What If California Could File Bankruptcy?

David S. White
Principal of the Law Firm of David S. White & Associates, West Los Angeles, specializing in litigation, arbitration and mediation of real-estate-related disputes and litigation since 1977; www.dswlawyers.com

Just think: if California could seek the protection of the Bankruptcy Court, let’s assume that states can actually do this for a moment, a Bankruptcy Judge could then oversee the knawing, energy-sapping, Gordian Knot of a $42Billion deficit, crushing contractual and pension obligations, and the imminent lack of financing opportunities facing this state as our credit rating plummets. What could a Bankruptcy Judge do that our Legislature and Governor cannot?

For one thing, if California could file a Petition in Bankruptcy under Chapter 9, Title 11 of the United States Code, a chapter of the United States Bankruptcy Code available only to “municipalities,” it might rescue our state from financial oblivion when we have simply run out of options to restructure our debts. That is the essence of why our federal Constitution provides for Bankruptcy as a remedy in the first place – to give the Debtor another chance.

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Odds & Ends – January 19, 2009

Chandra Sharma
Political Communications, Redistricting and New Media Strategist

Some odds and ends from the past week:

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Civil War

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Is California in a “civil war”? In his state of the state speech, the governor said, “I think you would agree that in recent years California’s legislature has been engaged in civil war.”

Have the two sides gone to war over their ideologies? Dictionary.com defines “civil war” as a war between political factions or regions within the same country. How can you not argue that we are witnessing a war between political factions, as long as we define war in this instance as intractable rhetorical battles sans bloodshed?

Yet, the term troubles me. It conjures up images of America’s Civil War and the battlefields I have visited where blood soaked the ground and seeped into America’s soul. Differences were settled not by diplomacy but by battle. Perhaps, with the issue of slavery that was inevitable.

But, is war necessary over budget issues? Diplomacy has been found wanting in the budget debate, as well. It has been tried. There have been countless meetings over the three special sessions called by the governor to settle the budget crisis. No “negotiated” settlement has come about as yet.

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The ‘I Got Nothing’ Speech

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

Watching Gov. Schwarzenegger brief state-of-the-state speech Thursday morning, only one question came to mind. (The speech wasn’t long enough for more than one). Why did he bother making the speech at all?

Perhaps it was merely tradition. But tradition had been blown when the speech was scheduled for a morning in mid-January. It’s usually early evening a week earlier. The timing alone – during the workday, at a moment when those who follow government and politics are focused on President-Elect Obama and his incoming administration –offers plenty of evidence that the governor didn’t want much public attention on what he had to say.

And perhaps it was out of some sense of constitutional duty, though a state of the state speech is not a constitutional requirement. Article V, Sec. 3 of the California constitution says only: “The Governor shall report to the Legislature each calendar year on the condition of the State and may make recommendations.” There’s nothing there about a speech. By my reading of the constitution, Schwarzenegger could have sent Tom Arnold over to the Assembly with a bugle, take-out from Frank Fat’s, and suggestions for preventing a Screen Actors Guild walkout. A state of the state message like that would have been entertaining, at least — and it might have even qualified as economic stimulus.

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Kudos to Benoit, Feurer and Adams!

Tom Scott
CA Executive Director, National Federation of Independent Business

These three legislators and a whole host of co-authors have truly started off the new year on the right footing by trying to restore common sense through the Good Samaritan Act.

It seems that once again our California Supreme Court has gotten it wrong in its recent majority opinion stating that the good samaritan law should only apply to emergency medical care providers.  The opinion is based on a Los Angeles case involving a “friend” who pulled another friend out of a crashed car that she thought might catch fire.  The friend filed a suit claiming the other’s actions were negligent and rendered her a paraplegic.  The court should have also ruled on the definition of a friend.

It is great to see a bi-partisan group of legislators step up to the plate and make the law right.  One can only hope that this bi-partisan gesture can bear fruit and that the personal injury lawyers do not try to de-rail this reform.  I am sure they are too busy looking for larger streams of revenue.

Congrats to these legislators for starting 2009 off right.  This kind of bi-paritsan gesture is a great example of how to make the system work for all of us.

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An Urgent Need for Legislative Reform

Michael D. Antonovich
Los Angeles County Supervisor

The crisis our state faces in Sacramento highlights the need for structural reform. That includes a 2-year budget, a part-time legislature, an end to legislation that costs more to pass than the recipient receives – as well as an end to term limits.

A two-year budget provides local government a consistent funding stream for it to prepare its own financial agenda for public safety, schools, libraries and parks.

In addition, a part-time legislature would enable citizen lawmakers to bring valuable professional experience to the legislative process. Term limits have created instability to the process and an inexperienced legislature that is unable to govern effectively.

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Excerpts from Governor Schwarzenegger’s State of the State Address

Arnold Schwarzenegger
Former Governor of the State of California

I will not give the traditional State of the State address today, because the reality is that our state is incapacitated until we resolve the budget crisis. The truth is that California is in a state of emergency. Addressing this emergency is the first and greatest thing we must do for the people. The 42 billion dollar deficit is a rock upon our chest and we cannot breathe until we get it off.

