Dialogue: "Berkeley Braces for Bankruptcy: Red Flag Warning from Berkeley City Auditor" and the Auditor's Response

Isabelle Gaston, PhD and Ann-Marie Hogan, Berkeley City Auditor
Thursday October 05, 2017 - 01:30:00 PM

Editor's Note: This interesting discussion was posted to the public record as part of communications to the Berkeley City Council. We have Dr. Gaston's permission to publish it, and the quoted title is hers. 

To Whom It May Concern: 

Two nights ago, at Berkeley City Council, the Berkeley City Auditor warned the Berkeley City Manager and the Berkeley City Council that the City could face bankruptcy unless steps are taken to protect our reserves.
  • The auditor stated that Berkeley has "serious unfunded liabilities" -- that originated in 1999, not in 2008, as the unions and politicians tell the story.
  • She acknowledged the "enormous pressure" the unions are putting on Council to give them raises.
  • She said that "we're looking at other cities that are going to hit the wall sooner than we are...we are looking at other cities that are talking about bankruptcy within the next 4 years as they spend down the reserves they have"
From the Auditor's statements, it is pretty easy to connect the dots:
  • The Mayor and Council plan to use the City's reserves to give unions a raise.
  • The draining of the reserves will lead sooner - rather than later - to bankruptcy. Possibly within 4 years.
Is political payback to the unions that supported the Mayor and new majority last November more important than avoiding bankruptcy?
We'll see soon enough!
And this will be this Council's legacy.
Isabelle Gaston, PhD 


Dear Isabelle – 

I disagree with your characterization of what I said (the first two bullets) and with your conclusions. I’m in an all day, live, on line training so I won’t have the opportunity to respond more fully today 

First bullet: 1999 was in reference to the discussions about increasing the benefits for state employees, not to the beginning of unfunded liabilities; PERS was super-funded back then. 

Second bullet: I have no information whatsoever about pressure being put on the Council by employees; I spoke more globally about the pressures that are inevitable when there are not enough resources to accomplish the City’s objectives. 

Regarding your conclusions, I absolutely am not predicting that the city will be bankrupt in four years, but rather that the PERS rates will be so high that difficult choices will be made. I also have no knowledge of particular pressures put on Council for particular expenditures other than what I see at public comment at Council meetings here and in other cities. 

My apologies for replying to all, but I suggest that anyone interested in my actual extemporaneous comments can go on line and listen to them; the video is posted on the city’s web site. 

Thank you very much for your interest. 

Ann-Marie [Hogan, Berkeley City Auditor]