"When the economic crisis deepened this fall, [Vallejo] already was losing scores of police and firefighters because it could no longer afford the rich salaries and benefits it offered after the Sept. 11, 2001, attacks. Now, with crime on the rise and tax revenue sinking, this San Francsico Bay area city faces more cuts in police and fire department budgets. ... Three years ago, the city agreed to a 20% pay increase between 2007 and 2009; an average police officer now makes $121,000. When benefits are included, the number rises to more than $190,000. By 2007, 80% of Vallejo's budget was dedicated to police and firefighters. ... 'We did a bad job of long-term forecasting,' said Craig Whittom, Vallejo's assistant city manager. 'We made agreements that were beyond our means'," Bobby White at the WSJ, 31 October 2008.
Something has to give in California. My bet: its muni bonds. See my 7 August 2008 post, http://skepticaltexascpa.blogspot.com/2008/08/prison-health-care.html.