Third California city in two weeks declares bankruptcy

posted at 10:41 am on July 11, 2012 by Ed Morrissey

In yet another in our series of posts on what the hell is wrong with my native state, San Bernardino voted yesterday to declare bankruptcy — the third city in California in the past two weeks to do so.   The city of 209,000 was about to renege on its payroll, but as the LA Times reports, the city has been lying to its residents about its budgets for years:

City Atty. James Penman said city budget officials had falsified documents presented to the mayor and council for 13 of the last 16 years, masking the city’s deficit spending.

“For the last 16 years the budget prepared for the council showed the city was in the black,” Penman said, not naming those allegedly responsible. “The mayor and the council were not given accurate documents.”

[Mayor Patrick] Morris was taken aback by the comments, saying this was the first time he has heard of the allegations.

Er, isn’t it the job of the mayor and city council to have those financial statements verified?  The city knew enough to demand concessions and workforce reductions from the public-employee unions the last four years, so they clearly had some inkling that their fiscal position wasn’t exactly solid.  Even if Morris and the rest of the council really knew nothing about the city’s financial woes, that’s still a damning indictment of incompetence.

Now they’re in a $46 million hole with no way to meet payroll.  Their only option now is bankruptcy protection, which will allow them to ignore some creditors while paying their employees, but that’s going to be a very tough solution.  Their municipal bond rating will plummet, making their borrowing costs shoot through the roof.  The bankruptcy might also allow them to impose new concessions on the PEUs, but that won’t come without a lot of agitation from the unions, which will complicate their ability to right the financial ship.

Nevertheless, this is starting to look like a trend for one of the trendiest states in the nation:

Officials in Stockton said their June decision to seek federal bankruptcy protection was the “only choice” for the city that was unable to reach finance agreements with creditors to address a $26 million budget shortfall.

On July 4, Mammoth Lakes sought bankruptcy protection from a $43 million court judgment, according to Bloomberg News.

In the six decades since Congress created bankruptcy protection for cities, fewer than 500 municipal bankruptcy petitions have been filed, according to the United States Courts website.

Decades of financial mismanagement has led the Golden State to the brink of financial collapse — and not just the cities.  The state has run annual budget deficits for years that run in the $15-25 billion range; their latest is an $18 billion gap.  At the same time, the California Senate just approved the construction of a completely unnecessary high-speed rail line between two points in California where no one wants to go, as a first step to building a full line between San Francisco and Los Angeles that will carry passengers at a rate roughly two and a half times slower than air travel.  The cost? $100 billion, at the moment.  Furthermore, it will run on electricity, which California already doesn’t produce in enough quantity to meet its current needs.

Don’t expect bankruptcy to be limited to San Bernardino, Stockton, and Mammoth Lakes.  The whole state will soon sink into fiscal oblivion if they keep making decisions like this, turning what should be a Nirvana into a financial Chernobyl.

On that same note, let’s take a look at a video Bill Whittle produced last month just before the spate of bankruptcies began about what ails California higher education.  I’ll give you a hint — it’s pretty much the same kind of decision-making that ails California in general.

Update: The second sentence should have read “third city,” not “third state.”  I’ve fixed it above; thanks to reader Gillian for the correction.


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The sad thing about cities going bankrupt, and leaving liberals crying in their $10 lattes, is that it all could have been prevented. Except that Democrats are totally incapable of learning that, when you stick your hand in fire and it burns, you don’t do it again.

Worse, the people voted into office those who ruined their city;’s finances will vote for them again, believing the tried-and-true lie that everything would have been fine if ‘Republicans weren’t in the way’.

Pffft!

Liam on July 11, 2012 at 11:39 AM

In the state of Texas, Public Sector Unions cannot hold municipalities hostage over salary/benefits negotiations. This is in the state constitution & Texas is a Right to Work State.

Maybe that would be a good start?

workingclass artist on July 11, 2012 at 11:47 AM

If CA goes bankrupt, I wouldn’t want the Federal government having total stewardship. The National Council of Governors should be the ones to decide, by 75% approval, if CA meets the measures that need to be imposed on it.

Liam on July 11, 2012 at 11:48 AM

In the state of Texas, Public Sector Unions cannot hold municipalities hostage over salary/benefits negotiations. This is in the state constitution & Texas is a Right to Work State.

Maybe that would be a good start?

workingclass artist on July 11, 2012 at 11:47 AM

A great start!

Liam on July 11, 2012 at 11:50 AM

So can we expect some indictments soon? This sounds like some criminal fraud to me.

iurockhead on July 11, 2012 at 10:51 AM

There should be indictments. I note the City Attorney doesn’t say the Mayor and the Council didn’t know the city finances were in trouble. He only says they were given falsified docs. The Mayor only says this is the first time he heard the allegations about the documents. He doesn’t say he didn’t know the city was in trouble. This style of parsing is exactly what you get from people who are trying to mislead.

OT: Is the IU in your handle Indiana University? Because that is my alma mater. Also, I responded to your comments on the Jarrett thread.

novaculus on July 11, 2012 at 11:50 AM

Bond underwriters are at fault too here. What the heck ever happened to due diligence?

I predict lawsuits by the score against affected California municipal underwriters and much tougher underwriting standards nationwide.

