A Red-Ink Warning System

Three municipalities in California have declared bankruptcy recently, and few experts believe this troubling trend is over.

You may think that what happens in California stays in California. Luckily, State Comptroller Thomas DiNapoli doesn’t subscribe to that narrow school of thought. 

Mr. DiNapoli wants to set up fiscal monitoring mechanisms that will sound an early-warning alert when a municipality or county is dangerously close to falling off a cliff. That is not only prudent, it would seem absolutely necessary at a time when over 300 local governments in New York are awash in red ink, and about 100 are so starved for cash that they are barely able to pay current bills.

The comptroller’s formula would take into consideration factors like cash on hand, operating deficits, population trends and revenue growth in examining the fiscal health of local governments. If an alarm goes off, the comptroller’s office would step in to offer a distressed local government financial advice and other services.

Mr. DiNapoli’s plan may help stave off a California-like wave of bankruptcies in New York. But, as many local officials have said, the path to financial health in many areas of the state, particularly in distressed upstate regions, must include pension and benefit reform.

Without a radical reform of benefits, Mr. DiNapoli’s early-warning system will sound like a broken car alarm. A Red-Ink Warning System