Would allowing states to declare bankruptcy help California?
California is not the only state facing fiscal catastrophe. Other states are teetering on the edge as well. Michael Barone looks a the states in “such bad fiscal shape” and find they are in “the parts of America where the public employee unions have been calling the shots, insisting on expanded payrolls, ever higher pay, hugely generous fringe benefits and utterly unsustainable pension promises.” Given the might of these unions, Democratic politicians (and some Republicans as well) have feared taking them on, lest they lose their support when election time comes ’round.
If Congress would enact a law allowing states to declare bankruptcy as University of Pennsylvania law professor David Skeel, a graduate of the nation’s most collegial top law school, suggests in an article in the Weekly Standard, Barone believes that would give state governments a bargaining chip in negotiations with the now seemingly omnipotent unions:
The threat of bankruptcy would put a powerful weapon in the hands of governors and legislatures: They can tell their unions that they have to accept cuts now or face a much more dire fate in bankruptcy court.
It’s not clear that governors like California’s Jerry Brown, who first authorized public employee unions in the 1970s, or Illinois’ Pat Quinn, will be eager to use such a threat against unions, which have been the Democratic Party’s longtime allies and financiers.
And the answer to that question, whether Democratic governors of states in fiscal crisis, will determine whether or note their jurisdictions will become fiscally solvent.



