Union-sponsored legislation that would make it nearly impossible for localities to declare bankruptcy is advancing in the California Legislature. Manhattan Institute's E.J. McMahon has made a compelling case against state bankruptcy, but it's disturbing to think about the possibilities if localities are effectively banned from getting out from under these cushy union contracts that are driving them to the fiscal brink. Granted, Vallejo's experience has been less than ideal. That Bay Area city went bankrupt and yet the council's workout plan doesn't touch existing pensions, but Orange County emerged from municipal bankruptcy in 1994 stronger than ever even after voters rejected a tax increase.
The unions basically want there to be no options short of raising taxes to pay for the unsustainable level of pay and benefits granted to their members over the past decade. The anti-bankruptcy bill, now headed to the state Senate, would require that municipal bankruptcies first be approved by a state panel designed to be dominated by officials who would almost certainly be opposed to every bankruptcy.
If it passes and is signed by the governor (very likely), it will lead more quickly to the showdown Democratic leaders want. They say that there are no other choices but to raise taxes to pay for the state's obligations or to reduce services. They don't want reform, they oppose contracting out services, they don't even want to trim benefit levels for new hires. It's getting harder to see how the state will emerge from the current mess.