The first thing I hope to see is that underwriters will want corporate actuarial standards applied to benefit calculations, regardless of the safe harbor in law that governments have built for themselves.

Underwriters will also want to see government entities required to get annual audits from large, knowledgable audit firms and stop doing business with in-their-pocket local accountants (who have little or no incentive to blow the whistle on neerdowell government managers).

MTF on July 11, 2012 at 11:56 AM

Of course OweBama will bail out his biggest blue state and campaign contributor. I just want to know what he’ll dub that fiasco?

Too blue to fail?

Laura in Maryland on July 11, 2012 at 10:57 AM

Too blue to fail?

Now that is hilarious. My first good laugh of the day.

Seriously, can Obama afford to propose to bail out the entire state of California? Wouldn’t that provoke backlash on a scale we haven’t seen since the passage of O-care by reconciliation on a party-line vote?

On the other hand, could he afford not to try to bail Cali out?

novaculus on July 11, 2012 at 11:57 AM

No problem though, they’ll have that bullet train ready to shuttle folks from one bankrupt city to the next.

California – you get what you deserve. Elections have consequences. Now I hear you want to allow more than 2 parents for kids. Hey, why not?

Perhaps Greek as the new official language while you’re at it.

ICanSeeNovFromMyHouse on July 11, 2012 at 11:57 AM

Well…Art History is not a worthless degree, although most at the top level are overpaid in the areas of museum administration.

workingclass artist on July 11, 2012 at 11:41 AM

I don’t think it’s meant as an attack on the major itself.

It’s just an example of a degree where the number of people who have one far outstrips the actual demand for it in the field.

In my circle of college friends, for instance, there were lots of people who got degrees in Radio-Television-Film who never did anything related to the actual field their degree was in. That was the opposite of what happened with ones who got degrees in business, computers, hospitality management, etc.

teke184 on July 11, 2012 at 11:47 AM

The reason there is a glut of students in these liberal arts fields is because these fields of study have been dumbed down & overly marketed…

The culture demands crapola & well there it is

It’s an old story

workingclass artist on July 11, 2012 at 11:58 AM

The worst part is, California is never going to “learn” their lesson. They’ll keep sending the same Democrats back into office. It’s reached the tipping point where there’s more parasites than hosts.

The US as a whole has not gotten there yet, but if government keeps expanding, we’re in trouble and the consequences of liberalism will be ignored by the electorate because too many of them will be part of the problem.

BradTank on July 11, 2012 at 11:58 AM

The State can do something… Walker demonstrated that in WI.

States are sovereign entities, they can break their contracts via legislation. That is the risk any company or individual takes when seeking work from or with a State: you get that only via the legislative process.

As seen in WI, States can remove privileges from its employees, change what they pay, even totally change retirement systems.

Cities, municipalities and counties can ask for help from the State legislature in doing this, or even begin a system of privatization of city/municipality/county functions so as to find private sector companies or individuals willing to take a set fee to perform services. In some cases like roads, ports, airports, and such, companies can be granted the entire thing to run and figure out what they will charge users as operations fees if the sovereign government allows them to do so.

Got stupid, government contracts?

Legislate them into oblivion.

Will that be painful?

Yes, extremely.

The alternative is seeing these lower level entities discorporate, thus returning the land and its governance back to the citizenry and to remove all the services that are driving the government bankrupt. Bankruptcy is only ONE option for these governments.

Voting themselves out of existence and letting the people living there start over is another.

Governments are instituted amongst men and are to be changed OR abolished when they no longer further the purposes of the citizenry. These aren’t companies we are talking about, but governments. There are more options available with them than with companies or citizens, but it means sucking in your gut and taking the body blow and then recovering from it via civil means.

City governments and municipalities have done this elsewhere.

My guess is that this is an option somewhere, buried in the CA legal code and if not then the citizens can get it put in or amend the State constitution to make it so. Constitutions are documents to found sovereign entities, and delegate powers to them from the people.

I don’t think anyone in CA has the guts to do this and it is that cowardice we will see come to the forefront in the insolvent Blue States.

ajacksonian on July 11, 2012 at 11:58 AM

Buth the Obama thugs want more illegals. They must be short on voters for the left and welfare candidates.

Schadenfreude on July 11, 2012 at 12:01 PM

Bond underwriters are at fault too here. What the heck ever happened to due diligence?

I predict lawsuits by the score against affected California municipal underwriters and much tougher underwriting standards nationwide.

The first thing I hope to see is that underwriters will want corporate actuarial standards applied to benefit calculations, regardless of the safe harbor in law that governments have built for themselves.

Underwriters will also want to see government entities required to get annual audits from large, knowledgable audit firms and stop doing business with in-their-pocket local accountants (who have little or no incentive to blow the whistle on neerdowell government managers).

MTF on July 11, 2012 at 11:56 AM

They did do their due diligence. They assumed the FED would bail out the bond holders, just like they did with mortgage back securites and Treasuries.

They’re probably right. Wall Street will be protected.

WisRich on July 11, 2012 at 12:02 PM

May there be thousands of Starnesvilles.

Starve the looters, and in turn the moochers.

