San Bernardino is the third of California cities filing for Chapter 9 bankruptcy in the last two months. After having determined they would not be able to meet city payroll obligations this month, the City Council declared themselves financially insolvent. With the increase in municipal bankruptcy filings, many Californians are left wondering what is happening to cause such financial turmoil around the state.
Although cities filing for bankruptcy are not exactly new, the publicity surrounding such occurrences is. In the last six months, many news stories have surfaced over cities entering bankruptcy protection to protect interests and resolve debt liabilities. One of the most common threads behind these filings appears to be, simply, mismanagement of funds.
Although each city’s filing is unique in its own way, they are all in desperate need of financial help if the city is to remain in control over services and entities. Unfortunately for city employees this means that layoffs and benefit cuts are imminent. Residents may also face cutbacks in the form of reduced city services while debt restructuring efforts take place.