You Can Bet The Bankruptcy On It

No matter what Serious Villagers decide the states should do about their massive budget crises (and it's gotten so bad now that the words "state bankruptcy legislation" are being thrown around in the Senate now) there's one thing for sure:  state and local employees have to be made to pay for it.

House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.

Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.

Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers.

“They are readying a massive assault on us,” said Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees. “We’re taking this very seriously.”

Mr. Loveless said he was meeting with potential allies on Capitol Hill, making the point that certain states might indeed have financial problems, but public employees and their benefits were not the cause. The Center on Budget and Policy Priorities released a report on Thursday warning against a tendency to confuse the states’ immediate budget gaps with their long-term structural deficits.

“States have adequate tools and means to meet their obligations,” the report stated. 

The reality is that state employees are not the cause of budget woes, but they are politically the easiest cuts for Republicans to make.  Republicans talk about multi-year pension obligations as if they are the same thing as single-year budget items and equate the cost, saying "Hey, states are on the hook for billions of fat government pensions, we need to eliminate them to cover our budget gaps."  The single year cost of these pensions is of course far lower.

But hey, these guys vote Dem anyway.  Screw them, right?