Schadenfreude on July 11, 2012 at 12:02 PM

I don’t think anyone in CA has the guts to do this and it is that cowardice we will see come to the forefront in the insolvent Blue States.

ajacksonian on July 11, 2012 at 11:58 AM

The Lunatic Fringe has persuaded the multitudes to abandon common sense…those that balk are voting with their feet

workingclass artist on July 11, 2012 at 12:03 PM

I’ll bet sanctuary cities has something to do with it… especially Stockton.

Welcome illegal invaders! Help yourselves to “free” stuff we don’t have and can’t afford! Enjoy those emergency room visits for common colds, and da skools, DMVs where you no gotta speaka no Ingles no more… et cetera.

viking01 on July 11, 2012 at 12:07 PM

Worse, the people voted into office those who ruined their city;’s finances will vote for them again, believing the tried-and-true lie that everything would have been fine if ‘Republicans weren’t in the way’.

Pffft!

Liam on July 11, 2012 at 11:39 AM

republicans in the way of what? I live in california, with the exception of a a few small towns, rest assured that a majority of elected individuals in decision making position at the municipalities level are of dimtard persuasion, so no, they don’t have anybody to blame but themselves…and those idiots who voted for them should friggin’ learn that these people bankrupted their cities, imagine it’s not much fun to have a house in a bankrupt city, who would ever want to buy it, how would you ever sell…so, maybe, who knows, the liberal mental disease has a cure, and it’s called bankruptcy…though you’d be surprised what people here say in the most causal manner possible, if you explain to them that at this pace california will go bankrupt, they smile and say something like ‘come on, they won’t let california go down, the feds will bail it out’, I look at them incredulously trying to determine if their mental disorder is curable or not, there got to be an antidote…I don’t think these idiots understand what it means for a state to go bankrupt, what happens to the state bonds (they are cose to junk eight currently), to the ability of the state to borrow, etc, plus the general anathema ‘bankrupt’, I simply don’t think they get it..

jimver on July 11, 2012 at 12:08 PM

I love the video. Reminds me of the days of Gene London (for all those who grew up in the Philadelphia region.)

djaymick on July 11, 2012 at 12:10 PM

Well…Art History is not a worthless degree, although most at the top level are overpaid in the areas of museum administration.

workingclass artist on July 11, 2012 at 11:41 AM

usually in the admin area of grand museums, such as the Met, MOMA, Guggenheim, a bunch of others in big cities, but then there aren’t so many of them in the country, which I guess explains the over-pay…

jimver on July 11, 2012 at 12:11 PM

casual not causal, that is :-)…

jimver on July 11, 2012 at 12:12 PM

Great Youtube video.

Shocked that 13 of 23 universities there failed to graduate half their students. I shouldn’t be shocked that something that bad happened in California, and yet I am. That’s terrible. Between all the illegal aliens an the liberals, the state is doomed. Get rid of the illegal aliens, close the border, put the marines down there. State sucks so bad, and they think their liberal mindset isn’t the problem.

Freeloader on July 11, 2012 at 12:13 PM

I’m not as sure about Stockton, but San Bernardino and Mammoth Lakes have been hit hard by the biggest factor in the recession: real estate value losses. SB County has been clobbered by foreclosures and unoccupied homes. Property tax receipts have fallen alarmingly, but so have sales tax receipts, because the jobless people who can’t pay their mortgages have fled.

Mammoth Lakes is kind of a separate story; it’s only real source of income is recreational assets. San B might have diversified better, as Riverside did, stopped spending on unnecessary projects like there was no tomorrow, and pinched the pennies better in general. That would have helped.

But much of the issue is that so much of SB County is protected land. If the people aren’t moving there to buy new houses, and spend what families spend where they live, SB County is toast. There just isn’t a whole lot else. Ontario airport used to be a major source of revenue for the county; now it’s a ghost town. Planning authorities are seriously considering shutting it down.

It’s important to point out that this isn’t going to get better, and that’s because of the coordinated policies of the local city and county governments. They have set strict limits on the kinds of housing that can be built (e.g., the percentage that must be multifamily, percentage that must be smaller), they’ve set policies that will make it more expensive down the road to be a driver, and the state and federal governments already place significant limits on land use.

This “Inland Empire” area used to be where people moved to get out of the close LA orbit, and find safe neighborhoods and good schools at affordable prices. Government regulations, unless they are changed, are going to ensure the area never regains its prosperity.

J.E. Dyer on July 11, 2012 at 12:17 PM

Why isn’t there a Federal Investigation of California State finance practices?

K Michael ODonovan on July 11, 2012 at 12:18 PM

Those fallacious documents were prepared by public employee union members. No doubt in complicity with union bosses. Expect worse throughout the nation. In fact expect to find union seminars and instructions for fooling elected officials.

pat on July 11, 2012 at 12:19 PM

When I was in a private college in CA, American History and American government were required by state law. What the hell happened?

pat on July 11, 2012 at 12:23 PM

At the risk of being called racist, I believe changing demographics are a major factor in San Bernardino’s fall.

As late as the early 1980s San Bernardino was an All American City. Today, according to the 2010 census, over 60% of the city’s residents are Latino and 13% are black.

Its hard to believe that Detroit was once the country’s most prosperous city with strong schools. But following the riot of 1967 and resulting white flight, Detroit went from a majority white to a majority black city in less than ten years. The results speak for themselves.

Yet, Moonbeam and the liberals that run Kalifornia are doing everything in their power to make their state a magnet for illegals.

bw222 on July 11, 2012 at 12:29 PM

Hmmmm. Looks like volunteer fire departments might be coming back….AND open carry.

