Local governments are coming out in full swing against a bill that would make it more difficult for them to declare bankruptcy. After being in stalemate, the bill emerged from the Senate Local Government Committee this week and while it is highly controversial, it is being backed by public employee unions. If the bill passes, before filing for bankruptcy, a local government would need to get the permission of the California Debt and Investment Advisory Commission. This commission is populated with Democratic officials who have strong union ties. Capital Alert reports that debate surrounding the bill can be summarized as follows:
It is not certain that Gov. Schwarzenegger will sign the bill if it comes to his desk. The bill came into focus in light of the city of Vallejo filing for bankruptcy and other cities across the state are facing financial difficulties. Read more here.
“Local government groups oppose the measure, contending that it creates a mechanism for their unions to extract conditions, such as a pledge not to abrogate labor contracts, in any bankruptcy action. But proponents say that it's needed to prevent local governments from shunning their responsibilities via the bankruptcy court and damaging the state's already low credit rating.”