In the latest sign that California is buckling under a financial earthquake with several aftershocks, the state has released a Q&A on local government bankruptcies. It's a how-to of sorts for municipalities considering Chapter 9. For example, the state's Legislative Analyst's Office says in order to declare bankruptcy, a local government must "be insolvent."
Insolvency is becoming as common in the Golden State as Botox and hoodies.
[More From CNBC: The 10 Emptiest US Cities 2012]
The state has posted a list of school districts which are in financial trouble, based on projections. A dozen districts are not expected to meet their financial obligations over the next year, and 176 other districts may join them. Interesting, not on the list is Poway, where the school district has made headlines for issuing $105 million in bonds in a delayed-payment plan that will end up costing the San Diego suburb nearly $1 billion.
By the way, Poway's bonds are still rated AA- by S&P.
San Bernardino and Mammoth Lakes are hoping to follow Stockton-and Vallejo before it-into the bankruptcy process. At least a half dozen other cities have declared fiscal emergencies, which in some cases allows them to seek higher taxes. El Monte, for example, is using its fiscal emergency to ask voters to approve a soda tax.
Culver City is pushing for a sales tax to lift it out of dire straits, and the town of Hercules has already gotten one.
[More From CNBC: The Most Expensive States to Live in 2012]
The most dramatic turnaround has been in San Jose, where the mayor threatened a fiscal cliff last year. Voters in June overwhelmingly approved changes which cut benefits for existing employees, or forces them to contribute more, and can even reduce payments to current retirees in a fiscal emergency. Unions have already filed suit to overturn the law.
The bankruptcy guide from the state may help government officials, unions, and taxpayers better understand their choices, as a growing number of cities say they're running out of cash. While Sacramento continues to cut services, borrow money, and hope for a voter-approved tax hike in November, little has been done to restructure the state's tax code and budget in a way that provides long-term stability. Instead, the restructuring of California may end up happening one city at a time, from the bottom up, rather than from the top down.
[More From CNBC: US Municipalities That Went Bankrupt]
Still, there is some good news. Despite CalPERS below normal performance in 2011, the U.S. Census Bureau says that overall, California's public employee pension funds outperformed those from other states, with 17 percent of assets but 20 percent of investment returns. However, the Golden State also doled out the lion's share of benefits, 15 percent of the nation's total, for a state with only 12 percent of the population.
More From CNBC
