Yet another California city is facing bankruptcy. The Wall Street Journal reports that San Bernardino has just authorized a bankruptcy filing as it faces the prospect of completely running out of money before the end of the year. The culprits are familiar:
San Bernardino, home to 210,000 residents, will run out of cash to pay its 800 employees within 90 days, said Jim Morris, the mayor’s chief of staff. San Bernardino expects its deficit to rise to $45 million in this fiscal year, Mr. Morris said.[. . .] San Bernardino’s bankruptcy vote came as a surprise, setting off alarm bells throughout the state. Economists and elected officials say other California cities with similar dynamics—falling revenue and pricey police and fire departments—could seek bankruptcy protection.
Unfortunately for San Bernardinians, the story gets worse. Not only are the city’s coffers dry, but it has been lying about its finances for the better part of two decades, reporting a deficit as a surplus year after year. Reuters reports:
San Bernardino is the third California city to move toward bankruptcy in the last few weeks, but the issue of bad accounting elevates this bankruptcy to a whole new level. The California Legislature enacted a new law last fall, AB 506, that requires 90 days of mediation between the city and creditors prior to a new municipal bankruptcy filing. But it is hard to see how that will be possible in San Bernardino’s case, since there are no legitimate financial filings to negotiate from. Moreover, the city doesn’t have the ability to pay its bills for 90 days during mediation. We’ve entered the twilight zone of muni workouts here.
This certainly explains why the bankruptcy came as such a surprise. California cities are in enough trouble as it is; serial lying and dishonest accounting make an already bad situation significantly worse.Fortunately San Bernadino may not in fact herald a huge wave of municipal bankruptcies just yet. While some of the city’s problems are similar to those facing other California cities, the city fathers of San Bernadino managed to create a uniquely toxic mess of misgovernment and denial.But unless California’s long term slide into political incompetence and fiscal incontinence is somehow reversed, more and more California cities will be trooping into bankruptcy court. Passengers on California’s high speed train may not find a single city on their route that hasn’t had to go bankrupt, shortchange its citizens, and shaft its employees.This, we are told, is what liberals call “compassionate government.”