James Spiotto is a nationally recognized legal expert on insolvency. At an upcoming Brookings Institute conference on municipal finance, he will be delivering a significant new paper, with an appropriately long title: “When Needed Public Pension Reforms Fail or Appear to Be Legally Impossible, What Then? Are Unbalanced Budgets, Deficits and Government Collapse the Only Answer.”
The paper is linked here.
It’s for legal and policy wonks, but it’s important, primarily because it lays out the case for why and how the federal government and federal courts can and should play a role in solving state and local fiscal crises, particularly in Illinois.
Ideas discussed include a special federal bankruptcy court for pensions. That aspect of the paper is also discussed in a Bond Buyer article linked here.
Pre-packaged Chapter 9 municipal bankruptcy is also discussed.
The paper also supports precisely what I wrote in my Crain’s article this month. When basic government services begin to fail, as they are in parts of Illinois, federal courts will recognize a “police power” that trumps other state and federal constitutional limitations.
The paper further contains model guidelines for a constitutional amendment on pension funding where state constitutional and statutory provisions and court rulings appear to prohibit or impair needed pension reform. I haven’t fully thought through those model guidelines and can’t say whether I agree with all of it, but they’re clearly well thought out and conformed to Spiotto’s reading of existing precedent.
This article was updated 7/17/17/ to describe more of what the paper contains.
–Mark Glennon is founder and executive editor of Wirepoints.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
It is of note that Brookings published this work. Detractors cannot plausibly cast Brookings as a conservative institution – it reliably leans left of center in most cases. Notwithstanding, those in the political status quo will likely find a way to dismiss or marginalize this work.
Yes, indeed. There’s much that’s notable about piece. Spiotto is very close to the Civic Federation which, while they do great research, has been very timid and weak on solutions. Note in the piece how Spiotto emphasizes the impossibility of the math we face. That’s what Civ Fed and so many others have not been candid about. It’s also core to his legal theories that run through the piece. Impossible math dooms core government services, so Congress and Federal courts will be receptive, he thinks. I agree.