Another California City to File for Bankruptcy – What Will This Mean for Unions?

San Bernardino will become the third California city to file for bankruptcy in less than a month. City officials say it won’t be able to make its August 15 payroll. Judge Andrew Napolitano weighed in on what this will mean for the city and its residents. He told Neil Cavuto on Your World that the filing is presented to a federal bankruptcy judge, who will then look at the obligations and the assets in order to decide what is fair.

He predicted that a judge will likely void the union contracts, and said, “[Judges] have extraordinary authority. They can reform and modify a long term collective bargaining agreement. Just as they could reform or modify the contract with the guy who cuts the grass in front of city hall, they could reform or modify a contract for hundreds of police or thousands of teachers.”

Cauvto asked whether bankruptcy could then be one way for the city to dodge union contracts?

Judge Napolitano answered, “That’s why the federal judge has to make sure it’s a genuine bankruptcy – that their assets are so low, their income so reduced and their obligations so great, that they can justify seeking protection from their creditors.”

Judge Napolitano said that whether the city’s economic woes are due to an overly generous union agreement or just reduced tax revenue, “it’s in the hands of a single federal judge to resolve. And though there is an appeal, these are decisions that are rarely overturned on appeal. Those union members will be stuck with the decision this federal judge makes.”

To keep the city running efficiently by opening schools after Labor Day, keeping police in the streets, and paying for electricity and water, “some people will get burned,” warned Judge Napolitano.