Spoke to Conor Daugherty, WSJ, re the beginning of the struggle between the municipalities and the state and local government unions. The lifetime benefits are at the center of the debate. The taxpayers of Los Angeles and California no longer choose to sustain the rising costs of the pensions and the healthcare provisions for the government workforce. This will be a long tussle. The taxpayers have the vote. A contract is only as good as the vote says it is. SEIU and AFSCME will resist. The UAW resisted, too.
Brief
Resistance
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i think but could be wrong:
california, new york, new jersey and michigan along with many of their "municipalities" are insolvent.
chapter 9 of the bankruptcy code covers "municipalities" which the statute defines broadly to include "political subdivision or public agency or instrumentality of a State." 11 U.S.C. § 101(40).
we may have multiple chances to learn whether states themselves are covered.
labor contracts can be rejected (voided) by the debtor (the municipality) as part of the plan of reorganization and replaced but the creditors (including the unions) get a right to vote on the plan confirmation. this was the main reason bho and the boys raped the bondholders in gm and chrysler. (side bar with a manager of a distressed fund recently - "avoid all reorg plays in heavily unionized industries")
the treatment of existing pension obligations is technical and beyond my ken (funded, unfunded, pbgc technical), but promises about continuing the accrual of benefits can be stopped i believe.
the real comedy will arise during expert testimony when witnesses try to convince the judge that the new plan is "feasible" that it it will not land the municipality back in bankruptcy. in other words the judge must be convinced to some standard of reasonableness that the entity will not become insolvent again in the foreseeable future. lots of luck.
the court can not order taxpayers to pay up. the normal rules for setting taxes and making such decisions still function.
do the nancy - just say no.
oops
nancy reagan not nancy pelosi
The day of reckoning has arrived for many of the lower 48. It's no longer possible to kick the can down the road. Hard choices must be made. Nobody is too big to fail when there can be no winners. JB asked rhetorically in one of his segments if there's a limit to how much the government can tax. There certainly is. Once this limit is breached, we become slaves to the state.
That point has been reached and surpassed. It no longer pays to work - even at gunpoint. It's ironic that it's a black president who would be charged with the task of delivering us to the plantation. Where are all those shovel-ready jobs that would build our version of the Underground Railroad - that bridge to nowhere – in Alaska? Was it?
http://peterkoelliker.blogspot.com/
http://didyouweekend.com
There will be blood, many civil servants have skills that are not easily transferable to the private sector. A School Cafeteria worker make many times more than a cafeteria worker in the private sector. Expect European and Greek-style Riots and Strikes.
States and cities are losing their credit status and have underfunded their pension plans. They can no longer issue debt to overspend as they have in the past. School districts cannot raise taxes as usual, property values and wages are a bit depressed.