Hard Times, USA: Cities and Workers Driven to Brink by Austerity

Roger Leonard, a heavy equipment operator for the city of Scranton, Pa., saw his pay plunge to $340 from about $900 for two weeks' work after the mayor cut city-employee pay to minimum wage. (Jeff Brady/NPR)

Hard Times, USA: Cities and Workers Driven to Brink by Austerity

Municipal workers in Scranton, Pennsylvania have filed federal lawsuits after the mayor cut all city employee's pay to $7.25 an hour, the state's minimum wage.

San Bernadino, California, meanwhile, became the third city in California this year to declare bankruptcy.

The city of North Las Vegas, Nevada declared a financial state of emergency beginning July 1st, an authority usually reserved for natural disasters like floods or fires. In this case, the declaration was used to justify cutting town labor costs following a projected budget deficit of $30.9 million for the 2012-2013 fiscal year.

Each town or city that faces financial crises has its own story to tell, but taken together, these stories spin a narrative about the American economic landscape that is impossible to ignore.

The financial crisis of 2008 -- which started in the housing sector -- has continued to spread to municipalities as tax revenues remain depressed and high unemployment numbers endure. Federal assistance has dried up as Washington lawmakers from both parties reside in gridlock and election year inertia make short-term relief unlikely.

As a recent story in The Independent notes, "Fears over civic bankruptcies stretch back to December 2011, when a high-profile Wall Street analyst called Meredith Whitney caused an overnight panic in the municipal bond market, which underpins America's public fortunes, by telling the TV news show 60 Minutes that she believed that there were going to be '50 to 100 sizeable defaults' by debt-ridden cities in the not-too-distant future."

Since 2007, a series of small cities - from Westfall in Pennsylvania, to Moffett in Oklahoma, and Prichard in Alabama - have found themselves in court declaring "Chapter Nine," the part of the US bankruptcy code applicable to municipalities.

City governments -- many who had been pressured to invest in complex financial instruments that promised safe returns but turned out to based on the same risky products that caused the collapse of the credit markets -- saw costs soar just as their revenues collapsed and as many of their citizens demanded more assistance than ever.

A sampling of US towns left in financial ruin (via The Indepenent):

Stockton, California

The biggest city in the US to run out of money so far, it listed a debt of $1bn in its bankruptcy application last month

Mammoth Lakes, California

The ski town filed for bankruptcy this week after losing a legal fight costing twice its annual budget

West Fall, Pennsylvania

The economy was doing well in this small town yet its $20m debt still proved too big for it to cope with

Jefferson County, Alabama

Failure to restructure $3.1bn bonds on its sewers sent its finances down the drain

Central Falls, Rhode Island

Went broke last year due to its massive pension bill for the baby boomers among its 18,000 citizens

Vallejo, California

Debt led to police officers being laid off, fire stations being closed, and cuts imposed on other services in 2008

Moffett, Oklahoma

Raised 78 per cent of its income from speeding tickets - until a state-imposed ban on the fines made it insolvent in 2008

Pritchard, Alabama

When town ran out of money for pensions in 2009, it simply stopped paying them, but that was not enough

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