Anyone drawing a paycheck from the Public treasury should be forbidden by law from unionizing.
Yep.
The article was on the Op Ed page, not a WSJ driven article
State bankruptcy doesn't exist yet - Article 9 of the bankruptcy code does allow municipalities to file.
To allow states to file (many legal issues to overcome) would hopefully only be used as leverage to renegotiate contracts with the unions, etc. One of the stronger aspects of bankruptcy laws generally is to disavow contracts you don't like in some circumstances - powerful motivation for the other party to renegotiate.
Federal courts have exclusive jurisdiction over bankruptcy actions (Constitution). Bankruptcy Judges are tough, but do not enjoy lifetime tenure like other Federal Judges - a constant issue of conflict. They can be political (although are generally a very strong group of judges) and they have tremendous discretionary authority. But, this should not be the answer either. (I think we allow the Judiciary to do too much now - because the legislation avoids the tough decisions - leave it all up to the activist judges.)
The author doesn't really address the alternative directly.
At the end of it all, I think that the municipality that simply stops paying the retirees benefits, and/ or perhaps basic services will drive the legal issue. Camden NJ just fired 400 critical employees - 200 police and fire personnel - because the union wouldn't renegotiate their contracts - that will be the fact pattern. So the town or city gets sued and lose. A Court then orders them to pay. If they have no money, how to enforce? I think facts like these will drive the discussion, not the bankruptcy angle.
And yes, we do care if the bond market gets roiled. All our cities, towns and local governments borrow to provide basic infrastructure growth - roads, schools, new firehouses, libraries etc. (not operating expenses, usually). If this continues, the cost to borrow - if you can borrow at all, will get appreciably higher. That will be passed through through higher real estate and sales taxes. No other choice.
The public union benefits, people getting pensions - as well as medicaid, will, by necessity, be vastly different in 10 years... and not better. Its going to be an ugly ride.