Portia46 on July 11, 2012 at 12:35 PM

Hmmmm. Looks like volunteer fire departments might be coming back….AND open carry.

Portia46 on July 11, 2012 at 12:35 PM

Posse’s and hired guns and all that. Yeehaw!

“Reach for the sky or you’ll be pushin’ up daisy’s…pilgrim”

Dueling. We need dueling to make a comeback, too.

BobMbx on July 11, 2012 at 12:43 PM

California also has a full time overpaid legislature & they don’t get their business done…because why should they?

“California
Michigan
New York
Pennsylvania – Full Time Legislatures

Ave. Time on the job 80%. Ave. Salary $68,599.00 Ave. Staff per member 8.9

States like Texas:

Ave. Time on the job 70% Ave. Salary $35,326.00 Ave. Staff per member 3.1

http://www.ncsl.org/legislatures-elections/legislatures/full-and-part-time-legislatures.aspx

In Texas we have a part-time legislature that is mid range in compensation and staff when compared to other states & they get the business done so they can go back home to running their businesses.

workingclass artist on July 11, 2012 at 12:59 PM

bw222 on July 11, 2012 at 12:29 PM

What really hurt San Bernardino was the closing of Norton Air Base in 1994.

Er, isn’t it the job of the mayor and city council to have those financial statements verified?

I think it’s called auditing, by an outside accounting firm, which I believe every local public agency in California has to do on an annual basis.

How did the annual audits miss this?

Captain Kirock on July 11, 2012 at 1:07 PM

It’s important to point out that this isn’t going to get better, and that’s because of the coordinated policies of the local city and county governments.

This “Inland Empire” area used to be where people moved to get out of the close LA orbit, and find safe neighborhoods and good schools at affordable prices. Government regulations, unless they are changed, are going to ensure the area never regains its prosperity.

J.E. Dyer on July 11, 2012 at 12:17 PM

this is exactly right, and they did that with many other towns and areas there, Palmdale in Antelope Valley comes to mind, from what I heard it used to be a nice area populated mainly with people from the aerospace industry and such and it’s been a while now since LA county has this policy of dumping the criminal elements there (and in Lancaster) – yeah, the bloody section 8 – to the point that the place itself is not fun to live in anymore…Lancaster has a Rep mayor, a rich lawyer, Rex Parris who apparently managed to turn things around criminality-wise, somewhat at least, but this is an ongoing ‘war’, if they don’t keep the pressure up, the area is going to become yet another waste land, it’s Lockheed Martin, Boeing and the aerospace industry there that keeps the whole AV afloat…the wind turbine industry picked up in the area too, so they might be the next big thing there, who knows…and you are right about Ontario too, my wife has regular short-term assignments at Plant 42 there and when she does, we go back and forth between Palmdale and Sacto on weekends, and used Burbank airport Ontario is just awful…btw, what happened to the New Model Colony (the name just sounds as right from ‘Oh, Brave New World’ :-) project that they were developing there..

jimver on July 11, 2012 at 1:11 PM

Expect more and more of this in the coming weeks and months.

While I couldn’t make my move out of state (due to moving costs), I did get a place up in the hills… way up in the hills. Time to stock up and buckle down.

I don’t want to be around any type of city’s in this state when hell will finally be broken loose.

RedbonePro on July 11, 2012 at 1:17 PM

Sure, the budget officials were sending false documents to the mayor and council, but what about the outside auditors? Couldn’t they find the truth?

Ward Cleaver on July 11, 2012 at 1:17 PM

CCSF was just given 3 months to show marked improvement in their financials or face closing its doors for good next year. So, not just cities failing.

riddick on July 11, 2012 at 1:19 PM

If a state declares bankrupcy should their Electoral College votes count?

E9RET on July 11, 2012 at 1:24 PM

When I was in a private college in CA, American History and American government were required by state law. What the hell happened?

pat on July 11, 2012 at 12:23 PM

CA replaced them with Gay History recently, starting with grade school level. A number of higher ones, such as UC Irvine, are nothing but Palestinian History, I can go on and on. Nothing about AMERICA is being taught.

Does that answer your question?

riddick on July 11, 2012 at 1:26 PM

What really hurt San Bernardino was the closing of Norton Air Base in 1994.

Captain Kirock on July 11, 2012

Don’t forget George up in the High Desert, it was also part of San Bernadino County. Two bases in the same county in the same year. I took a bath on my house in Victorville and it took me almost 15 years to sell it at half the cost.

I won’t be surprised to see the entire county go into bankrupcy

E9RET on July 11, 2012 at 1:30 PM

If a state declares bankrupcy should their Electoral College votes count?

E9RET on July 11, 2012 at 1:24 PM

States cannot declare bankruptcy. Only cities and local municipalities can.

riddick on July 11, 2012 at 1:33 PM

What really hurt San Bernardino was the closing of Norton Air Base in 1994.

Captain Kirock on July 11, 2012 at 1:07 PM

The closing of Norton cost the about 10,000 civilian positons, but its no different than other base closings and how they affected local communities.

