Someone Forgot to Tell California's Bankrupt Cities About the Golden State's Alleged Economic Revival


After California voters narrowly approved a hike on their income taxes this November, a species long thought extinct started re-appearing in the national media: the California-is-back story.

"California Finds Economic Gloom Starting to Lift," declared The New York Times, bolstering the case with such beautifully worded info-explainers as "Most Californians are still pessimistic about the direction of their state, but the trend is improving." Politico trumpeted "Jerry Brown's California Revival." The articles were short on economic numbers, long on armchair politics and carnival-barker quotes like disgraced ex-governor Gray Davis telling the Gray Lady that "I can see the sun glistening off the ocean as I look out my office window."

For a reality check against premature it's-back-ulation, I recommend the relentlessly grim website Pension Tsunami, where you can see the daily nitty-gritty of blue-state interest groups (read: governments and public sector unions) fighting like wolverines over the ever-shrinking pie of available government revenue. For instance, here's a recent article from the Riverside Press-Enterprise:

The city of San Bernardino won an important victory in its request for bankruptcy protection Friday, Dec. 21, when a judge denied CalPERS' attempt to force payment of unpaid pension obligations through state court.

CalPERS, the state retirement system, is the city's largest creditor. CalPERS had filed a motion for relief from the automatic protection from creditors under bankruptcy law that came with San Bernardino's Aug. 1 Chapter 9 petition.

In order to make payroll and keep basic operations going, the city has stopped paying many of its debts, including the employer share of biweekly payments to CalPERS.

The city now owes $8.3 million and is accruing a debt of $1.7 million a month even as the agency continues to pay $3.75 million in benefits to city retirees a month, said Michael Gearin, an attorney for CalPERS, during an almost five-hour hearing in U.S. Bankruptcy Court in Riverside on Friday.

The agency depends on timely payments from its members, he said.

"Without that, the system falters, and it will ultimately fail if enough employers don't participate," Gearin said.

He said that like it was a bad thing! (I kid.) Comments Chris Reed over at Cal Watchdog:

[This] will be remembered as the first in a very long line of defiant acts from local governments in California as budgets that don't add up force local officials to make tough and often unprecedented decisions. For local officials, telling Sacramento to take a hike is a much easier call than taking on those who benefit from city compensation policies or who benefit from city services. […]

The decision of a judge to side with the city in its maneuvering will absolutely prompt other cities to copy it.

Other cities such as bankrupt Stockton, where national reporters should be forced to walk after nightfall before hitting "send" on their California-revival stories.

I'll be happier than Huell Howser tripping on acid when the Golden State makes its long-delayed comeback, but the structural problems of converting tax dollars into a guaranteed pension machine are vast and ongoing, and it's going to take more than one month of sub-10% unemployment since January 2009 to get me busting out the Phantom Planet catalogue