Another California City Headed for Bankruptcy?

Another city in California is considering bankruptcy, mainly due to runaway pension costs and salary levels. Desert Hot Springs, a small city 110 miles east of Los Angles would be the third city in California dealing with bankruptcy. 

Yesterday, the city warned it will run out of money by March 2014.  A new city finance director found a $3 million shortfall in the city’s budget of $13.5 million. 

“It’s obvious we can’t continue with salaries and pensions that are in the stratosphere, no matter how much love there is for our police department,” said Russell Betts, a council member.

Amy Aguer, the interim director of finance was hopefully the city would not have to file bankruptcy, but that the option was on the table.  A staggering 70% of the budget is used for police costs, of which most are salaries and pension payments to Calpers, the public employees retirement system. 

Excessive pension obligations have contributed to the bankruptcies of San Bernardino and Stockton, as well as Detroit.