The Air Force alone has closedover 400 bases and stations since WWII.

http://en.wikipedia.org/wiki/Category:Closed_facilities_of_the_United_States_Air_Force

That was nearly 20 years ago. Blaming the closing of Norton for San Bernadino’s problems today is like Obama blaming Bush.

bw222 on July 11, 2012 at 1:42 PM

If a state declares bankrupcy should their Electoral College votes count?

E9RET on July 11, 2012 at 1:24 PM

Well, Chapter 9 of the U.S. bankruptcy code allows individuals and municipalities (cities, towns, villages, etc.) to declare bankruptcy. But that doesn’t include states. States are supposed to have something called sovereign immunity, which means they can’t be sued. In other words, they don’t need any protection from angry creditors who would take them to court for failing to pay their debts. As a result, states can simply borrow money ad infinitum. Say, for instance that the state can’t make its debt payments, and no one will lend it any more money. In that case, the federal government can step in and put the state into receivership. This would involve the assignment of an accountant to manage the state’s debt, overseen by a judge. It would be a lot like bankruptcy, except instead of following a structured set of steps, a receiver has the authority to force creditors to renegotiate loans in a speedy fashion. But the accountant in charge would not have the power to make decisions about the state’s budget, such as which programs needed to be cut and which taxes had to be raised. BTW, no state has ever gone into receivership, California will probably be the first :-(…

jimver on July 11, 2012 at 1:45 PM

That was nearly 20 years ago. Blaming the closing of Norton for San Bernadino’s problems today is like Obama blaming Bush.

bw222 on July 11, 2012 at 1:42 PM

I was trying to support your statement that San Berdo went from being a nice community in the 1980s to where it’s at now.

The decline began with the closing of Norton in 1994 and San Berdo has never recovered. I’m not trying to blame anybody, I’m just stating a fact.

Captain Kirock on July 11, 2012 at 1:50 PM

That was nearly 20 years ago. Blaming the closing of Norton for San Bernadino’s problems today is like Obama blaming Bush.

20 years ago is history. By now San Bernadino should have had an economic recovery plan for dealing with that. What really hurts every city is out of control government spending and taxation at just about every level, unsustainable costs of government social services and pensions and costly over regulation of business and industry driving job creators out of the state with most of those in the private sector remaining unlikely to expand much if at all.

hawkeye54 on July 11, 2012 at 1:53 PM

Now this isn’t racist, but actually applies. The median age is only 28 (via city-data), ok, a reflection of this: 84% of the San Bernardino populatin is either black or Hispanic, with 19% white. This is a Sea Change from the place where the first McDonalds was born.
Why is it important? It reflects the income of an eroded tax base. Per capita income is only $14,804, less than half of the avg income for the state of CA. And this is a precursor to what will happen all over the state of CA, and then all over the nation at large.

anotherJoe on July 11, 2012 at 1:53 PM

Don’t forget George up in the High Desert, it was also part of San Bernadino County. Two bases in the same county in the same year. I took a bath on my house in Victorville and it took me almost 15 years to sell it at half the cost.

I won’t be surprised to see the entire county go into bankrupcy

E9RET on July 11, 2012 at 1:30 PM

Good point. I forgot about George.

Captain Kirock on July 11, 2012 at 1:56 PM

Its not only money mismanagement at play in CA, its state stupidity with “clean air” regulations and such. “Green” idiots run the state and limit its growth. Bakersfield is sitting on an oil glut, which, if allowed to be developed, will make it the richest municipality in the state, but not allowed to do anything with it. Better to pay for out of state gasoline deliveries, from as far as TX, than create jobs and and make gasoline more affordable. Just one example.

If AZ and NV cut their electricity and water deliveries to CA, the state is done. Maybe its time.

riddick on July 11, 2012 at 2:01 PM

the liberal mental disease has a cure, and it’s called bankruptcy…

jimver on July 11, 2012 at 12:08 PM

Bankruptcy is the best possible solution for California. Pensions need to be renegotiated and government workers need to feel the pain of their irresponsibility and, frankly, of their stupidity. They are not going to die; they’ll get something and be able to eke out a living; but they cannot and should not wind up with large fortunes and incomes just because they were part of the corrupt state bureaucracy.

People in California are very small children–and that goes for conservatives as well as liberals. They live in la la land. I have the same experiences as you do, jimver, when I talk with friends and acquaintances. Some of them are “conservatives” who nevertheless voted for Jerry Brown and think the bullet train is a good idea. Well, then, fine.

Burke on July 11, 2012 at 2:10 PM

Decades of financial mismanagement has led the Golden State to the brink of financial collapse — and not just the cities.

This is what happens when you have liberal activist running the show instead of competent leadership.

California is getting what it deserves for being on their knees to the democratic party for so many years.

Baxter Greene on July 11, 2012 at 2:10 PM

Don’t expect bankruptcy to be limited to San Bernardino, Stockton, and Mammoth Lakes. The whole state will soon sink into fiscal oblivion if they keep making decisions like this, turning what should be a Nirvana into a financial Chernobyl.

…and the liberals will sit around whining about how it’s “Bush’s fault”…..

Baxter Greene on July 11, 2012 at 2:12 PM

Why is it important? It reflects the income of an eroded tax base. Per capita income is only $14,804, less than half of the avg income for the state of CA. And this is a precursor to what will happen all over the state of CA, and then all over the nation at large.

