San Bernardino Bankruptcy

Earlier this year, when San Bernardino became the third California to declare bankruptcy in 2012, the finger-pointing began immediately. The mayor blamed the city council and the police and fire unions. The unions blamed the mayor.

But when my colleagues Ryan McNeill, Tim Reid and I took a deep dive into why this prosperous, middle-class community of about 210,000 went bankrupt, the answer was suprisingly straightforward. In this special report published by Reuters in November 2012, we detailed how the city succombed to a vicious cycle of self-interest between its public employees, local politicians and state pension overseers.

Unions poured money into city council elections, and the city council poured money into union pay and pensions, even as major employers left San Bernardino and the city gradually became poorer and poorer. Public employees took home hefty payouts of accrued vacation and sick time, which helped explain how a policeman could earn nearly twice as much money one year as the city’s entire street sweeping department.

We also found that many cities in California are experiencing very similar back-scratching, meaning San Bernardino may not be the last to file bankruptcy.