Municipal Bankruptcy Bill (AB 155) to Undergo Further Review?

While we relayed here that the Senate Appropriations Committee referred AB 155, the bill that would make it more difficult for local governments to declare bankruptcy, to the suspense file, it now appears that Dave Cox, Chairman of the Senate Local Government Committee, is asking that the bill be sent back to his committee in order to review changes implemented on the 20th by the addition of some amendments. You’ll recall that the Local Government Committee approved the bill a month ago, but Cox wants to have the opportunity to possibly make more changes to the bill. In a letter to Senate President Pro Tem Darrell Steinberg, Cox argues that the recent amendments to the bill “raise substantial new policy questions” and should therefore be reviewed by his committee again. The bill was authored by Democratic Assemblyman Tony Mendoza of Artesia and Cox originally voted against it, although it passed in committee. If the measure becomes law, local government entities would be required to receive the approval of the California Debt and Investment Advisory Commission before filing for bankruptcy.

However, many local government groups are opposed to the measure. The State Association of Counties, the League of California Cities, the Regional Council of Rural Counties, and the Urban Counties Caucus are some of the groups who urged a “no” vote. These groups argue that local governments should have control without requiring approval from the California Debt and Investment Advisory Commission. Public employee unions have supported the bill so that there is state oversight of local governments’ bankruptcy petitions, ensuring protection of pensions and benefits. Specifically, the California Labor Federation, California School Employees Association and California State Employees Association all support the bill’s passage.

The amendments added on the 20th will allow local entities to possibly override the commission’s decision. The Appropriations Committee will review the suspense file on Thursday. You can read Cox’s letter here.

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