In an editorial, the Sacramento Bee’s Dan Walters makes the case that the state’s finances are in no better shape than those cities that have already decided to declare bankruptcy. With the exception of Mammoth Lakes, their situations are remarkably similar.
Among the similarities cited by Walters is the propensity for budget gaps to be covered by accounting gimmicks laced with questionable accounting practices and unrealistic assumptions. Those one-time fixes compounded on top of one another to create the “wall of debt” that Governor Brown alluded to in his first budget, that remains persistently unresolved.
Additional similarities can be drawn between the actual decision making processes that were used in previous years. Those decisions were influenced not only by individual political agendas and aspirations, but the pressure of interest groups and lobbyists. Many times, these pressures delayed or averted important cuts and restructuring that could have improved long-term solvency.
From the Sacramento Bee:
So far this summer, three California cities have moved toward bankruptcy and several others are distressed enough that the b-word has left the lips of their elected and appointed officials – including those in the two largest, Los Angeles and San Diego.
With the exception of tiny Mammoth Lakes, which sought bankruptcy protection after losing a lawsuit, the conditions of California’s financially distressed cities are remarkably similar.
Elected leaders and appointed managers succumbed to hubris and political pressure, particularly from their employee unions. They committed their cities to spending on employee salaries and fringe benefits, especially pensions and health care, and civic improvements that could not be sustained when the housing bubble burst and revenue declined.
Read the full article here.