In today’s Los Angeles Times, Newt Gingrich and Jeb Bush have double-bylined an argument for a federal law to permit state bankruptcies. From the op-ed:
“The figures for next year’s budgets are staggering. California, which faces a $25.4-billion budget shortfall, will pay $100,000+ pensions to more than 12,000 state and municipal retirees this year. A Stanford study puts the state’s unfunded pension obligations at more than half a trillion dollars. Illinois has a $15-billion budget deficit, prompting its governor and lame-duck Legislature to hike its personal income tax rate by 66%. New York, where 73% of the government workforce is unionized, is staring at a $10-billion deficit.
“…[A]s with municipal bankruptcy, a new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations. In such a reorganization, a state could propose to terminate some, all or none of its government employee union contracts and establish new compensation rates, work rules, etc. The new law could also allow states an opportunity to reform their bloated, broken and underfunded pension systems for current and future workers. The lucrative pay and benefits packages that government employee unions have received from obliging politicians over the years are perhaps the most significant hurdles for many states trying to restore fiscal health.
“…[T]he new law should provide for triggering mechanisms to initiate the bankruptcy process that respect the sovereignty of the people of a state. A state legislature acting by a majority vote, with the governor, would fit this test. The new federal bankruptcy law should also allow those states that provide for the right of initiative, like California, to put the question to voters whether they support a reorganization of their state government under the U.S. Bankruptcy Code.”
A popular vote on whether to send a state into bankruptcy? Think of the TV ads.
- By Jim Galloway, Political Insider