San Bernardino today became the third California city since June to file for bankruptcy, citing a $46 million budget shortfall and $1 billion in debt.
Under Chapter 9 bankruptcy, Mayor Patrick J. Morris told Bloomberg News that court cases and other actions against the city by creditors will be halted.
"All of our vital service bills will continue to be paid," Morris said. "We are going to keep our city services running."
San Bernadino's problems have been years in the making: An analysis prepared by the city's finance department blames "accounting errors, deficit spending, lack of revenue growth and increases in pension and debt costs." The recession hit the city hard.
The "accounting errors" may not have been innocent.
According to San Bernardino's city attorney and as reported in the L.A. Times, budget officials for over a decade falsified financial reports, in an attempt to mask the city's problems. "The mayor and the council were not given accurate documents," the Times quotes the attorney as saying.
The city's deficit stands at $46 million, despite the fact that San Bernardino has cut its workforce 20 percent in the past four years.
The reasons for the fiscal troubles include high pension costs, falling revenue from property taxes and a municipal salary increase scheme that ties worker pay to salaries in other California cities that are better off, city officials have said.
Stockton and the small Sierra hamlet of Mammoth Lakes have also filed for bankruptcy court protection.
With reporting by Alan Farnham.