California on Brink of Financial Armageddon Californ-I-O-U
California has the largest economy in the U.S. and is also the most indebted state with a deficit that has balloned almost 70% since January 2012. Current FY 2013 budget gap is more than $15 billion. And at least three California cities are exploring the option of declaring for bankruptcy. 20% of cities in California could be teetering on the edge of bankruptcy by the end of 2012.
Stockton, CA: Carrying $700 million in debt... could become the largest U.S. city to file for bankruptcy
San Diego: 8th largest U.S. City -- city's retirement fund soared to $231.2 million this year -- 20% of the general fund budget -- Has laid off hundreds of workers in recent years to pay soaring pension bills
San Jose: 10th largest U.S. City -- mayor declared a fiscal emergency in 2011 -- experienced back-to-back General Fund deficits of over $100 million in 2010 and 2011.
Hercules, CA: recently defaulted on a debt payment -- S&P dropped its ratings on city debt by five notches
Santa Ana. CA: population of 325,000--city has recently shuttered its fire department and turned fire protection duties over to the county--saving $10 million a year
Vallejo, CA: became the largest city in America to declare bankruptcy in 2008--emerged in 2011
Antioch, CA: a city of 100,000, hammered by the housing slump. To keep its books balanced, the city implemented a hiring freeze; furloughs; employees waiving pay increases; and also reduced its workforce from 401 to 245
Costa Mesa, CA: a city of 110,000 south of Los Angeles and because of financial issues, it has slashed its payroll from 611 to 450. Reported that the city is selling its police helicopters and has hired a neighboring city for air patrols. Costa Mesa is also pursuing a somewhat controversial effort to convert to a charter city from a general law city, which would give City Hall more power to outsource more work
[sources: Bloomberg, Center on Budget and Policy Priorities, Washington Post, Wall Street Journal, Reuters]
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