State Law Would Prohibit L.A. From Going Bankrupt

The city of Los Angeles flirted with bankruptcy this spring as the City Council looked for ways to deal with hundreds of millions in red ink. As its costs, including pensions, continue to outpace its income, bankruptcy seems to be a perennial option in this sour economy.

But a law passed by the state legislature will essentially prohibit cities like Los Angeles from taking this easy way out, according to CNN. Under the law (PDF), which is headed to Gov. Arnold Schwarzenegger for his signature, cities could only file for Chapter 9 bankruptcy with the approval of the California Debt Investment Advisory Commission.

Ironically, the bill seeks to protect the very pensions and retirement benefits that would be the source of a sinking L.A. City Hall. If a municipality like Los Angeles filed for bankruptcy protection, it could theoretically renegotiate union contracts or even walk away from them.

"California's taxpayers who rely on public safety, senior, park and library services, as well as those who own and operate businesses in our communities, deserve every effort that state and local government can make to avoid the long-term devastation of bankruptcy," the bill states.

It was introduced in the assembly by Artesia Democrat Tony Mendoza and was supported last year by Assemblyman Paul Krekorian, who is now a member of the ... Los Angeles City Council.

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