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A Look at California’s Future?

Is the bankruptcy in San Bernardino and Stockton a glance at what is forthcoming for the state of California?

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.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Steve Cohn July 19, 2012 at 02:45 AM
The courts might disagree. MOFD has $18 million in revenues and four times the firefighters per capita as adjoining ConFire. They might not be considered "indigent" by a bankruptcy court. Past promises weigh heavy when compared to current spending on things like brick sidewalks and multimillion dollar libraries and even super smooth streets. I'm not saying I disagree with you going forward but the people we elected to represent us gave away all these goodies in our name with our blessings and many of them are still in office.
Chris Kapsalis July 19, 2012 at 03:00 AM
@DC. I am not sure where you got all that from, but it was not me. I did pay all my bills and on time. I do not want to be bailed out, paid all my due taxes my whole life and want no money from anyone. You have no clue about me, no clue about a whole lot imo, and I am finished with you personally. Not worthy of my time. If you knew the facts about me you would feel pretty stupid right now.
Sam Clemens July 19, 2012 at 03:17 AM
Steve Cohn 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.
Thisisnot A. Pipe July 19, 2012 at 06:12 AM
Why is No One talking about the economic havoc Redevelopment Agencies brought upon this State? The money went not to public employees--but flowed like champagne to developers, council people, consultants. The State is not Enron that it should raid pensions. So, should we become a 3rd world country with the resources all on the top tier and the middle class gone? That's the worst thing you could do to a Democracy.
Sam Clemens July 19, 2012 at 01:29 PM
To: This is not a pope 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.

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