Similar to much of California’s Central Valley region. EPA orders water cut off, less irrigation, less agriculture, less supporting industries, fewer jobs, and a vast amount of personal income derived from government handouts.

hawkeye54 on July 11, 2012 at 2:15 PM

Wall Street will be protected.

WisRich on July 11, 2012 at 12:02 PM

“Wall Street” doesn’t own municipal bonds, and neither do institutions- individuals do. Municipals are a different breed of cat for the simple reason that they offer tax free income. That’s attractive to individuals, mainly older individual investors who have invested retirement savings, and not “Wall Street” or institutions.

So individual retirees will take it in the neck due to these bankruptcies. There will be lawsuits by the score.

MTF on July 11, 2012 at 2:31 PM

That was nearly 20 years ago. Blaming the closing of Norton for San Bernadino’s problems today is like Obama blaming Bush.

bw222 on July 11, 2012 at 1:42 PM

It was still a factor in the current situation. Lots, LOTS of tax revenue came from both George and Norton from the personnel and the federal gvernment, I drove around Victorville and San Berdo near the area both bases were a few years ago and I was shocked at the general air of shabbyness at both, but especially in the High Desert.

Victorville, Apple Vally and Hesperia all appear to have suffered the most, crappy, unrepaired roads, and all those beautiful trees on George planted in the 40 were all dead. All the housing on George was still vacant and falling into disrepair.

What happen to the housing on Norton? Or the golf course at Norton?

E9RET on July 11, 2012 at 2:35 PM

Similar to much of California’s Central Valley region. EPA orders water cut off, less irrigation, less agriculture, less supporting industries, fewer jobs, and a vast amount of personal income derived from government handouts.

hawkeye54 on July 11, 2012 at 2:15 PM

Water cutoff was nothing but political move, Central Valley was mostly conservative, still is for the most part. Now farmers cannot grow crops and make money, so they either sell and move or go on government dole. Win/win fron a liberal point of view.

riddick on July 11, 2012 at 2:43 PM

Why isn’t there a Federal Investigation of California State finance practices?

K Michael ODonovan on July 11, 2012 at 12:18 PM

Because Jerry Brown has promised 55 electoral votes to Barack Obama come hell or high water. In exchange Obama will (by most likely one of his EO’s), loan/bailout California—under some emergency powers act—to the tune of 25 billion taxpayer dollars.

California’s official language will become a Greek/Mexican dialect called Habla-popa-dopulus.

Rovin on July 11, 2012 at 2:46 PM

Sad news, but not surprising. And the video about our universities is too true. Used to be that students went to the state universities because they were cheaper. The tuition just keeps going up with no end in sight. The CFU (California Faculty Union) is talking about a strike because the contract doesn’t increase pay and benefits, so if they actually got what they are demanding, the tuition would go up even higher. We live in a state where everyone thinks that they are living in Fantasyland instead of visiting it when they go to Disneyland. I am sad for what we were and where we are headed.

con_in_socal on July 11, 2012 at 2:57 PM

Now farmers cannot grow crops and make money, so they either sell and move or go on government dole. Win/win fron a liberal point of view.

Yup. And some crony of a lib politician will buy that family farmland cheap to turn around to sell it back at an inflated price to the state for high speed rail right of way, or turn it into a massive corporate farm, and once it is in the “right” hands will somehow persuade the “right” people to get the water turned back on. Just a thought.

hawkeye54 on July 11, 2012 at 3:02 PM

California resident here, loving these bankruptcies. Keep them coming. Perhaps, only perhaps, a majority of voters will wake up to what has happened to our once-great state.

GaltBlvnAtty on July 11, 2012 at 3:08 PM

Similar to much of California’s Central Valley region. EPA orders water cut off, less irrigation, less agriculture, less supporting industries, fewer jobs, and a vast amount of personal income derived from government handouts.

hawkeye54 on July 11, 2012 at 2:15 PM

A great article by Victor Hanson Davis on the distruction of California’s Central Valley:

http://www.nationalreview.com/articles/255320/two-californias-victor-davis-hanson

Another article, long and detailed, on California’s busted city budgets:

http://www.vanityfair.com/business/features/2011/11/michael-lewis-201111

itsspideyman on July 11, 2012 at 3:22 PM

Bankruptcy provides debt relief in the short term and an opportunity to restructure. These California cities haven’t shown the willingness to do the restructuring needed to survive.

As the state itself teeters towards bankruptcy, they still promise money they don’t have for a super-train they will never build. These people are incapable of learning anything.

Adjoran on July 11, 2012 at 3:23 PM

The ‘minorities” in these cities are actually the majority now. Eventually you run out of other people’s money.

4 of the top 5 employers in San Bernardino are government workers

Wigglesworth on July 11, 2012 at 3:34 PM

“For the last 16 years the budget prepared for the council showed the city was in the black,” Penman said, not naming those allegedly responsible. “The mayor and the council were not given accurate documents.”

Put ‘em in jail.

HondaV65 on July 11, 2012 at 3:42 PM

Whoops, make that four.

OccamsRazor on July 11, 2012 at 3:46 PM

“Wall Street” doesn’t own municipal bonds, and neither do institutions- individuals do. Municipals are a different breed of cat for the simple reason that they offer tax free income. That’s attractive to individuals, mainly older individual investors who have invested retirement savings, and not “Wall Street” or institutions.

