Posted by
Katy Grimes on Tuesday, May 12, 2009 4:30:59 PM
Sacramento City and County governments desperately need to get out from under the union contracts that are killing them. Is the only way at this point - since none of our elected officials will ever attempt to negotiate with unions - Chapter 9 bankruptcy? Will we see candidates run on Bankruptcy paltforms in the future? Should they?
In 1994, Orange County became the largest American municipality to file for Bankruptcy.
The financial difficulties leading to the bankruptcy were the direct result of an enormous gamble with public funds taken by a county treasurer who was seriously under-qualified to deal in the kinds of investments he chose (PPIC). When Government Fails: The Orange County Bankruptcy
As expected, the Unions contested Vallejo's bankruptcy filing. The unions are challenging a number of aspects to the Vallejo petition. First, they claim that Vallejo is not actually insolvent within the meaning of the Bankruptcy Code, contending it has plenty of cash and the ability to strengthen the General Fund’s cash position and that it could significantly reduce expenditures to more accurately reflect its financial difficulties.
Second, they are contending that Vallejo’s petition is not based on the desire to effect a plan of adjustment. Next, they content that Vallejo did not satisfy the statutory requirements for negotiation with creditors prior to filing for bankruptcy. Finally, they contend that Vallejo’s petition is not filed in good faith. The Court will have to satisfy itself that the evidence demonstrates these requirements were met.
In the end, Vallejo's bankruptcy filing was approved by the Bankruptcy Court.
Is Sacramento City and/or County heading for bankruptcy? Staggering statistics show State and local public employees comprise approximately 12 percent of the U.S. workforce and have an estimated $800 billion or more of unfunded pension liabilities (not counting other post-employment benefits). By comparison, employees in the private or corporate sector make up about 78 percent of the U.S. workforce with an estimated $450 billion of unfunded liabilities.
California unions have responded to the City of Vallejo’s bankruptcy filing with the introduction of AB 155 (Mendoza). Under AB 155, a municipality would have to obtain approval from the California Debt and Investment Advisory Commission before filing for bankruptcy. The commission consists of the state treasurer, the Governor or the Director of Finance, the State Controller, two local government finance officials, two Assembly Members, and two Senators. AB 155 is supported by a number of unions, including the California Professional Firefighters and CDF Firefighters Local 2881, both of whom are co-sponsoring the bill. The California Association of Counties and the League of Cities are leading the opposition.
Obviously, the unions are worried that more municipalities will follow Vallejo into bankruptcy in an effort to void labor contracts. AB 155 goes a long way towards preventing that. By requiring approval by the California Debt and Investment Advisory Commission, unions hope to prevent municipalities from filing for bankruptcy altogether or at least delay the process long enough to give them more leverage. (From the California PERB Blog)
http://caperb.blogspot.com/2009/04/ab-155-unions-respond-to-vallejos.html
California as a state, is in crisis. The unions are calling the shots and now trying to prevent other California cities from filing for bankruptcy.