Treasurer: Calif. Bankruptcy Not Necessary

SACRAMENTO (CBS13) – State officials are pushing back against a Congressional effort to allow states to file for bankruptcy, saying California can still pay its bills.

Congressional members have been discussing the idea after former House Speaker Newt Gingrich said states would need bankruptcy to renegotiate retirement benefits they can't afford.

California Treasurer Bill Lockyer said the "pension monster boogeyman" is being blown out of proportion for political purposes, and said bankruptcy is not necessary for struggling states.

"They're trying to say, 'Don't come to Washington D.C. for help, declare bankruptcy and undo all those state employee pensions,'" Lockyer said. "It's not needed."

Pension reform advocate Marcia Fritz said the pension problem cannot be underestimated and said reform needs to happen quickly.

"It's truly a crisis. I totally disagree with [Lockyer]," Fritz said, adding that a bankruptcy law "would get some serious negotiations going with the labor unions, where they know that this is an option, and they know that if they push it, it could be used to walk away from the liability."

Fritz warned that bankruptcy should only be used as a last resort, in the event that unions refuse to come to the table like the private sector.

"We've had that with GM, we've had that with United Airlines pilots, where their pensions were reduced, so we've got that in the private sector," she said.

No legislation on the issue has been introduced in Congress yet.