What Kind of California Town Do You Live In?

While much of California is a mess these days as a consequence of the weak economy and years of overspending, it's important to remember that there's a lot of variation across its towns and cities, in terms of fiscal health and the ability to take their troubles seriously. Not all governments are created equally irresponsible here. As these three stories illustrate, California cities often fall into one of three types.

Deadbeats. If you read this blog regularly, you're probably aware of many municipal governments openly flirting with bankruptcy these days — the cities of Montebello, Santa Ana, and Bell come immediately to mind, along with the Mendocino County Recreation and Parks District. There are also many governments right on the edge of major financial trouble. As an example, consider Stockton. Back in May, the Central Valley city was struggling to close a mammoth $37 million hole in its budget. Though it ultimately fixed that deficit, the problems created by years of overspending and borrowing on a foolish downtown revitalization effort remained, and yesterday, the city warned it could default on redevelopment bonds issued in 2006. According to an October 12 filing with the SEC, the debt service on those bonds exceeds revenue by almost $900,000. In other words, the city is broke.

Welfare Queens. Of course, not being completely out of money doesn't mean your government is doing well. As an example, consider the city of San Bernardino. Unlike Stockton, it isn't broke; but as one of the poorest cities in the country, it's hardly doing well. Almost half of the town's residents are on welfare — either Medi-Cal, food stamps, or cash assistance — and all told, it receives a staggering $524 million a year in federal and state welfare assistance. In other words, San Bernardino's economy consists in large part of cash transfers. It's not in danger of declaring bankruptcy, but ask yourself whether paying people to be poor is a sound model for an economy that leads to greater wealth.

Beacons of Sanity. With all the bad news these days, it's important to remember that there are municipal governments in the Golden State trying to do right by the taxpayers. The most obvious example, of course, is Costa Mesa, which is attempting to implement steep cuts in spending to get out ahead of ballooning pension costs before they turn into a crisis. Yet the town of Pleasanton, in Alameda County, also deserves a tip of the cap. In addition to being one of the nicest towns in northern California, Pleasanton is embarking on a plan to cut its pension debt by at least 10% in the next five years. Currently, city employees contribute almost nothing to their retirement benefits; under the City Council's new plan, concessions on these contributions will be used to pay down its unfunded liabilities ahead of schedule. While the plan doesn't go far enough — Pleasanton's unfunded liabilities sit somewhere between $82 million and $144 million — they've got the concept right: taking on short-term pain and deferring spending in order to keep debts from snowballing.