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Press Enterprise Editorial
Sunday, June 7, 2009
AB 155 asks Californians to believe that the best option for financially struggling local governments is more state interference. The bill would set bad policy, for the wrong reasons, and the Senate should reject it.
The Assembly last week approved AB 155, by Assemblyman Tony Mendoza, D-Artesia. The bill would require cities, counties and special districts to get state approval before filing bankruptcy. Under the bill, the California Debt and Investment Advisory Commission would evaluate municipal bankruptcy applications and rule whether such filings are the appropriate course.
The idea of state government judging the wisdom of local financial decisions provokes first mirth, then dismay. The state's long history of fiscal irresponsibility hardly inspires confidence in its financial expertise.
Granted, the debt advisory panel is not the Legislature, though the governor and four legislators would form a majority of the group. But AB 155 is not about sound fiscal practice anyway, but about public employee unions protecting their interests.
The bill stems from Vallejo's bankruptcy filing in 2008, and is sponsored by firefighters unions. The bankruptcy judge in the Vallejo case ruled that the city could undo the collective bargaining contracts with its labor unions to ease financial burdens. So this bill aims to block public agencies from declaring bankruptcy and thereby dissolving expensive union contracts.
But the idea that local officials would rush to cede control of civic finances to an outside party is ludicrous. Bankruptcy is an unattractive last resort for local governments that have run out of better choices. Nor is it common: Only three jurisdictions in California have ever declared bankruptcy, which hardly suggests a tidal wave sweeping the state's 58 counties, 480 cities and 4,700-plus special districts.
The bill's proponents say the state has a right to intervene, because local bankruptcies could affect the state's credit rating. But Legislature's mishandling of the state budget does far more damage to the state's credit status.
And local governments need flexibility to handle fiscal stresses. Bankruptcy is an emergency measure, and adding another time-consuming step to the process when a city or county faces fiscal disaster would set perverse policy. Besides, walling off the biggest chunk of any local budget -- personnel costs -- in a financial emergency makes no sense.
The Assembly Appropriations Committee also noted that state interference in local bankruptcies could create state liabilities reaching hundreds of millions of dollars. The bill says that the state would not be liable for meddling in local bankruptcies, but whether that absurd notion would hold up in court is uncertain.
AB 155 would impede solutions to local fiscal crises to protect a special interest. Only legislators would see an approach that bankrupt as a reasonable way to prevent financial disasters.
Sunday, June 7, 2009
AB 155 asks Californians to believe that the best option for financially struggling local governments is more state interference. The bill would set bad policy, for the wrong reasons, and the Senate should reject it.
The Assembly last week approved AB 155, by Assemblyman Tony Mendoza, D-Artesia. The bill would require cities, counties and special districts to get state approval before filing bankruptcy. Under the bill, the California Debt and Investment Advisory Commission would evaluate municipal bankruptcy applications and rule whether such filings are the appropriate course.
The idea of state government judging the wisdom of local financial decisions provokes first mirth, then dismay. The state's long history of fiscal irresponsibility hardly inspires confidence in its financial expertise.
Granted, the debt advisory panel is not the Legislature, though the governor and four legislators would form a majority of the group. But AB 155 is not about sound fiscal practice anyway, but about public employee unions protecting their interests.
The bill stems from Vallejo's bankruptcy filing in 2008, and is sponsored by firefighters unions. The bankruptcy judge in the Vallejo case ruled that the city could undo the collective bargaining contracts with its labor unions to ease financial burdens. So this bill aims to block public agencies from declaring bankruptcy and thereby dissolving expensive union contracts.
But the idea that local officials would rush to cede control of civic finances to an outside party is ludicrous. Bankruptcy is an unattractive last resort for local governments that have run out of better choices. Nor is it common: Only three jurisdictions in California have ever declared bankruptcy, which hardly suggests a tidal wave sweeping the state's 58 counties, 480 cities and 4,700-plus special districts.
The bill's proponents say the state has a right to intervene, because local bankruptcies could affect the state's credit rating. But Legislature's mishandling of the state budget does far more damage to the state's credit status.
And local governments need flexibility to handle fiscal stresses. Bankruptcy is an emergency measure, and adding another time-consuming step to the process when a city or county faces fiscal disaster would set perverse policy. Besides, walling off the biggest chunk of any local budget -- personnel costs -- in a financial emergency makes no sense.
The Assembly Appropriations Committee also noted that state interference in local bankruptcies could create state liabilities reaching hundreds of millions of dollars. The bill says that the state would not be liable for meddling in local bankruptcies, but whether that absurd notion would hold up in court is uncertain.
AB 155 would impede solutions to local fiscal crises to protect a special interest. Only legislators would see an approach that bankrupt as a reasonable way to prevent financial disasters.
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