Economy

Lehman's Collapse Still Costs California

Millions vanished in bankruptcy, hurting schools.

Although Wall Street appears to be recovering nicely from the financial crisis, local governments are still hurting, particularly thanks to the spectacular bankruptcy of Lehman Brothers. San Mateo, California, saw $155 million vanish, compounding the deep state budget cuts it's facing. Teachers have been laid off from public schools, community colleges scrapped classes, commuter rail service was cut, and a women's prison won't be built. Construction spending in the county was reduced by $148 million over two years because of losses on Lehman bonds. Unemployment is double what it was a year and a half ago, up to 9 percent. Other U.S. cities and counties, concentrated mostly in Florida and California, lost $1.7 billion when the company went under, but San Mateo took the worst losses by far. Before the crash in 2008, it was on track to balance its budget within five years.