Fixing a Broken System

By Alberto Torrico

On June 3, the state Assembly acted to protect police officers from those who would scapegoat public safety employees for the financial woes faced by cities and counties statewide.

The Assembly passed Assemblymember Tony Mendoza’s AB 155 by a 47-25 vote. I am the principal co-author of this bill, which would stop union foes and their attorneys from wielding the threat of bankruptcy – or an actual bankruptcy declaration itself – as a hammer to break hard-won labor contracts.

Vallejo’s bankruptcy filing last year set off a chain reaction that will see no winners, except perhaps a number of high-priced attorneys. Our recession left Vallejo with sagging sales and property tax revenues. But the city’s problems were compounded by years of financial mismanagement and an anemic economic development plan.

Vallejo’s firefighters and police officers did what you would expect dedicated employees to do: they conceded benefits and salaries in an attempt to ease the city away from the financial brink.

But rather than work with the unions and accept their concessions, Vallejo’s city council, in the words of the local paper, “seemed hell-bent on finding some way – any way” – to break the contracts. Unfortunately, leaders are risking the city’s fiscal stability with their pre-ordained conclusion that bankruptcy is the sole answer to this crisis.

Now other cities may be tempted to use the threat of bankruptcies as a quick way to gain savings without dealing effectively with their own budget shortages.

This is why I support AB 155. It’s a reasonable, measured response to what’s happening in Vallejo and what may occur elsewhere. It says a local public entity may only file under federal bankruptcy law with the approval of the California Debt and Investment Advisory Commission.

The goal is to allow an independent set of financial experts to explore all options to avoid bankruptcy. While bankruptcy could provide short-term relief, the long-term negative effects will harm both cities and the state. Interest rates will increase, hurting taxpayers and the services they demand. The effects on Vallejo provide just one example. Employees are leaving, morale is low and the community is badly divided.

AB 155 will prohibit cities from filing for bankruptcy without first working with the CDIAC to research all alternatives. It ensures bankruptcy will only be used as an absolute last resort. Twenty-two states don’t even allow bankruptcy as an option. This bill will put California on a middle course with the 16 other states who allow bankruptcies but only after a thorough review with state oversight.

Our public safety employees, and the people who rely on them, will benefit from this smart public policy.

Alberto Torrico is the Majority Leader of the California State Assembly.