A City and Its Unions

Robert G. Flanders Jr., the state-appointed receiver for Central Falls, RI, said his city’s declaration of bankruptcy had proved invaluable in helping it cut costs. Before the city declared bankruptcy, he said, he had found it impossible to wring meaningful concessions out of the city’s unions and retirees— who were being asked to give up roughly half of the pensions they had earned as the city ran out of cash. Why does bankruptcy give the city bargaining power against its unions?