The specter of municipal bankruptcies spreading across the land – especially in states like Illinois, California, and Michigan – has been out of mind of late. Pushed off the agenda by other crises. But it has not gone away even – or, perhaps, especially – in jurisdictions where the problem was thought to have been dealt with, if not actually solved.

For instance:

Less than two years after exiting bankruptcy, the city of Vallejo, California, is again facing a budget crisis as soaring pension costs, which were left untouched in the bankruptcy reorganization, eat up an ever-growing share of tax revenues.

Situations like this (think Detroit)

… are considered test cases in the titanic battle between Wall Street and public pension funds over whether municipal bondholders or current and retired employees should absorb most of the pain when a state or local government goes broke.

So it seems inevitable that there will be pressure for bailouts. Another transfer of wealth from the responsible to the profligate. With the responsible officials long since out of office.

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