Unsustainable spending continues to be unsustainable: Third CA city goes bankrupt

Victor Joecks

Fiscal conservatives and libertarians often note that current levels of government spending are unsustainable.

Guess what? As the residents of San Bernardino just found out, unsustainable spending levels can’t be sustainable, and that city’s now bankrupt.

San Bernardino on Tuesday became the third California city in less than a month to seek bankruptcy protection, with officials saying the financial situation had become so dire that it could not cover payroll through the summer.

The unexpected vote came at the suggestion of the interim city manager, who said the city faces a $46-million deficit and depleted coffers.

And what caused the problems in San Bernardino?

The city’s fiscal crisis has been years in the making, compounded by the nation’s crushing recession and exacerbated by escalating pension costs, lucrative labor agreements, Sacramento’s raid on redevelopment funds and a city reserve that is tapped out, officials said.

Oh boy, those things sound all too familiar to Nevada residents.

So what’s the one thing that won’t be impacted by San Bernardino’s bankruptcy? Is it police protection, the fire department, libraries, services for the poor or programs for the community? Nope. It’s pensions for retired government workers.

Current employee pension obligations, one of the contributors to the city’s financial straits, will not be affected, officials said.

This isn’t unusual. Around the country, government pension payments have continued to make full payments, even when the municapity is bankrupt. This is another reminder of why PERS reform is so desperately needed.

Government can’t spend its way to long-term prosperity, but it can spend its way into bankruptcy with dramatic negative impacts on current residents. That’s why lowering government spending levels – not just limiting future increases – is so important and so urgent.