AB 155, by Assembly Member Tony Mendoza, is set to be heard in the Senate Local Government Committee on Wednesday, April 21.  Remember that this bill requires that local governments seeking Chapter 9 bankruptcy in federal court to first receive permission from the California Debt and Investment Advisory Commission (CDIAC).

Currently, CDIAC is tasked with providing information and assistance to local governments regarding debt issuance and public fund investments. 

Any local agency seeking bankruptcy protection does so because it cannot manage its financial obligations and maintain services to its citizens.  At its foundation, AB 155 undermines the principal benefits of federal bankruptcy protection: the automatic stay of financial obligations and time to allow a debtor some “breathing space” to formulate a debt readjustment plan.  Counties assert that AB 155 may in fact lead local agencies to default, precisely the result that bankruptcy protection seeks to avoid.

CSAC, the Regional Council of Rural Counties, the Urban Counties Caucus, the League of California Cities, and the California Special Districts Association, along with a number of individual local agencies, are working hard to secure “no” votes on AB 155.  (Frankly, we would be just as happy with “not voting” votes at this point.)  However, given the change in membership on the Senate Local Government Committee, it appears that AB 155 will move to the Governor.

So, we are asking for your help.  Contact your Senator.  Call or e-mail the Governor.  Let them know that AB 155 is an unwise, unwarranted intrusion into local affairs.  Make sure that they understand that when the state precludes local agencies from working out their financial problems, the state will be left holding the bag. 

It bears repeating:  AB 155 would require a local government to ask permission from CDIAC prior to seeking bankruptcy protection.  For local agencies in serious fiscal crisis, it almost sounds like the punchline of a bad joke. 

We understand that “bankruptcy” is a dirty word, particularly in this fiscal environment, but the consequences of keeping quiet on this bill are considerable.  Stand up.  Start hollering.  Loudly, please.