The lesson of Vallejo

News this week that the Vallejo City Council had unanimously voted to declare bankruptcy shouldn’t be ignored in Chico. Their city’s budget problems differ from Chico’s largely in degree, and their inability to solve them has forced Vallejo to take this drastic step.

That city faces a $16 million budget shortfall in the 2008-09 fiscal year, which begins July 1. At that point it will be unable to pay all its bills. There are several reasons for this, including the housing crisis, with its resulting decline in property values and tax revenues. But the primary problem in Vallejo, as in Chico, is the cost of labor contracts, particularly those of its public-safety employees. There, as here, around 80 percent of the city budget goes to wages and benefits, and the contracts have proven to be more generous than the city can afford.

Months-long efforts to renegotiate those contracts have been fruitless, with union officials insisting the deficit is not as large as the city insists it is and balking at compensation cutbacks.

Let’s hope it doesn’t come to that in Chico.

Fortunately, our city still has a year to go before it dips into the red. And the deficit it faces is nowhere near as large as Vallejo’s. But the danger is there. It will take a willingness to compromise on the part of all parties—the city, the unions and, quite possibly, the taxpayers—to meet Chico’s needs while keeping city government fiscally sound.