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Reason.com Managing Director Tim Cavanaugh on cities in California filing for bankruptcy.
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-- -- And about news just keeps coming out of California we've told you about three cities filing for bankruptcy in less than two weeks.
Now group of retirees are suing the city of Stockton.
To keep their medical benefits good luck with that and Governor Brown has a plan to save this state.
More than 400 million dollars -- per -- union workers but the unions aren't letting that would go by without a fight.
So how bad will it get to the Golden State more bankruptcies.
And we'll see eighty start to default and -- municipal bond obligations that's what I'm worried about.
Bring it to have a not reason dot com managing editor Tim you'll want California resident.
You get -- -- -- that's not just getting.
And India -- illegal -- though I mean do you think it's gonna get a lot worse before it's -- Probably -- -- that the stay at the state level there is not any serious effort to kind of solve what's at the root of these problems which is the pension and health care benefits that you.
Alluded to just a minute ago.
And Jerry Brown the governor of California has a plan that is not serious enough but it is at least a plan.
Two to try and rein in the pension crisis change some ways that things get calculated and how much.
Did the taxpayers are on the hook to pay for government employees pensions but.
His own party the Democrats who control everything in California and union except the weather which remains nice.
Yet you don't they they can't get anything.
It doesn't like is only part of it seems fair and is it that it's coming to a head finally are we just sort of now paying attention to.
We're now paying attention to -- -- -- it's it's the old being hanged in the morning concentrates the mind.
We have.
You've made big cities you know I was on Fox Business a couple times last year.
The -- Charlie Gasparino he was right that in 2000 intently we're not we didn't see a wave of municipal bankruptcies but.
We mean this is it's it's getting serious and as of just a couple of weeks ago there are still people saying.
You know and haven't -- -- California's declare bankruptcy when the big town I mean if not all cities.
These -- among the biggest cities in California.
That's not gonna spark anything -- now -- San Bernardino another large city polite hello -- a large city.
And you know it's happening first in California has a lot of things happen first in California.
Yet -- -- -- woman everywhere -- I mean the reason why we focus on this is because this is a problem that's happening around the country and what we see happening in California.
Is really just the beginning of what could happen everywhere else but I wonder is so California has a 167.
Billion dollars in municipal bond obligations.
Do they defaulted they missed payments are we leading that or is that sort of the last thing that they stop paying on.
-- it probably not the last thing -- they've stopped paying on its it varies from city to city I mean stopped in at first the Smart money was saying.
When Stockton declared bankruptcy a few weeks back.
That -- their bond holders are probably going to be in pretty good shape.
Now one of their one of their biggest bond -- is looking to try and legally and stop the city from doing this bankruptcy out of concern.
That there tended to flee into the city is gonna get out of its bond payments to them yeah in addition to which you know you have a state and you know.
I don't wanna blame everything on one party -- a lot of people guilty but you have a state where the Democrats and the unions really control everything and they have already been passing laws in California to try and make it harder for Citi to declare bankruptcy.
And war.
Make sure that when the city does declare bankruptcy it doesn't get out.
And -- -- wants thread so you think that it is it possible on the line that these cities -- we're hearing declare bankruptcy will stop making their bond payments and then.
What is sort of the extension about I mean a lot of pension and investment -- Are invested in Munis so is there a bigger tidal wave coming and -- -- what Meredith Whitney was talking about a long time ago.
Right and second biggest supplier of health care in the United States.
That's the California public employee -- -- retirement system.
You know their their invested in the bond market -- so you're gonna see this sort of you know cyclical thing where today.
That hurts the the pension funds and in the pension funds continue to need more taxpayer assistance causing more.
Financial hardship for the city's -- so yes there is a good possibility -- Earning -- the pensions are involved on another level this time they're really getting hit at the cities don't make those payments so.
It's just an interesting full circle typing -- stand -- and it came Tim Cavanaugh thanks for joining us.
Thank you very.
