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  • Morning Bell: The Municipal Government Bankruptcy Enhancement Act

    Yesterday the Senate voted to end debate on a bill that requires police officers, firefighters and other first responders across the nation to submit to collectively bargaining. Before the Senate votes on final passage of the bill later this week, lawmakers really ought to take a very close look at a city council vote in the sleepy California town of Vallejo last week.

    The Vallejo City Council voted May 6 to become the largest city to ever declare bankruptcy in California. The cause of Vallejo’s demise? Contracts with fire and police unions account for 74% of the city’s $80 million budget. Why did the city sign such ridiculous contracts? Because public sector unions are a controlling force in the Democratic Party and Democrats dominate Vallejo’s government.  So when it came time for the city to negotiate salaries with its unions, the Democrats were represented and the unions were represented, but the city’s taxpayers were not.

    But don’t think for a second that this problem is confined to California. Bondbuyer.com reports: “The U.S. will probably see more municipal bankruptcies in the years ahead as local governments deal with the mountains of pension and retiree benefits they’ve promised but never funded.”

    The Weekly Standard’s Stephen Moore documented many of these nationwide unfunded liabilities earlier this year, including: One of every three Los Angeles County school system dollars goes to teacher requirement costs; the 10 largest Chicago-area cities face a combined $18.7 billion in unfunded pension liabilities; Philadelphia was forced to issue a $4.5 billion bond to cover unfunded pension liabilities for 33,000 retirees.

    Liberals in Congress defend their new bill for police officers, firefighters and other first responders by pointing to language that forbids public safety unions from striking. But as the Wall Street Journal notes, similar strike bans in state laws never work: “Union officials call strikes anyway, then negotiate amnesty as a condition of ending the work-stoppage. This is what happened in 2005 when New York transit workers broke the law by going on strike and shutting down the city. They paid no price and still got their raise.”

    Heritage analyst James Sherk explains what we will have to cope with if this legislation passes:

    A union’s monopoly over bargaining makes it a cartel that prevents employers from hiring workers who would do the same job for less than union wages. … Without providing financing for the mandate, the act will force these governments to either cut services or raise taxes.

    Or as Vallejo shows, they could also just declare bankruptcy.

    Quick Hits:

    • Thanks to liberals in Congress, starting next year all cargo on passenger planes must be screened — a requirement that “could have far-reaching effects” on international commerce.
    • Wal-Mart, the world’s largest toy seller, voluntarily raised its child product safety standards above existing government requirements.
    • Senate and House Democrats reached a budget agreement Tuesday calling for, surprise, more federal spending than requested by President Bush.
    • Defense Secretary Robert M. Gates, speaking at a Heritage-sponsored conference, implored the U.S. military to prepare for fighting future wars against insurgents and militias such as those in Iraq and Afghanistan, rather than spending so much time and money preparing for conventional conflicts.
    • A private South African company is fighting poverty throughout the world with innovative mobile solutions that bring basic financial services to the poor.
    Posted in Ongoing Priorities [slideshow_deploy]

    2 Responses to Morning Bell: The Municipal Government Bankruptcy Enhancement Act

    1. Pingback: Why One City Had To Declare Bankruptcy « Look Around HR

    2. Robert Denver says:

      The problem isn't the unions it is the corrupt management and politicians. Check there bank accounts and then put a help wanted add in the paper, I will bet you can fill there jobs for far less than what they are making.

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