The story of how this happened has likely been repeated over and over in municipalities all across the United States. Poor little Stockton is just the vanguard of a wave of what are actually quite necessary bankruptcies that will hit within the next ten years, but on the positive side, will allow these cities to clear their book and start over.
The only question is whether the idiot city governments will simply repeat the errors.
The LA Times has a pretty good article I found via Maggies Farm, and I quote from it as follows:
"During the boom years, Stockton promised its future public-sector retirees free lifetime medical coverage. It also adopted rules allowing workers to spike their pensions by letting them include overtime and other payments from their final work year to calculate retirement pay.
The city also issued far too many bonds. From 2003 to 2009, on an annual budget of just $156 million, Stockton borrowed $191 million for a spending spree that included public housing, an events center and arena, parking garages and a new City Hall and police communications center.
The city also borrowed $125 million to make its required payments to the California pension fund. Yes, even during the boom years, Stockton could not afford to make its pension payments.
Since 2008, the average home price in Stockton has fallen from $407,000 to $118,500, which means that property and sales tax collections have fallen sharply too. The city has cut back severely, reducing its workforce by 25%, including deep cuts in the fire and police departments, and cutting worker pay and benefits. When it became clear that wasn't enough to balance the budget, Stockton last year suspended $2 million of its $13 million in annual bond payments."
I guess the only losers here are the foolish people who bought the city's bonds, and the incredibly greedy city workers who now have to be satisfied with much less in loot from the pockets of the public.
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