Bill changes bankruptcy-debt rules
9:31 PM 9/30/03
Phil Brinkman State government reporter

The GOP-led state Senate voted Tuesday to give workers first crack at recovering some of their unpaid wages when a company goes bankrupt, reversing a 1998 law that gave banks priority over most liens and debts. <

Republicans said the measure provides workers some of the most generous protection in the country while still ensuring banks can recover outstanding loans. But Democrats said the provision, while appearing to protect workers, actually makes things worse. <

Under the provision, each worker would be entitled to the first $3,000 in unpaid wages, after which financial institutions would be paid the full amount of their liens. After those are paid off, employees would be paid the remaining amount of any wage liens. <

In a letter to legislators, Democratic Attorney General Peg Lautenschlager said the practical effect of the move would be to cap employee payments at $3,000, which would include wages, health-care claims and vacation pay. <

That's far short of the tens of thousands of dollars in lost wages and health-care costs the Department of Justice has helped workers win from bankrupt companies in recent years, even after the 1998 change in the law, Lautenschlager said. <

The changes were the only point of contention in a sweeping banking reform bill (AB 2) that otherwise received broad bipartisan support. <

That bill, a version of which has already passed the Assembly, eases restrictions on the formation and operation of credit unions while allowing state banks and savings and loan institutions to offer the same services as federally chartered banks. <

Backers predicted the bill could free up hundreds of millions of dollars in investment capital in the state. <

"You take away this wage lien language and it (the vote) is 33 to nothing," said Senate Minority Leader Jon Erpenbach, D-Middleton. <

But the bill's chief sponsor in the Senate, Sen. Dale Schultz, R-Richland Center, said the provision was needed to assure lenders that they'll get their money back. That, in turn, ensures banks will lend more, allowing companies to create more jobs, Schultz said. <

Most Democrats weren't buying it, noting the bill also says any bank liens in place before the law takes effect would still take precedence over wage liens. <

"The idea that this is a job creation tool .