Detroit and Stockton, who decides?

Short post; but, something that has been on my mind. I have read lots of stories about how because Detroit is so bad off, the state is going to take them over. This is quite legal as cities and towns are merely "creatures of the state". They get a state charter to exist. In California, the City of Stockton is seeking bankruptcy in Federal court. This means that the State of California must have consented to the city declaring bankruptcy and is willing to let a federal judge determine how a city in California will be run. Most of the chatter in the media is about whether or not the judge will take public pension funds (that are not city owned) and use them to pay down the city's debt. The bigger question is why the state is not taking over Stockton and managing it, itself. Think about this, can a state declare bankruptcy? If they did, the federal judge could put whoever he wanted in as governor (under the title of financial manager or whatever). I don't believe a state can declare bankruptcy unless it abdicated it's roll as a state.

Now here is the thing. Would you think it was okay if the federal judge took 5% of all the bank accounts in Stockton to pay the city's debts? You would be outraged. Stockton does not have it's own pension plan, it places the employees and city's contributions into the state plan. It is a private bank account, for the employees that is managed partly by the state. It is it's own entity, it is not controlled or owned by the City of Stockton. But, Stockton is owned by the state, all cities are in California.

This is one to watch. Stockton itself is small and meaningless, just like Cyprus. It is the precedent that is being set that tells the tale. In 1975, New York City was looking at declaring bankruptcy, the Teachers Pension Fund lent it $150 million (quite a lot at the time). Today, New York would like to not pay in to the same fund. People here are just arguing over whose bank account gets robbed and that is a shame. It is also a distraction from the biggest issue, the federal government controlling local governments with the permission of the state.