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Give States a Way to Go Bankrupt

Original post made by dublinmike on Jan 21, 2011

The Weekly Standard advocates that states should be allowed to bankrupt.

I wholeheartedly disagree with allowing States to declare BK. It's bad for the state's ratings and for vendors that do business with the State.

From my 20+ years in lending one thing I have seen, if they declare BK once will that entity do it again? I have seen individuals do it and I bet lunch in Downtown Pleasanton that states will do it again. States must fight their way through this mess.

For more information: Web Link

And: Web Link

Comments (9)

Posted by Stacey, a resident of Amberwood/Wood Meadows
on Jan 21, 2011 at 11:53 am

Stacey is a registered user.

I'm not sure I agree with this idea either.


Posted by Stacey, a resident of Amberwood/Wood Meadows
on Jan 21, 2011 at 11:55 am

Stacey is a registered user.

Politicians treat revenue and spending as divorced from each other. Giving them the option to go bankrupt can invite more weakening of how revenue and spending are treated.


Posted by need something, a resident of Another Pleasanton neighborhood
on Jan 21, 2011 at 1:13 pm

It might be better for all if we modify the state constitution to allow agencies, and the state, to lower employee benefit amounts without agreement from the unions when contracts expire. The main reason states would like the benefit of a bankruptcy is because of the stronghold of the public employee unions. We should do something to address this issue.

While both sides of a contract want to work together, there are times financially when we cannot afford what the other side is asking for and we need the option to address this situation. Another option is to have all benefits agreed to in a contract to be required to have a sunset date of a reasonable amount of time which makes then open for negotiation again.


Posted by mepartypatriot, a resident of Downtown
on Jan 21, 2011 at 1:13 pm

mepartypatriot is a registered user.

I concur that our states not be allowed to file for bankruptcy. Besides damaging the state's credit rating it also sends the wrong message to it's citizens that it is okay to file for bankruptcy. Bad enough they over spend.

I was a bit surprised that the Standard Weekly has the opinion that states should be allowed to go into bankruptcy.


Posted by two cents, a resident of Another Pleasanton neighborhood
on Jan 21, 2011 at 1:30 pm

Many cities and states are bankrupt / nearly bankrupt or about to become a disaster zone if you look at incomings, outgoings and most important liabililties in the future. You can only lay off the teachers, public safety workers so much until there is no one left and you can only raise taxes so much until the taxpayers leave. But the escalating costs keep on coming.

Maybe this is being proposed as a way to manage the bankruptcies to minimize the overall impact.

Or maybe the public sector unions could agree to more realistic terms for the times so we don't have to go there . . .


Posted by agree, a resident of Another Pleasanton neighborhood
on Jan 21, 2011 at 1:50 pm

"Posted by need something
It might be better for all if we modify the state constitution to allow agencies, and the state, to lower employee benefit amounts without agreement from the unions when contracts expire. The main reason states would like the benefit of a bankruptcy is because of the stronghold of the public employee unions. We should do something to address this issue."

Here is a good article that speaks to your point: A FAIR WAY TO RESOLVE PUBLIC PENSION CRISIS

Web Link


Posted by need something, a resident of Another Pleasanton neighborhood
on Jan 21, 2011 at 9:31 pm

Thanks "agree"! That was a great link that hits 100% on what I was thinking. Glad to see there is some movement on that way. I wish the legislature would make this change but my guess is they don't because of the union contributions to campaigns. So we will probably have to wait until the voters can vote on this in an initiative form.

I thought these paragraphs from that link (Web Link) were very good:

"Using CalPERS own statistics, the average state employee who retired last fiscal year received a benefits package worth more than $1.4 million. This bonanza is in stark contrast to the $60,000 the Employee Benefits Research Institute says the average American has available for his or her own retirement. Is it fair to have taxpayers pay for retirement benefits 20 times more valuable than they receive themselves?

To build these very rich benefits over time, state and local government agencies pay between 10-50% of employee salary into pension funds each year. The Bureau of Labor Statistics says the average private sector employer contribution to retirement benefits is 3.6%. Is it fair to have taxpayers pay as much as 10 times more for retirement benefits than they receive at their own job?

Although most pension plans require employees to contribute a portion of the cost of their benefits, many local governments pay that cost too, along with the entire cost of retiree health care benefits. Is it fair to require employees to make half the investment in their retirement?"


Posted by Maja7, a resident of Vintage Hills Elementary School
on Jan 24, 2011 at 8:55 am

What an insane idea, allowing states to declare bankruptcy. Why can't those politicians get it through their thick heads that they can only spend money that they have because of the taxpayers. Maybe scale all services back 5% and put a call out to churches and non-profits to help fill in the money gap and the service gap. They've got to get creative.


Posted by dublinmike, a resident of Dublin
on Jan 25, 2011 at 6:25 pm

dublinmike is a registered user.

Maja7, you and do agree on something! Get a way from the election year rhetoric, and we CAN have some discussion and find out that we have many things in common.

Too bad that you are not likely to read this. Four days since I posted the topic and not many responses. Not even Cholo or Jimf01. As important as this topic is, it does not appeal to the basic emotions that get people riled up.

Cheers.


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