Yet another California city may be joining Stockton, Mammoth Lakes, and San Bernardino in bankruptcy. According to the Huffington Post, Compton has $3 million on hand but must pay out $5 million in the next month. The problems are the result of lower property tax collections while labor costs (including pensions) continue to escalate.
Meanwhile, Democrats in Sacramento still push higher taxes as the solution. That “solution” will drive yet more businesses from the Bronze Golden State, and will only exacerbate the problems. Humorously, the state legislature gave raises to legislative aides of up to 10% and then cut the pay of other state workers by 4.62%.
A friend asked me what I thought it would take for California to rationally approach their problems and craft solutions that would work. That is an excellent question. I think the state will need to throw out all of the labor contracts and pension plans that have been negotiated in the past with state employees. California must also drastically cut taxes and regulations, and make the state a place that businesses want to locate in. The legislature’s example of the past week shows that California is still years away from solving their problems.