The prime lesson of Orange County’s bankruptcy: O.C. pols learned nothing from it

Here’s a sharp Cal Watchdog analysis by one “Chris Reed” of how Orange County’s Chapter 9 bankruptcy was so unique that it doesn’t offer much in the way of lessons for local governments now considering bankruptcy — but that the aftermath of Orange County’s quick recovery from bankruptcy offers painful lessons for voters dumb enough to believe their leaders have a learning curve:

 “Orange County was very unique,” said Baldassare, now president and CEO of the Public Policy Institute of California. “It doesn’t really have much to do” with the present straits facing other local governments in the state.

This doesn’t mean Chapter 9 is a bad choice for local governments overwhelmed by red ink – just that their path back to stability isn’t likely to be as clean and straightforward as Orange County’s.

But there is a powerful lesson to be learned in how Orange County’s leaders behaved after the county emerged from bankruptcy. That lesson: Even after as wrenching an event as a bankruptcy declaration, leaders can’t be counted on to be fiscally responsible. The bankruptcy fiasco was still a very fresh memory when Orange County supervisors and top bureaucrats put the county back on the path toward severe financial problems of a more conventional sort.

The piece outlines the pension spiking and pay hikes that drove the unfunded liability for the Orange County Employees Retirement System from $85 million in 1999 to $3.7 billion on Dec. 31, 2009.

And so in short order, Orange County went from being a nationally recognized model of smart governance to just another California government in which elected officials and top bureaucrats blithely showered taxpayer funds on public employees. …

Far from acting prudently with taxpayer funds, [former Orange County Treasurer Chriss} Street said, government officials instead work overtime to enable their spending schemes by crafting narratives that depend on “false impressions of spendable cash flow.”

In other words, they lie now and let the public pay later.

Orange County’s experience in the 1990s does show a Chapter 9 municipal bankruptcy filing can help local governments when it comes to the “pay later” part of this disastrous public policy one-two punch. But the blithe way the county government created a fresh fiasco illustrates a larger truth about the need for citizens to show perpetual and eternal vigilance in monitoring their leaders.

“One of the common failings among honorable people is a failure to appreciate how thoroughly dishonorable some other people can be, and how dangerous it is to trust them,” Thomas Sowell once observed. In less than 20 years, Orange County’s citizens learned this painful lesson twice.

3 thoughts on “The prime lesson of Orange County’s bankruptcy: O.C. pols learned nothing from it

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