The city's stupid decision to cut the budget for its fire department by more than $17 million made the recent Los Angeles wildfires much worse.
The budget crunch that led to that cutting was the result of hundreds of millions of dollars in unexpected payouts from lawsuits lodged against the city in a kind of municipal litigation lottery.
Los Angeles is not the only city to experience budget problems due to unexpected costs associated with lawsuit payouts.
New York City saw a one-year jump of $500 million in lawsuit payouts, for a total of $2 billion. Chicago's payouts doubled over the last year. Most cities are self-insured, meaning that taxpayers ultimately foot the bill.
Experts say part of the problem is cities' "rush to judgment," which encourages them to settle a suit rather than litigate a questionable claim. Some of those claims are outrageous.
In Chicago, "the city paid $5 million to a woman who developed frostbite after being locked out of her apartment, even though police said she had refused their help," reports City Journal.
The city is also paying out judgments from suits filed against a crooked cop who framed up to 40 innocent people. Those cases have already cost the city $39 million with more judgments on the way.
“I want all the [aldermen] and the general public to get ready, because we’re going to have more settlements,” the city’s corporation counsel said recently.
The city budgeted $82 million to pay judgments from lawsuits and ended up paying around $160 million. With the city staring down a $1.1 billion budget shortfall, the last thing Chicago needs is more multi-million-dollar payouts.
New York City has long struggled to control its liability costs. From the early 1990s to 2013, payouts rose at an average annual rate of nearly 6 percent, climbing from $231 million in fiscal 1993 to about $700 million in 2013. Since then, costs have more than doubled in less than a decade. Court cases have helped drive the surge, including a 2021 settlement under Mayor Bill de Blasio in a decades-old class action suit brought by Hispanic and black teachers, who charged that a teacher-certification test was discriminatory because white teachers passed it at higher rates, though the plaintiffs struggled to provide any evidence beyond the disparate outcomes. The city has set aside some $1.8 billion to compensate potentially thousands of claimants who failed the test as far back as 1994.
New York City is also now on the hook for nearly $1 billion in annual special-education claims, based on a 1993 Supreme Court ruling that allows parents of special-needs children to seek private school tuition at taxpayers’ expense if they believe local public schools fail to provide adequate instruction. Over the past decade, lawsuits under this ruling have exploded. According to the city’s Independent Budget Office, judgments have jumped fivefold from $200 million in 2014. This rise has continued despite the city’s significant investments in expanding special education—efforts that, so far, have failed to stop the tide of parents opting out of the public system.
Bad laws, bad policy, and a lot of citizens who see dollar signs in their eyes if they slip and fall on city streets, as well as city employees who hear "cha-ching" when state legislatures grant them a potential liability windfall, have all contributed to the explosion of litigation.
The bad news is only going to get worse unless massive reforms take place at the state and local levels.
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