster only half that amount. Now the commission, which has already tapped savings to keep the budget balanced, has to seriously consider dismissing 10 percent of the county's work force or negotiating 10 percent pay cuts.

The city's woes are far more urgent. Tax revenues for the current fiscal year were expected to drop 2.5 percent, but instead they've fallen off 18 percent. Last week, City Manager Betsy Fretwell announced 19 layoffs and the elimination of 54 vacant positions. Las Vegas is quickly burning reserves to preserve the rest of its payroll, and is bracing for the possibility of a $40 million budget hole next fiscal year.

No one expects the local economy to recover for years. And yet the city and county keep handing out generous annual pay raises to public employees, even as tax collections tank and the local cost of living falls. They write millions of dollars worth of checks to retiring workers, who get to call it quits well before they're eligible for Social Security or Medicare, cash out gobs of unused sick and vacation time and collect taxpayer-funded pensions for the rest of their lives.

Elected and appointed officials will shrug their shoulders and claim their hands are tied by their contracts with bargaining units -- they can't eliminate pay raises, cut salaries or reduce benefits unless the unions agree.

But now they can -- if they file for bankruptcy.

The city of Vallejo, Calif., did just that in 2008 under the very circumstances Las Vegas and Clark County currently face.

Public employee contracts negotiated during flush times had created a payroll dominated by six-figure salaries, sweetened benefits and enhanced pensions. When the real estate crash gutted home values and the city's tax collections, Vallejo couldn't meet all its obligations. Rather than give back some of their largess, Vallejo's unions told their indentured servants on the City Council to quit whining and raise taxes.

Instead, the council took the extraordinary step of filing for Chapter 9 reorganization, making Vallejo, with a population of about 120,000, the largest California city to declare bankruptcy. Foremost among the city's requests in the case: blowing up all of its public employee contracts and writing new ones from scratch.

In March, U.S. Bankruptcy Judge Michael McManus made the unprecedented decision to grant the city the authority to void all of its union contracts. His ruling held that federal law limits the ability of employers to reject union contracts only in Chapter 11 bankruptcies, which cover reorganizations of private-sector companies. McManus ruled that government workers do not enjoy such protections under Chapter 9, which covers municipal bankruptcies.

The ruling is a beacon of hope for beleaguered taxpayers who labor to provide for themselves while supporting a higher standard of living for unionized public employees -- and getting fewer services in return. Vallejo got what the city of Las Vegas and Clark County desperately need: flexibility and a fresh start.

Bankruptcy is not without painful consequences for governments and taxpayers. A Chapter 9 filing would crush city and county credit ratings and make it more expensive to borrow and build infrastructure. But if the city and county wipe out all their reserves maintaining the status quo, their ratings will suffer anyway. And there are more fiscal storm clouds on the horizon.

The county assessor's office is putting the finishing touches on property valuations for the next fiscal year. The vast majority of parcels will have reduced values, meaning property tax collections will soon go the way of sales and gaming tax receipts -- off a cliff.

The state Supreme Court, meanwhile, is still considering the imposition of caseload caps on public defenders. If justices order Clark County to immediately double or triple its spending on counsel for indigent criminal defendants, the county general fund will melt faster than the Nazis in "Raiders of the Lost Ark."

And then there's the city's reckless plan to build a new City Hall and the state's billions of dollars in unfunded public employee pension and retirement health care obligations. When those bills come due in several years, California's current budget problems will seem pretty tame.

Filing for municipal bankruptcy is no simple task in Nevada. As with all matters affecting local government revenues, it requires the approval of the Legislature -- which is, of course, a wholly owned subsidary of the public employee unions -- and the signature of the governor.

But how much longer can all the elected union lackeys defend the runaway gravy train? How bad do things have to get before someone on the City Council or the County Commission says the "B" word?

We'll find out sooner than any of them realize.

Glenn Cook (gcook@reviewjournal.com) is a Review-Journal editorial writer.