Three interconnected forces brought the working-class, inland Southern California city of San Bernardino to insolvency: a burst housing bubble and lethargic economic growth, high police and firefighter salaries mandated by the city’s charter and compounding pension obligations, according to a commentary in the City Journal yesterday. Bankruptcy should give San Bernardino leverage to deal with the last two, but the big, structural changes required will not be easy or pleasant. Absent such changes, though, salaries and pensions will continue to grow faster than the city’s revenues, crowding out most other government functions and services, according to the commentary. The city, with a poverty rate equivalent to Detroit’s and a homicide rate that has quietly surpassed Chicago’s, declared a fiscal emergency in early July and officially filed for bankruptcy on August 1. Deferring payments to bondholders just to make payroll, the city has been forced to trim its budget radically. As a bridge to the bankruptcy proceedings, interim city manager Andrea Miller attempted to reduce the deficit by proposing a new budget called a pre-pendency plan. Her austerity budget, which passed with only a few changes after much haggling, will form the basis of the plan submitted to the bankruptcy court. The city projects a $45.8 million budget deficit, which the pre-pendency plan would reduce to $7.5 million by making “draconian” and “catastrophic” cuts, in the words of some city council members.
