The Golden State is now the Bankruptcy State.  In late July and early August, California suffered a cluster of bankruptcies in three cities: Stockton, San Bernardino, and Mammoth Lakes.  In 2008, Vallejo declared bankruptcy.

Since 2010, 26 municipalities in the United States have filed for bankruptcy.  The most notable, Central Falls, Rhode Island (August 2011), led sensible Democrats in the state to reform pensions.  Jackson County, Alabama (November 2011), was the largest municipal bankruptcy in U.S. history.  And Harrisburg, Pennsylvania (March 2012), is a state capital where one would assume plentiful tax money would be available.

The ongoing Great Recession has been tough in most places.  And given California’s position as a trend setter, from surf music to illegal immigration, the rest of the country will likely follow the bankruptcy trend in a few years.

California’s bankruptcies are different because of long-standing problems and the refusal of state authorities to deal with them.  Alexander Rubalcava, president of Rubalcava Capital Management, an investment advisory firm in Los Angeles, has been warning about California’s kamikaze finances since 2006.  “There will be dozens or hundreds of municipalities in California filing Chapter 9 in the decades to come,” he recently claimed.  The Bankruptcy State has 58 counties and 482 municipalities.

Mammoth Lakes is a resort town of 8,234, where movie stars frolicked during Hollywood’s Golden Age.  Its bankruptcy stemmed from losing a lawsuit to a developer—itself a bad sign, but not reflective of the real bankruptcy problem in California.  The other three cities are down-and-out former industrial areas that are the vanguard of the pension tsunami soon to wash over the whole state.

Stockton and Vallejo missed the digital prosperity of nearby Silicon Valley and San Francisco.  After Vallejo’s bankruptcy, the city cut half its police force instead of reducing pension payments for city employees.  I recently visited both bankrupt cities.  In Vallejo, a friend and I stopped for gas and were nearly assaulted by a panhandling “homeless” man.  Stockton seemed better off, with some nice areas near the city’s canals, but the city’s infrastructure is visibly deteriorating.

Each city’s bankruptcy has unique causes.  In Stockton, population 291,707, the booming real-estate market of the mid-2000’s lured the city council into blowing $190 million on a new “Taj Ma-City Hall,” a new park for the Stockton Ports Class A minor-league baseball team, and a multipurpose arena.  Then the crash hit.  Unemployment soared to 20 percent.  The median home price slumped from $380,000 in mid-2006 to $120,000 today, a drop of more than two thirds.

San Bernardino, population 209,924, ran up one billion dollars in debt in part by linking city employees’ pay and benefits to that of more prosperous cities in the state.  A study by the city department of finance blamed “accounting errors, deficit spending, lack of revenue growth and increases in pension and debt costs.”  The real-estate boom-bust also shook the city, with median home prices dropping from $324,000 in 2006 to $118,000 today, a 64-percent decline.

By contrast, home prices in the more thriving coastal cities have declined only 20 percent from 2006 to 2012.  But bankruptcy is written across the sky for them, too—especially badly run Los Angeles.

Aside from each city’s fiscal peculiarities, every municipality in the state shares common fiscal woes.  An influx of immigrants, legal and illegal, soaks up more public money than they provide in taxes, especially in the poorer inland areas.  “Pension spiking” in the late 1990’s, during the previous dot-com boom/bust cycle when it seemed stock gains would never cease, has made most municipal and state pensions unsustainable.  A Stanford University study headed by Joe Nation (a former liberal state assemblyman but an honest man, good with numbers) pegs the state’s current unfunded pension liability at $500 billion.

The money problems stem largely from the state’s psychotic political structure.  The public-employee unions effectively control almost all state politics, beginning with the Democrats who form near-two-thirds majorities in both houses of the state legislature.  Unlike in Rhode Island, Massachusetts, or New York, there are no Democrats willing to take on the unions.  Gov. Jerry Brown was elected in 2010 with their help and calls them his “troops.”

Police and firemen now commonly can retire with pensions well in excess of $100,000.  Along with other government workers—teachers, city administrators, etc.—the “$100K Pension Club” statewide now totals 9,111.

Something has to give.  Something will give in the Bankruptcy State.  And then in your state.