Yahoo! News - San Diego now 'Enron by the Sea'
City Hall's Web site proclaims it "the most efficiently run big city in California." Howard Jarvis, architect of Proposition 13, California's landmark 1978 ballot measure capping property taxes, once said that if all cities were as financially prudent as San Diego, there'd be no need for a tax revolt.That was then. This is now: a financial mess dragging the nation's seventh-largest city toward insolvency, federal investigators looking for evidence of corruption, a $1.7 billion gap in city workers' pension fund and retiree medical benefits brought on by years of mismanagement and alleged sweetheart deals. The city manager and city auditor quit in disgrace. Allegations of conflicts of interest dog pension-fund trustees. The City Council and Mayor Dick Murphy, who's up for re-election Nov. 2, are accused of short-changing the pension plan to stem red ink and keep pet programs afloat, then shying from tough steps needed to close the gap.
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Thanks to Fred Pilot for sending this link. This is one of the main reasons cities privatize government services--they can't afford the cost of large staffs of government employees. Government employee unions negotiate contracts that cities and states can't afford in the long term. The problem in San Diego, according to this article, is municipal employee pensions, which are becoming an enormous problem for many cities and states. While city services deteriorate steadily, city employee pensions are quite lavish in San Diego, as the article notes:

Meanwhile, the average police officer, firefighter or clerk retiring after 30 years takes home a one-time $300,000 check from a much-criticized deferred retirement program established in 1997, plus a $50,000 annual pension for life, inflation adjusted. A few top officials have left with $1 million deferred-retirement checks and $144,000 a year for life. San Diego's benefits are "certainly on the high end of the spectrum," says April Boling, head of a pension-reform committee created by City Council.

A masterpiece of understatement, that last comment from Ms. Boling. Line employees are retiring at 55 with a massive cash payout, followed by maybe 30 years of a fat monthly stipend. Bigwigs get seven-figure lump sums and six-figures every year. Illinois has similar problems. So do other states and municipalities. Privatization, anyone?