Municipal Bankruptcy Bill Returns To California
According to a recent editorial, a special-interest bankruptcy bill thought to have expired last year, is back, thanks to Democratic Senator DeSaulnier of Concord.
According to the bill, AB 155, cities and counties applying for federal bankruptcy protection would have to first seek the approval of the California Debt and Investment Advisement Committee. The bill would seriously limit the autonomy of local governments to decide in the public interest during difficult economic times.
Under federal bankruptcy law, local governments are permitted to rewrite the contracts of public employees in order to save money when public funds plunge desperately low.
It is evident that no city or county wants to declare bankruptcy, but local leaders appreciate the option as a valuable tool when expenses skyrocket.
Predictably, unions representing public employees do not want cities and counties to have this authority. It is for this reason that they support this bill, and the Senator keeping it alive.
After AB 155 got stuck in a Senate committee, DeSaulnier gutted and amended a similar bill, SB 88 to be an advisory bill in place of AB 155. But SB 88 failed, and the authority of local governments to use bankruptcy protection seemed safe.
But after changes in the Senate, DeSaulnier was able to move AB 155 out of committee and on to appropriations. The Senator envisions a state review of a local government’s bankruptcy decision to simply be an advisory one. To this effect, he will seek compromise language on the bill before it goes to the Senate floor.
To his credit, Senator DeSaulnier has a thoroughly consistent record of supporting government-worker unions, some would say to the financial detriment of state and local government. It is clear that the rescue of AB 155 means the final chapter of union interests vs. local governments’ fiscal autonomy is yet to be written.
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