Nearly every day you can read reports of large judgements or settlements made by government entities to pay for improper actions by government employees or agencies. The numbers associated with these payments are eyepopping. Large liability payouts against government occur for various reasons including police misconduct, property damage, civil rights violations, and personal injury claims. The focus on these actions are usually the victims receiving the money and the government hindered by the big payouts. A lost focus should be on the taxpayers burdened by excessive payouts.
This is not to say that victims of government employee actions have a right to be compensated fairly. However, by governing bodies accepting outlandish payments in a settlement (usually for fear of even higher payments as the result of a lawsuit) or jury verdicts, the ultimate burden falls on the taxpayers.
You wonder if the jury members, representatives of the community which is being sued, consider the incumbrance they are putting on the community and their fellow citizens when they serve to punish or set an example by jacking up the government liability payments.
The issue of government liability payments is in the spotlight because of the recent travails of Los Angeles City and County dealing with big liability payments while their budgets suffer.
Los Angeles City Mayor Karen Bass traveled to Sacramento twice to seek help from the state to close a $1 billion dollar budget deficit. While there are many reasons for L.A.’s fiscal problems including pension costs and high salary promises as examined in David Crane’s Substack column, one additional issue is the cost of liability payouts. The city budgeted $100 million to cover costs of lawsuits but finds it needs three times that to meet current obligations.
Meanwhile, Los Angeles County has reached an agreement to pay $4 billion to victims of sexual abuse that go back decades at county facilities, all the result of a recent state law that removed statute of limitation standards for these actions. The consequence is the county will have to cut 3% of its budget and continue budgeting for the payout through 2050.
Governments self-insure, carry private liability insurance or participate in public entity risk pools with other governments. Private insurers and risk pools can assert changes in procedures and training on the governments being covered to lower potential risk. Rarely does the employee who does the misdeed pay for his or her actions. In many cases departments and agencies don’t always pay out of their own budgets when a payment is required. It falls to the general fund or special judgement obligation bonds or even tax increases to cover government liability costs.
And in each case, in the end the taxpayer pays through new revenue enhancements or reduced services.
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However, the argument shouldn’t be made that seeking reforms on liability lawsuits are to bail out governments, which after all brought some of the big verdicts on themselves because of employee actions. The pitch should be made to shield taxpayers. They ultimately suffer the consequences of the eyepopping judgements. A message of protecting taxpayers would be good fiscal policy as well as good politics.
Joel Fox is a senior fellow at Pepperdine University’s Graduate School of Public Policy.
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