Then there were three. This week, San Bernardino became the third California city to file for bankruptcy as a result of unrestrained government spending. It was preceded by the cities of Vallejo and Stockton. What economists and other cities are wondering is if there is a pattern developing or if this was just a fluke. If it was just a fluke, there is nothing to be worried about. On the other hand, if this is a glance into California’s future, we will be living in a real fiscal nightmare.
The usual suspects for this fiasco were rounded up to see if they had any part in this mess. And as usual there was a lot of finger pointing going on. Some of the suspects include more than generous public salaries, inadequately funded public pension funds, and health benefits both for present public employees and those who have retired. Another suspect is the decline in property values and the resulting loss of tax revenue. In addition, when unemployment soared, private spending slowed down and with it came a reduction in sales tax revenue. In short, there were many players in the perfect storm leading to bankruptcy.
These cities said “let the good times roll” assuming that tomorrow would be brighter than today. A new mantra that real estate always increases in value, and that employees can continue to expect wage increases, replaced the old adage of “what goes up must come down.” With the new mantra firmly ensconced, promises made by city planners cannot now be fulfilled.
These cities ignored the warnings and did not make the necessary fiscal changes. And now they are suffering for it. Will California be next?
California also has a stubborn debt problem that is not going away any time soon. Cuts in the state budget are mostly based on accounting gimmicks, hidden fees, and delaying payments to cities and counties or “borrowing” money from dedicated funds like the gasoline tax. For example, taxes on gasoline and diesel fuel are to be used for road and bridge repair. To my “surprise,” a significant portion of these monies are transferred to the General Fund to help balance the budget. That is why I am not surprised that roads and other infrastructure languish in disrepair. Yet even with all the smoke and mirrors, Governor Brown is still telling us we need to raise taxes this fall.
Our cities are microcosms of the state. The state continues to add burdens to an already woefully unfunded public pension fund. Public unions continue to hold an inordinate sway over financial decisions. And even with all the crocodile tears being shed for cutting the budget and raising taxes, suddenly there is plenty of money for an unwanted, unneeded, and unprofitable boondoggle train. So, it is understandable that cities copy many of the same errors of fiscal profligacy; they are simply following the state’s lead.
These bankruptcies are a wakeup call to the entire state. The fiscal methods presently being used are not working and instead are leading to financial ruin. Returning to the sound policies of the past is a good place to start. Either we make a paradigm shift in the approach of government on both the state and local levels, or what we see in San Bernardino will be commonplace.
Mark Meuser is a candidate for State Senate District 7. You can follow him on Facebook.
I dont know anyone that wants our public workers to not be given fair pay as they provide a valued service. I do suggest the current system is going to collapse and it is in everyones best interest to manage this.
Only solution is small government, and much privitization as possible. and do our best to elect responsible adults (but that really won't work due to pov re human nature above)
the objective of the employees of the failing entities is to keep the music playing until the stern slips below the waves. And they scramble to get as close to the stern as possible. So embrace bankruptcy. It's the only cure.
Inflate the costs for all other Take a seat away from a legal student
Well stated. The current system is not sustainable. Unfortunately, the ones who will suffer the most are public employees and retiree's of public agencies. Unless the pension system is fixed, there won't be one for either the current workforce or for the currently retired workforce. Fix it now when the "pain" is not too much, or fix it later when the "pain" will be severe (ask the Greeks).
if you look at the actual stats it is pretty ugly...govt wages are high, benefits are way above the private sector, pensions are out of control, and yet productivity in the public sector is way below any measure in the private sector. plus for all the perceived budget cutting in the state, if you look at actual employment levels, there have been zero cuts in staffing and that is another problem that needs to be faced. say what you will about meg, her plan to cut 30k state workers was a good start imo...and now the job is just tougher all around as time is not on our side.
for me, i do not care much about the social issues these days because if we don't fix the fiscal disaster the other issues really won't mean much.
http://www.calwatchdog.com/2012/07/12/union-efforts-failed-to-stop-bankruptcy-tsunami/
http://online.wsj.com/article_email/SB10001424052702304388004577531293525264410-lMyQjAxMTAyMDEwODExNDgyWj.html?mod=wsj_valettop_email
That is the DUMBEST idea I've heard yet in regards to fixing this problem. Wow.
The *sole* reason the country is in this mess is because people spent more than they had. And now that the money has run out you'd rather take it from people that *earned* it. It didn't work the first time when you stole it and didn't pay it back - why should you get any more? If you don't pay your obligations when borrowing, you are stealing. You're in luck at the moment, though, because *your* President is an f'ing thief and so you've got some cover. Not for long, though. It is time to grow up and take responsibility for your successes AND failures. No political party will save you from yourself.
This is really true. Bankruptcy cleanses the system of waste and low value activity. Auto's, Steel, Airlines. It's givernment's time, and it's none too soon.
We ain't gonna pay what was promised. Sorry there are no guarantees in life. Govt employees bought into a failed enterprise, it's going down as are their pensions.
Let these communities spend whatever they get any way they want. If they make choices that increase their revenue great, if there revenue falls they have less to spend. Either way we taxpayers should do all we can to stifle and shrink the revenue stream. Starve the cancer.
Fraudently awarded pensions should be clawed back. Taxpayers need not make good on pension payoffs for political contributions. Creating a middle class from fraud should not be acceptable. A middle class created based on market determined economic worth is a middle class with a foundation.