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July 12, 2012

The Big One: San Bernadino Earth-Shaker Sends Aftershocks to LA

The end of California.

San Bernardino on Tuesday became the third California city to seek bankruptcy protection in the last month and, while no one expects the state to be consumed by municipal insolvencies, other cities teeter on the abyss.

"There are likely to be more in the future, but it's hard to know, since a lot of struggling cities may manage to work things out,'' said Michael Coleman, a fiscal policy advisor for the California League of Cities. "Some cities may not go into a bankruptcy, but they may dissolve. They may cease to exist.''

Once rare, turning to bankruptcy has become a painful but enticing option for cities whose labor costs and municipal debt far outpace anemic tax revenues....

San Bernardino couldn't close a $45.8-million budget shortfall and would be unable make its payroll this summer. Days before Tuesday's City Council vote, the city of 211,00 people had just $150,000 in the bank. The city barely scraped together enough money to cover its June payroll.

An LA County Supervisor has requested a report comparing LA's finances with bankrupt San Bernadino's and Stockton's.

In other words, Stockton and San Bernardino may be only the first dominoes to fall in California. In Stockton, avers Antonovich, “Rather than matching spending to revenue, they float bonds in order to cover escalating costs for retiree health care, pensions and public facilities and capital improvements. This is a recipe for fiscal collapse.”

They keep assuming they'll have a great big pile of money sitting around in the future. Trouble is, 1, they won't, and 2, the unions have also made that erroneous prediction, and have demanded ever-higher shares of the Big Pile of Free Money that doesn't exist, too.


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posted by Ace at 02:16 PM

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