California Cities Going Bankrupt – Symptom of a Bankrupt System

The economic crisis that began in 2008 has so far driven three California cities into bankruptcy. And this is no natural disaster. Why are these cities going bankrupt? Because of an economic crisis engineered by the big banks and corporations. During the last decade many city governments invested public funds in the banks and financial firms that promised to deliver big profits on investments. With the economic crisis, these funds have disappeared. On top of this, city governments rely on property taxes. With the crash in housing prices, city governments receive far less from taxes. This has increased the burden on cities too much, and it has driven entire cities to bankruptcy – a fate that isn’t the fault of the people who live there.

So far Stockton, San Bernardino, and Mammoth Lakes have all filed for bankruptcy, and there are 35 other California cities are on the brink of bankruptcy. And who is being forced to pay? City workers whose health care and pensions are on the chopping block, and citizens who are losing essential services.


In July, the 300,000 person city of Stockton became the biggest city in the country to file for bankruptcy. What are the consequences?

  • Stockton refused to pay $400 million in health care for city employees.

  • Stockton canceled $197 million in payments to employee pensions.

  • Stockton fired 40% of its city employees.

  • Stockton fired 30% of employees in the fire department.

San Bernardino

The city of San Bernardino, 65 miles east of Los Angeles, recently announced that it is going bankrupt. This means the city will have to cut $45.8 million from the $166-million city budget.

  • Retiree health plans have ceased receiving payments.

  • Full-time library employees have gone from 43 to 12 in the last year.

  • No city job vacancies will be filled, putting all of the work on the remaining employees.

Mammoth Lake

Mammoth Lake is a small ski-resort town North of Los Angeles. Between the economic crisis and last year’s short ski season, Mammoth Lake has gone bankrupt with a $2.8 million shortfall.

  • Mammoth Lake laid off 70 full-time city employees.

  • $400 million in city property was auctioned off to a hotel company.

Balance Sheet of the Bankruptcies

The bankruptcies have left residents in fear. Burglaries are increasing dramatically. Streets are going unpaved, and stray animals are left to roam the streets. And what’s worse, every financial analyst says bankruptcy is the future for more and more cities. The crash has forced many families to dissolve under the pressures of poverty. Women’s shelters are reporting that they are counseling more than three times as many women for domestic abuse. Most of these incidents are from families suffering foreclosures.

The federal government gave $13 trillion to the banks as bailouts. How much of that money has gone to replace the missing city funds? None. The banks have taken the money and returned nothing. What about the state government? Jerry Brown’s 2012 budget pushes the cost of many public services onto cities, knowing that the cities can’t pay for it. We can’t depend on the politicians to save us from Stockton’s fate. But there’s no reason we need to accept these bankruptcies. They just show that the problem is with this system which rewards the wealthy and tears apart our cities. If anything is bankrupt it is this system.