So individual retirees will take it in the neck due to these bankruptcies. There will be lawsuits by the score.

MTF on July 11, 2012 at 2:31 PM

Wrong. Institutions buy lots of these and they aren’t all tax free. CA is not experiencing a rash of defaults. In fact the CA Munis are extremely good value outperforming other Munis providing a healthy return to investors. I have never seen any bonds for San Bernardino but investors would be wary of unaudited financials just as they would be with any regular investment.

lexhamfox on July 11, 2012 at 4:08 PM

Bankruptcy is unnecessary; governments are not obligated to outflows. A government can be completely cost-null if it is fully volunteer. There can be no guarantee of wages, employment, benefits, payouts of ANY type to ANY actor(s).

Contracts FROM goverment cannot obligate free peoples. You must take arguments to the extreme to see if they are plausible; such as, can a State give everyone permanent employment or a million dollars and then be forced to make due by….what, selling lands? confiscating properties? raising all kinds of taxes to like 100%?

Courts and Bankruptcy Law need not tend to governments, they need to act within their means, as they have no other choice. Therefore, there are no “obligations” besides merely existing.

John Kettlewell on July 11, 2012 at 4:08 PM

In Texas we have a part-time legislature that is mid range in compensation and staff when compared to other states & they get the business done so they can go back home to running their businesses.

workingclass artist on July 11, 2012 at 12:59 PM

We have a part time legislature here in Oregon too, only supposed to meet for a few months every two years. They still manage to stick it to the productive people in the state and make the state government the largest employer.

PastorJon on July 11, 2012 at 4:20 PM

Yup. And some crony of a lib politician will buy that family farmland cheap to turn around to sell it back at an inflated price to the state for high speed rail right of way, or turn it into a massive corporate farm, and once it is in the “right” hands will somehow persuade the “right” people to get the water turned back on. Just a thought.

hawkeye54 on July 11, 2012 at 3:02 PM

Many of these lands are right along the proposed HSR route. Anyone thinking this is just a co-incidence needs to get off meds. You’re right, this was nothing but a way to devalue the land quickly and then buy and re-sell back to the state for HSR project.

riddick on July 11, 2012 at 4:21 PM

People in California are very small children–and that goes for conservatives as well as liberals. They live in la la land. I have the same experiences as you do, jimver, when I talk with friends and acquaintances. Some of them are “conservatives” who nevertheless voted for Jerry Brown and think the bullet train is a good idea. Well, then, fine.

Burke on July 11, 2012 at 2:10 PM

wow, I’m shocked at what you posted there, the cons that I know are rabidly against the ‘bullet train’ project and not a single one voted for governor moonbeam (or shall I say moonbat), as for the rest of the kalifornia residents, I agree with you that they live in a alternate reality in their own heads…I love this state, as in nature, geography, climate, but the degree of denial among my fellow residents borders psychological disorder really, and I don’t say this entirely in a hyperbolic sense…

jimver on July 11, 2012 at 4:28 PM

The shit will really hit the fan when cushy Judicial lifetime pensions begin to conflict with liberal entitlement largesse for finite resources.

Afterseven on July 11, 2012 at 4:30 PM

Honey Union Badger don’t care.

John the Libertarian on July 11, 2012 at 4:43 PM

People in California are very small children–and that goes for conservatives as well as liberals.

Burke on July 11, 2012 at 2:10 PM

People who make sweeping generalizations are, in general, idiots.

John the Libertarian on July 11, 2012 at 4:44 PM

The Bozos who run this state are ruining it. They have been too long sequestered in their offices, spending other people’s money. It is so frustrating not to be able to get the message through to fellow voters in CA, who blame everyone else but the ones in charge for these horrid decisions.

We foolishly thought this high speed rail idea was dead. Not so fast. Ugh.

Anifin on July 11, 2012 at 4:54 PM

The shit will really hit the fan when cushy Judicial lifetime pensions begin to conflict with liberal entitlement largesse for finite resources.

Afterseven on July 11, 2012 at 4:30 PM

Many California judges work the minimum time as judges needed to secure lifetime healthcare (it may be only 5 years) and then resign to take on more lucrative careers as arbitrators or mediators.

GaltBlvnAtty on July 11, 2012 at 4:56 PM

As a former military resident of the Golden State and close friend of many life-long residents, I find the problem is the only two voting blocs in California completely denigrate the things that made the state great in the first place:

Mining, agriculture, heavy industry, logging and more are actively being driven under by the greenies who lives in the Bay Area; the public employees unions vote themselves unsustainable benefit packages; the ever-burgeoning welfare state defines fiscal insanity.

And the people who lives in the parts of the state outside of the LA basin and the Bay area find themselves powerless.

It is pathetic, and a harbinger of things to come across a once thriving and still-beautiful state.

Ishmael on July 11, 2012 at 5:47 PM

San Berdoo has NEVER been either business friendly or had a good planning track record…

They have an “international” airport SBD (old Norton AFB) but no foresight to use it, no rail hook up (they could connect to either the UP or BNSF railroads, no real manufacturing base, no jobs…

But a lot of government money (welfare, Section 8 housing, etc.) coming in… overcrowded schools…

Not a happy place to live… I should know…

Khun Joe on July 11, 2012 at 6:14 PM

No, another now. Mammoth Lakes has filed too.

jake49 on July 11, 2012 at 6:54 PM

Help us Moonbeam

jake49 on July 11, 2012 at 6:55 PM

Latest numbers indicate that roughly 20% of CA municipalities may look to file for bankruptcies by end of this year alone.

