Few non-Californians pay much attention to
the goings-on in Stockton, a hard-pressed Gold-Rush-era industrial
city of 300,000 that sits in the agriculturally rich San Joaquin
Valley. But bond-holders, taxpayers, and government officials
throughout the country will be listening to U.S. Bankruptcy Judge
Christopher Klein’s expected ruling on Monday as he decides whether
the city may remain in bankruptcy. As Steven Greenhut explains, if
Klein sides with the city, then municipalities will face a
disturbingly low bar for pursuing bankruptcy. They will be
emboldened to choose Stockton’s course—i.e., using bankruptcy as a
strategic policy tool to offload debts without having to confront
the main reasons that they went bankrupt in the first place, such
as lush pensions for public employees.
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