When Government Fails: The Orange County Bankruptcy

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University of California Press, Jun 1, 1998 - Social Science - 320 pages
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When Orange County, California, filed for Chapter 9 protection on December 6, 1994, it became the largest municipality in United States history to declare bankruptcy. In the first comprehensive analysis of this momentous fiscal crisis, Mark Baldassare uncovers the many twists and turns from the dark days in December 1994 to the financial recovery of June 1996. Utilizing a wealth of primary materials from the county government and Merrill Lynch, as well as interviews with key officials and players in this drama, Mark Baldassare untangles the causes of this $1.64 billion fiasco.

He finds three factors critical to understanding the bankruptcy: one, the political fragmentation of the numerous local governments in the area; two, the fiscal conservatism underlying voters' feelings about their tax dollars; three, the financial austerity in state government and in meeting rising state expenditures. Baldassare finds that these forces help to explain how a county known for its affluence and conservative politics could have allowed its cities' school, water, transportation, and sanitation agencies to be held hostage to this failed investment pool. Meticulously examining the events that led up to the bankruptcy, the local officials' response to the fiscal emergency, and the road to fiscal recovery—as well as the governmental reforms engendered by the crisis—When Government Fails is a dramatic and instructive economic morality tale. Eminently readable, it underlines the dangers inherent in a freewheeling bull economy and the imperatives of local and state governments to protect fiscal assets. As Baldassare shows, Orange County need not—and should not—happen again.
 

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Contents

Introduction Roots of the Bankruptcy
xvii
The Orange County Setting
31
The California Context From Proposition 13 to Fiscal Crisis
59
Events Leading up to the Bankruptcy
86
Response to the Fiscal Emergency
116
The Road to Recovery
149
Reforms after the Crisis
182
Lessons Learned from the Bankruptcy
214
Recommendations for the Future
238
Time Lines
263
Orange County Annual Surveys
269
The Times Orange County Polls
276
InDepth Interviews
295
References
297
Index
311
Copyright

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About the author (1998)

Mark Baldassare is a Senior Fellow at the Public Policy Institute of California (PPIC) and Professor and Chair of Urban and Regional Planning at the University of California, Irvine. He is also founder and Director of the Orange County Annual Survey, and the author of numerous books in urban politics.

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