Proposed Law Would Allow Municipal Bankruptcy in IL

Mar 23, 2015

An Illinois Republican has proposed changing state law to let cities and towns declare bankruptcy.

Credit Illinois Public Radio

As state government considers cutting back the money it shares with municipalities, State Rep. Ron Sandack says it ought to give cities more tools to fix their own finances. Sandack says letting cities threaten bankruptcy would give them more leverage in dealing with unions: “The public pension situations, with their police and fire — there’s not a real level playing field in those negotiations."

Sandack says even in bankruptcy, cities would still have to negotiate contract changes, like happened in Detroit But Pat Devaney, president of the Associated Fire Fighters of Illinois, says police and fire pensions are no more costly than those of other city workers:  “So while it’s convenient to blame police and fire for all of the financial woes of our communities, unfortunately it’s not grounded in fact."

Unlike a business that declares bankruptcy, cities would not be subject to liquidation. Rather, they could “adjust" their financial obligations including with unions.  About half the states in America allow municipal bankruptcies.

The bill is HB298