It doesn’t make any sense to talk about education, infrastructure, water, health care reform and all these things when we have this huge budget deficit. I will talk about my vision for all of these things… and more… as soon as we get the budget done.

The legislature is currently in the midst of serious and good faith negotiations to resolve the crisis, negotiations that are being conducted in the knowledge we have no alternative but to find agreement.

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The Anti-Stimulus

Loren Kaye
President of the California Foundation for Commerce and Education

The state budget abyss draws closer, and the first victims – surprisingly – are not public employees or school children or poor people, but instead are working men and women, many with union cards.

State construction projects are grinding to a halt, triggered by a decision last month by a crucial state finance agency to halt working capital for state-financed projects. This has led to a cascading effect on state construction projects, placing at risk more than 5,700 projects valued at $22.5 billion.

·        Some 203 transportation projects valued at $1.8 billion are in danger of being suspended. "That has never been done in the history of the state, certainly not in the transportation program," Will Kempton, director of the California Department of Transportation, said Monday.

·        The nation’s largest higher education system – California State University – has shut down  all state-funded design and construction projects on all campuses, affecting libraries, classrooms, laboratories, and seismic upgrades.

·        Schools, flood control and water projects have also been halted.

According to the Department of Finance, stopping these projects "will result in closure costs and penalties that could be hundreds of millions of dollars."

Hundreds of large and small businesses – and thousands of workers – are collateral damage, even as politicians from Washington, DC, to Sacramento are touting the value of new public works construction to prime the pump of economic recovery.

But it gets even worse.

Not only are current projects shuttered because of the budget debacle, magnified by the international credit crunch, but California may well lose its opportunity to land our fair share of federal infrastructure funds from President Obama’s economic recovery package.

The new package being considered by Congress would provide states with billions of dollars in new transportation and public infrastructure funding, but may condition that financing on having those projects "shovel-ready" within a relatively short period of time. Unfortunately for California, the construction projects with the most jobs and economic benefits are potentially those most at risk for environmental challenge, which is why the Governor is asking for limited relief  from state and federal environmental regulation.

According to the Governor, the relief he is seeking would require all relevant permits to be obtained to protect natural resources and human health and implement all mitigation measures required by state and federal regulatory agencies. They must also conform with air quality planning as well as Americans with Disabilities Act and storm water runoff design requirements.

In response, Legislative Democrats have proposed a "green economic stimulus" package  that amounts to a statement of infrastructure priorities, but assumes the existing environmental review and project delivery mechanisms are adequate. On the other hand, since their priorities do not include any short-term infrastructure investments, project delivery schedules would be the least of their concerns.  Key Democratic infrastructure priorities include:

·        $200 million for "expenditures in integrated regional water management plans."

·        $800 million for mass transit projects.

·        $700 million for local road maintenance (consistent with the Governor’s proposal).

·        $50 million for "multi-benefit projects that reduce conflicts between flood conveyance facilities and transportation infrastructure."

·        $200 million for state and local park maintenance and rehabilitation.

·        $65 million for "habitat restoration and enhancement."

·        $10 million for "community tree planting projects."

None of the money in the Democrats’ economic stimulus package is geared toward highway, water development, higher education or public safety projects.

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Card check effort a serious threat to free enterprise

John Kabateck
NFIB State Director in California

Imagine if last November when you walked into your voting booth, the curtain was open and people were watching you vote. Now visualize these spectators are telling you how to vote.

Is that wrong? If you think so, then you would agree that attempts by organized labor to take away an employee’s long-standing right to privacy when voting on the critical issue of whether or not to be represented by an organized labor group.

In 2007, the House of Representatives passed H.R. 800, the sadistically-named “Employee Free Choice Act.” It should really be called the “Employee NO Choice Act,” because it rips away the curtain or privacy and may result in employees being forced to accept a government-negotiated wage and benefit contract.

Organizing by card check would be a radical change in union organizing. It initiates the union drive from outside the business, not by the employees themselves, and means that small business owners would be uninformed about organizing drives.

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Who Needs Representative Democracy Anyway?

John R. McLaurin
President of the Pacific Merchant Shipping Association

To put it politely, Sacramento is dysfunctional. It is something that everyone agrees upon. For over a decade the State has enacted budgets that didn’t make any sense. But since we are a State that is governed by media events as opposed to policy, everyone declared victory. This self induced euphoria usually faded by late summer. And now, with a worldwide recession in full force, the penalty for avoiding their responsibilities as elected officials is coming due – and our elected leaders are paralyzed, impotent and afraid to act (some would say govern).

So how do we change things?

Lots of ideas have been thrown out for discussion recently. Some folks want to eliminate our bicameral system of government and narrow it down to a unicameral system. I would argue that despite having two legislative houses, the operational and political reality is that we already have a unicameral system – but unlike a unicameral system it just takes a bit longer for bills to move through our current system. Given the gracious and courteous practice of not killing bad bills (or any bills for that matter unless you are a Republican), we have in effect a unicameral system in place today. Why mess with perfection?

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