Let fun begin.

riddick on July 11, 2012 at 7:30 PM

Oh Bobby, I’m sorry you gotta head like a potato
I really am

Sharke on July 11, 2012 at 7:46 PM

But, they will have a spiffy fast train to ride down that road to hell.

Kissmygrits on July 11, 2012 at 8:33 PM

In the state of Texas, Public Sector Unions cannot hold municipalities hostage over salary/benefits negotiations. This is in the state constitution & Texas is a Right to Work State.

Maybe that would be a good start?

workingclass artist on July 11, 2012 at 11:47 AM

Indiana has a $2B surplus; will be refunding some of it to taxpayers next year (via income tax filings.)

These, and CA, are examples of federalism at work. “Experiments in democracy” at the state level showing what works and what does not. This, to me, is the main difference between ObozoCare and RomneyCare. Why toss the entire nation into something unproven (and likely to go very bad) when you can let the states work out their own solutions without throwing us all over a cliff at the same time?

IrishEyes on July 11, 2012 at 9:54 PM

But, they will have a spiffy fast train to ride down that road to hell.

Kissmygrits on July 11, 2012 at 8:33 PM

Very unlikely it will get built any time soon, so, sadly, no faster ride to hell…

riddick on July 11, 2012 at 11:36 PM

Now this isn’t racist, but actually applies. The median age is only 28 (via city-data), ok, a reflection of this: 84% of the San Bernardino populatin is either black or Hispanic, with 19% white. This is a Sea Change from the place where the first McDonalds was born.
Why is it important? It reflects the income of an eroded tax base. Per capita income is only $14,804, less than half of the avg income for the state of CA. And this is a precursor to what will happen all over the state of CA, and then all over the nation at large.

anotherJoe on July 11, 2012 at 1:53 PM

84% and 19% is… er… 103%.

No wonder they’re having a problem. They have more people than people.

trigon on July 12, 2012 at 12:22 AM

Should Obama win reelection, bailing out California would be the first thing on his agenda. I guess Jerry Brown is betting on that happening with his authorization of the bullet train off a cliff.

TonyR on July 12, 2012 at 1:56 AM

Opps, can it be that the electorate of CA in the words of the Indiana Jones classic “You chose poorly”, they shrivel up?

Problem is, the lib politicians got the money and will run. I kinda saw this coming on 30 years ago as a 3d generation Californian and moved to Washington.

When I left, California led the nation in schools, wealth and social support programs which became a parasite magnant which led to the death of the golden goose.

joelj31 on July 12, 2012 at 4:59 AM

In the state of Texas, Public Sector Unions cannot hold municipalities hostage over salary/benefits negotiations. This is in the state constitution & Texas is a Right to Work State.

Maybe that would be a good start?

workingclass artist on July 11, 2012 at 11:47 AM

That’s awesome! Pity New York isn’t like that. Between the unions and our idiot mayor, this city is just going to heck in a handbasket.

JoAnn1965 on July 12, 2012 at 11:29 AM

Opps, can it be that the electorate of CA in the words of the Indiana Jones classic “You chose poorly”, they shrivel up?

I’ll tell ya what….if the electorate passes Moonbeam’s tax initiatives in November they deserve to shrivel up and be blown away like central valley dust in the wind…cause that’s exactly what will be happening to the state.

hawkeye54 on July 12, 2012 at 1:55 PM

Talking about public universities, like the CA in the video:

It is not possible to throw around percentages of increase, without looking at the full budgets for your colleges, because if you go there, you have never paid what it costs, taxpayers have done that for you.

I hear conservative minded people tsk and say you should go to a state school young lady or young man. But it is better for everyone if you go to a private school. The money that people give to a private school, endows the education, and you are sent a bill and it is more than the Public college bill, but you are paying your own way. Very little comes from the state taxpayer.

If you look at how much every family pays every year for the Public university system, the cost of this education has been very expensive. Now in CA they are pulling the taxpayer money away due to hard times, but I need to see how much the budget is going up in your video, not the percentage more it costs for the kids to go. It might still cost the same for a kid to go, it is just that the KID has to pay more because the state government is sending the money to other hotspots in the budget.

It would be better to look at the school budgets, and yes, the Spiderman waste and the Recreational facility waste, but pull it away from what tuition is. No one is entitled to a cheap trip to public college, it would be better to shut a few of them down. Let the kids compete for the places in private colleges and the kids with the Most Merit should get in. Also you can choose a college that has more of those nice things like Math and Science and Writing. The hardest thing to control is a public university with the pressure of the public to be all things to all people, it ends up being no Thing to no People. A public college gets a lot of pressure to have all that diverse fairness which caters to the lowest common denomenator, and ends up in total:

Costing the university system per child (not what YOU pay) more than it costs to go to an Ivy university.

So, really what you want to do is figure out what the cost per student is INCLUDING their tuition bill. And use that figure, for the shock value, but also because it is the truth.

There are a lot of people hiding and making money in these havens…hint..hint.

Fleuries on July 12, 2012 at 4:31 PM

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