State and local governments going broke


The controller of Harrisburg, Pennsylvania's capital city, says "Bankruptcy is inevitable." Chapter 9 was put into the bankruptcy code in 1934 and gives municipalities protection from creditors while developing a plan to pay off debts.

"We can't raise taxes; they're already very high," Controller Miller says. "If we did, people would just leave. It's cheaper to move out to the suburbs."

The burden of paying union contracts prompted Vallejo, Calif., to file Chapter 9 in 2008 and the city has not yet emerged from bankruptcy.

In a related story, the WSJ reports that virtually all state retirement plans are underfunded.

While union membership has fallen in the private sector, many government employees work under union contracts. Combine that with the ability of union support to sway election results (and have union government employees serving in legislatures) at the state and local level and it's a recipe for fiscal disaster.

Add/view comments on this post.


The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Their postings appear here on the Monitor's Money site as well as on their own individual blog sites. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the blogger's own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.

of stories this month > Get unlimited stories
You've read  of  free articles. Subscribe to continue.

Unlimited digital access $11/month.

Get unlimited Monitor journalism.