The Scary Future of Municipal Bankruptcy - California Leads the Way

http://www.alternet.org/economy/scary-future-municipal-bankruptcy-california-leads-way?akid=9168.277129.16BXT1&rd=1&src=newsletter687370&t=10

In California, the names of the latest victims are well known. San Bernardino, Stockton and Mammoth Lakes all filed for bankruptcy within the last few weeks. And Vallejo emerged from Chapter 9 protection just last year. The questions appear to be "Why all in California?" and "Who will be next?"

Although California's problems are extreme, the state is hardly alone in financial difficulties. Towns and counties in Alabama, Illinois, Michigan, New Jersey, New Hampshire, New York, Pennsylvania and Rhode Island are all having trouble meeting their financial obligations. If these conditions continue to spread, the United States will be facing a crippling debt crisis at the state and local levels, which is where Americans receive much of what matters for their quality of life.

This was a central point in a report released July 17 by the State Budget Crisis Task Force headed by former Federal Reserve Chairman Paul Volcker and former New York Lt. Gov. Richard Ravitch.

Simply put, in the aftermath of the financial crisis emanating from Wall Street, the federal financial mess is bleeding over into state budgets in profound ways, adding enormous costs to already overburdened state coffers. That spillover, in conjunction with broader national crises in finance and healthcare, is overwhelming state and federal finances.