Today, the Senate Local Government Committee  approved the August 20 version of AB 155 by Assembly Member Tony Mendoza on a 3-1 vote.  This bill now requires that local agencies wishing to seek Chapter 9 bankruptcy protection either receive approval from the California Debt and Investment Advisory Commission (CDIAC) or seek a review of its financial position from the State Auditor.  Either way, local agencies would face delays prior to entering federal court.  As a result, CSAC is maintaining its “oppose” position.

The committee discussion focused on the new option to request a financial review by the State Auditor.  Senator Mark DeSaulnier, a member of the Committee, worked with Senator Lois Wolk and the measure’s proponents to provide this alternative as a less onerous option for local governments.  The goal was to ensure that all parties interested in a local agency’s decision to seek bankruptcy protection could have confidence that “the numbers were right.”  Senators DeSaulnier and Wolk believe that the State Auditor can provide an independent analysis that can serve to alleviate disputes about the local agency’s finances and need for Chapter 9 protections. 

While we are appreciative of the Senators’ efforts, a number of local agencies, CSAC, the League of California Cities, and our local government partners, continue to have strong concerns about the practical effects of such pre-filing activities, as delays could place local agencies in an untenable position, potentially in default or closing their doors.  These consequences could be devastating to local communities and Californians that rely on local government programs and services.

AB 155 will likely be heard by the Senate Appropriations Committee in the next few days, then moves to the Senate and Assembly Floors before heading to the Governor’s desk.  If you haven’t weighed in, please consider communicating your concerns to your legislative delegation and the Governor.