California’s Ongoing Efforts to Limit Municipal Bankruptcies

California’s Ongoing Efforts to Limit Municipal Bankruptcies

Since late January, California’s state assembly has considered legislation designed to impose additional hurdles on cities, services districts, and other California municipalities that need to rehabilitate themselves under Chapter 9.

Supporters of California Assembly Bill 155 (AB 155) – which requires California municipalities to to receive filing approval from a state panel prior to commencing a Chapter 9 proceeding – argue that the bill will preserve the credit-ratings of local municipalities and protect local taxpayers.  Opponents of the bill argue that it is merely an “end run” by public employees’ unions around a process that permits municipalities to reject union contracts and rehabilitate themselves.  Some additional background, and a copy of the bill as introduced, is available on an earlier post on this blog.

On June 3, AB 155 took a step toward passage when it cleared the California State Assembly by a vote of 43-16, with no Republican support.  A copy of the bill, as amended, is available here.  Governor Schwarzenegger has reportedly not taken a position on the bill, according to an article in Thursday’s Sacramento Bee.

The bill now goes to the California State Senate.

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