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The municipal bankruptcy decision

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  • E d i t o r i a l C o m m e n t NATIONAL



    Vol. XXV, No. 6 Total No. 240

    The Municipal Bankruptcy Decision T H E decision of the United States

    Supreme Court invalidating the mu- nicipal bankruptcy act is most unfor- tunate for those municipalities which are bonded for more than can ever be repaid as well as for the holders of such bonds. If the debt cannot be adjusted, the municipalitys cre it cannot be re-

    to lose all instead of only part of what he put in.

    In this 5-4 decision we again find what was so apparent in some of the famous earlier 5-4 decisions when Mr. Justice Holmes was on the bench-a clear cut conflict between realism and legalism. I t is all very well to say that debts can be adjusted by agreement without court sanction but the fact is that whenever an agreement actually is reached by a city and a majority of its creditors, there is always a small minority who hold out and demand preferential treat- ment. The act held unconstitutional did nothing more than extend to insol- vent municipalities the power effective- ly to adjust their debts by agreement with the majority of their creditors. As for those who say that a unit of govern- ment with taxing power can always levy sufficient taxes to meet its obligations, they forget that there is a limit not only to the ability to pay taxes but to the

    stored; as for the bon i holder, he is apt

    willingness to pay taxes. Those who close their eyes to this fact and reply with moral preachments would do well to look into the dusty case of St. Clair County, Missouri, when the failure of public officials to levy a tax for indebt- edness became an act of heroism and those who served jail terms for contempt of court were lifted by public sentiment into the realm of martyrdom.

    The act in the opinion of the majority of the Supreme Court constituted an in- terference with states rights. The min- ority decision, with which the REVIEW finds itself in agreement, pointed out that far from being within the field in which the states can act, the law was in the territory embraced by the constitution- al prohibition to the states against pass- ing any law impairing the obligation of existing contracts. If Congress could do nothing about it, nothing could be done.

    With some relish, the minority main- tained that to hold that this purpose (of debt composition) must be thwarted by the courts because of a supposed affront to the dignity of a state, though the state disclaims the affront and is doing all it can to keep the law alive, is to make dignity a doubtful blessing.

    An article elsewhere in this issue of the REVIEW summarizes the experience



    under the municipal bankruptcy act. The appraisal does nothing to alter our view that the act represented an intelli- gent effort to solve a knotty problem and any realistic approach to the constitu- tional question could not but have found

    it valid. I t is with some satisfaction that we observe a charter member and a former president of the National Muni- cipal League, Mr. Justice Brandeis and the Chief Justice respectively, concur- ring in the minority opinion.

    Toward Better County Government T O the outsider viewing the session of

    the New York legislature just com- pleted, it must have appeared that, as the result of the conflict of a Demo- cratic senate and Republican assembly, nothing whatever was accomplished in the way of constructive legislation. This is distinctly not the case. While much sound legislation was lost in the dead- lock which prevailed until the last days of the session, many good measures were passed, among them two bills providing the opportunity for the reorganization of county government. The first was the Nassau County charter bill and the sec- ond the Fearon bill setting up optional forms of county government, both bills passed pursuant to the provisions of the county home rule amendment adopted by the voters in November.

    The Nassau charter, drafted by the Consultant Service of the National Mu- nicipal League for the Nassau County Commission on Governmental Revision, provides for an elective county execu- tive and a number of interesting inven- tions directed toward the coordinating of county and local administration of the various functions. The charter, which will go to the voters of Nassau County in November, represents the first local use of the county home rule amendment which those interested in the improve- ment of local government in New York State fought for so long and so hard, I t is encouraging to see a county of Nassaus consequence getting into action so early.

    The Fearon-Parsons bill setting up optional forms of county government

    will pave the way ultimately for other counties to follow in the footsteps of Nassau and Monroe counties (Monroe having adopted the limited county man- ager plan as authorized by earlier leg- islation). One of three bills submitted on this subject, (the other two being the Desmond-Mailler and Buckley-Reoux bills, the latter sponsored by the New York State Commission for the Revision of the Tax Laws of which Seabury C . Mastick is chairman) this measure establishes five optional forms of county government-the elective county executive form (Plan A), the appointive county executive form with full administrative powers (Plan B ) , the appointive county executive form with restrictive administrative powers (Plan C) , the board of district super- visors form (Plan D ) , and the board of supervisors form (Plan E). The last mentioned is the present form with improved budget procedure and other administrative alterations.

    I t is to be regretted that Plan D is the only form in this act which permits a change in the present set-up of the county board of supervisors. As many REVIEW readers know, the New York State system is for the county board to be composed of the town supervisors, who are the chief administrative officers of the towns, plus representatives from any cities in the county. This frequently results in boards far too large for any good use. Plan D permits a small board, the members to be chosen by districts within the county but no plan permits

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