The Hill News

In 1975, New York City was on the brink of bankruptcy. The City did not have the cash to make municipal bond payments and continue to pay for vital services or its public retiree and healthcare benefits. Consequently, New York City was on the verge of defaulting on its municipal bonds. In the face of this reality, New York City pursued three options: seeking aid from the federal government, negotiating a deal with its public unions or filing for bankruptcy. The federal government rebuffed New York City’s request for a bailout. Faced with the option of a municipal bankruptcy, the unions agreed to invest $2.5 billion of their pension funds in municipal bonds, which were used to bail the City out. The unions’ investment put the pensions of thousands of public employees and retirees at risk, but it enabled New York City and the unions to avoid bankruptcy and positioned the City to build a strong, long-term fiscal foundation. New York City avoided bankruptcy because! it had the option to file for bankruptcy. 

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