WHEN GOVERNMENT FAILS

paper 0-520-21486-2 A thorough academic study of the biggest government bankruptcy in US history. Baldassare, a scholar at the University of California, Irvine, likens the Orange County crisis to other recent municipal crashes—up to a point. Despite its image as an affluent, lily-white enclave, Orange County fell victim to several problems: increased costs from rapid population growth, including an influx of poor immigrants who were especially heavy users of services; post—Proposition 13 financial constraints which precluded county government from raising taxes commensurate with the voters’ desire for services; and the recession of the early ’90s, which caused the state government to reduce aid to counties. To this familiar mix was added an exceptionally large measure of malfeasance. Attempting to provide more for less, the county treasurer (whose activities received virtually no oversight from other elected officials) pursued a highly risky investment strategy that led to a severe shortfall and, ultimately, the December 1994 bankruptcy filing. A special election to raise the sales tax resulted in a ringing (and predictable) defeat. County leaders then developed a plan that depended on drastically cutting services, especially for the poor. Although the bankruptcy officially ended within a year, the ultimate resolution depends on speculative litigation against a number of financial institutions with which the treasurer did business, and Orange County’s credit may be diminished for years to come. Since politicians in suburban counties across the country are under similar pressures to raise revenues without raising taxes, the Orange County scenario could recur, and Baldassare devotes his closing chapters to a discussion of lessons learned and recommendations for policy changes. Although Baldassare writes clearly, he makes no concessions to the general reader; surely the fact that the treasurer took financial advice from psychics deserves more than passing mention. But the book is directed at “policy makers and scholars,” for whom it should be illuminating. Sober and sobering. (86 tables, one map, one line figure)