Last night I read an article on NPR, Surprise, San Bernardino! You're Bankrupt. The article tells the sad story of San Bernardino, California, as the city became the third California city to announce bankruptcy, in less than three weeks. San Bernardino joins Stockton and Mammoth Lake, as they prepare documents to file for municipal bankruptcy.
The city is faced with a $45 million budget shortfall, and without filing for bankruptcy, the city will not be able to meet payroll obligations on August 15. From what I understand, by filing for bankruptcy, the city will be able to renegotiate city employee contracts, but is still obligated to meet employee pension payments. Pension payments, like with many municipal governments, are one of the driving costs for San Bernardino. As the bankruptcy process begins, city leaders, employees, and union representatives are in for long, tense, contract negotiations - and will be forced to make difficult decisions that will have a long lasting impact on the community.
Leaders will be faced with finding an agreement that is mutually beneficial for both parties, but above all, is an agreement that can provide the needed services to citizens. For San Bernardino, all parties are going to be forced to look beyond protecting interests, and move towards an agreement that is best for the citizens of San Bernardino.
The NPR identifies that San Bernardino, like many California cities and municipalities across the country, has been hit especially hard by the Great Recession, rising pension payments, and has been forced to use emergency funding to stay afloat. But what differentiates San Bernardino is that for last 16 years, budget documents have been falsified, and decisions have been made using inaccurate budgetary documents. Councilmen John Valdivia stated in the San Bernardino Sun, "The taxpayers of this city have been duped, hoodwinked and misguided for the past several years."
This situation is unimaginable, especially at a time when the city has laid off 20% of the workforce over the last four years, faces 15.7% unemployment rate, and over 5,000 homes are in foreclosure in city of just over 200,000. Municipal bankruptcies are unfortunately becoming more common, based on the current fiscal environment, more may be on the horizon. NBC Los Angeles reports, “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.”
I’ll be following this story more, and looking into how documents could have possible be falsified for so long without anyone catching on. Someone needs to be held accountable for their actions.