I am writing to clear up some misinformation about my bill AB 506 in the article “Labor asks tough rules for cities to go belly up” (Capitol Weekly, July 14).
The U.S. Bankruptcy Code allows states to set preconditions or prohibit municipalities from filing for bankruptcy protection. A majority of states either do not authorize local government entities to file for bankruptcy or place significant restrictions that are well beyond the requirements of this bill. Indeed, despite this expressed authority, AB 506 would only establish a locally-based alternative dispute resolution process that will help public entities avoid a protracted, expensive, and damaging bankruptcy.
The local parties would choose the mediator not the Debt and Investment Advisory Commission. Power would not be taken away from the locals and given to the state – it remains in the hands of the municipalities and their creditors. The bill also does not contain a pro-union bias – nothing in it precludes negotiations and concessions by labor unions related to collective bargaining agreements. I believe contracts should be negotiated when a municipality is financially distressed and nothing in the proposed statute would prevent modifying contracts. Many labor unions all across the state are making significant concessions in these difficult economic times.
Fortunately, there have been only three municipal bankruptcies, but the collapse of our economy has put several cities in tough financial straits and has raised the threat of bankruptcy. This has implications beyond the local interests of the distressed entity. Other state and local borrowers will end up paying in the financial markets if more bankruptcies occur.
Assemblymember Bob Wieckowski, D-Fremont, 20th Assembly District