Amendments to California Chapter 9 Bill

As I previously noted, the California Senate is considering a bill that would limit the right of municipalities to file for bankruptcy protection. The primary movers behind the bill are public employee unions, who were none too happy with the result of the Vallejo bankruptcy case. The bill originally provided that cities had to get approval from a commission to file a bankruptcy and the commission had the power to limit or condition the ability to file Chapter 9, including potentially, a requirement that the union contracts not be rewritten. The appointees to the commission would almost unanimously have been labor-friendly, so Chapter 9 as a negotiating tool would have been gone. The bill, however, has now been amended to allow municipalities to override the commission’s decision. This sounds to me, a lot like a credit counseling requirement for cities. Punch your ticket before you file. Once you have your decision from the commission, you can overrule it and file the case. The only benefit to anyone would be the increased fees to attorneys representing the municipality at the commission hearing and any party who is collecting on a judgment and would be helped by the delay.

And, in an interesting twist, the Local Government Committee Chairman (Dave Cox, who voted against the bill in committee) asked to have the bill sent back to committee to consider these amendments.