A Bailout for the States? Policymakers Debate State Bankruptcy Law
- Posted on January 20, 2011 at 11:09pm by
Meredith Jessup
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According to the New York Times, policymakers are quietly looking for a way to let states declare bankruptcy to get out from underneath massive debts, including crushing pension funds previously promised to retire public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign. But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors. …
For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.
House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.
Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.
Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers.
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Comments (101)
justice
Posted on January 21, 2011 at 4:15amThey must think our money grows fom trees.
Report Post »TexasCommonSense
Posted on January 21, 2011 at 7:00amActually, they think it grows in a printing press. Weimar Republic, people! Those who fail to learn from history are doomed to repeat it!
Report Post »chuck
Posted on January 21, 2011 at 1:14pmWho is learning from history any more, our schools teach revisionist history, exhaulting Mao, Che, Lenin, Marx and Alinsky. All progressives have to do now is sign a few papers, and we will be prisoners in our own homes…sad what we’ve come to, how asleep we were, taking things for granted, even awake, the chains that bind us are already around us…all I can say is when they turn off the entitlement taps, or if we default on our debt, or a another war breaks out, or a collapse of the housing sector, or muni-bond collapse, no new jobs, look out? This country, and others, China included, are a tinderbox waiting for a spark. I pray nothing happens, but if so, we survive the coming collapse with something to rebuild, good luck to you all. God Bless America.
Report Post »Truth4me
Posted on January 21, 2011 at 1:36amDon`t you just love liberal reasoning? When liberal policies fail, steal the money from the people that were responsible to bail out the liberals that were irresponsible.
Report Post »dljimz
Posted on January 21, 2011 at 1:23amIf California goes bankrupt just sell the oil off their coast. I’m sure that is enough to pay off their bills.
Report Post »That would save us money of importing oil and help them continue in their spending.
bit.ly/gX930C
Posted on January 21, 2011 at 1:21amThey need to go ahead and get this done. It’s like watching a slow motion chess game.
Report Post »xoke
Posted on January 21, 2011 at 1:03amHere is the solution…if taxpayers in Burbank want to pay for sex changes thats cool, as long as it is the tax payers in Burbank paying for them. I could care less…but when my Kansas/Oklahome/Texas taxes go to bail out Cali and NY…**** will hit the fan.
Report Post »Diane TX
Posted on January 21, 2011 at 12:59amHere’s the solution:
End all public service unions, at the Federal, State, City, Town and whatever level, now.
Do not allow Obama Care to ever be implemented. Start unraveling the ridiculous new regulations for this mess, now.
Start looking for a way to end Social Security, Medicare and Medicaid. We, middle America, should have never been forced to pay into Social Security and Medicare, so those who have paid into this Socialist nightmare deserve some kind of buyout.
It’s time to close all of our borders, and really learn who is in our Country. Don‘t open them until we know who’s who. We must assert that a child born on our soil, is not an American citizen, if neither parent is an American citizen. They’re foreign Nationals.
We must not allow our secular laws to be modified by any religion at all, including the Islamic religion.
Report Post »scout n ambush
Posted on January 21, 2011 at 12:50amFirst sentence “ will allow them to get out from under massive debt ”This is going to bail the states out in a way by null and voiding union contracts allow them to alter contracts with retirees or give them leverage negotiating with unions i can’t wait to see how this works if the unions were smart but they are not one thing we do know is the state would be better off doing it without federal help .Wait a minute this could be part of bottom up and the rep are walking into a trap where the unions start rioting over the bankruptcy idea , boy i am getting paranoid !
Report Post »Workforit
Posted on January 21, 2011 at 12:47amLet them go bankrupt! The Ultimate Union Failure! The greatest legal Ponzi scheme ever brings down the house. If union members knew how the math works (many do) but hey… Why should they care, union members as long as they are “good, loyal union party members” and follow union leaders blindly, don’t need to get a second job to pay for that new truck. They don’t need to learn about the stock market, they don’t need to better themselves through education because the last thing the union really wants is smarter members… Union leaders know what is best and don’t you forget it union member. I worked a couple of union jobs in my life time… Never again. I know why it takes a billion dollars to build something… It takes 3 union members from 3 different locals to turn on a light switch. I’m not kidding, I sat on my a$$ for three well paid hours for the right group of people to agree that “yes” it is safe, the direction the switch should go is “up” and the desired outcome of “light” is indeed the desired and natural outcome of this Union Approved Action!
Let me be the first to welcome you to the real world disgruntled union member. You better be able to produce because the rest of us do, and you better take some business classes because that is the only way you are going to provide for your family at the level they have become accustomed too.
Now you are going to be a business owner…14/16 hour days, supply problems, marketing problems, and oh yeah you can‘t hire any additional employees because if you pay them minimum wage it will mean you don’t get to eat this month…The jobs gotta get done, the only way it is going to happen is if you do it, aint that a kick in the nu_ts. Reality is going to hit the worst performing, most vocal of you like a 10lb sledge hammer…right in the face… I can hear you screaming for socialism from here.
Gimme, Gimme, Gimme!
Try working for it for once. You just might find out you are capable of more than you ever imagined… That is what happened to me… I turned on my own light switch.
Report Post »FLDeb
Posted on January 21, 2011 at 4:25amworkforit, I totally agree! I grew up in MI and watched the unions bring down that state. Union members DO NOT get a pass from me. If I could figure out as a teenager/young adult that the unions were nothing but corrupt and in the end would cost jobs, so can EVERYONE else. It was an insult to me to think I needed anyone to speak for me. I can do that just fine – thank you ever so much.
Report Post »Center right
Posted on January 21, 2011 at 12:38amObama, bail out for the state. yea.
Please support My new Blog called Freedom Apparatus. I am a Journalism and Mass Communication Major and a Political Science and Government minor, and I also believe that we do not have enough Fiscal Conservastive Journalism in the press (believe me, it is true) and I think we need more. I am still in my first year, but figured that I should get a start now. Thank you, and God Bless you all.
Report Post »Freedom Apparatus—
http://tbladel.wordpress.com/2011/01/19/sarah-palin-the-liberal-boogieman/
idrathermisstotheright
Posted on January 21, 2011 at 12:36amSince when does anyone follow the constitution?
Report Post »FoundersRedPill
Posted on January 21, 2011 at 12:22amConstitutional Hurdles? Maybe they will find its covered in the good and plenty clause.
Report Post »xoke
Posted on January 21, 2011 at 1:01amLol…Nice! I thought I was the only one who remembered hearing that BS. :)
Report Post »psst
Posted on January 21, 2011 at 12:00amOK. so quite a few states are in deep sheet.
Report Post »So, who puts the pols in charge in these states?
Ya know, the pols that makes sweetheart deals w/ unions to buy their votes.
The pols that gives in to all the union demands for great retirement benefits and other goodies for union workers.
Answer. The people of these states.
Soo. Let them raise taxes and cut services. The majority of the people in any state deserves the kinds of leaders they have. What da hey. they elected them.That some in these states may have to suffer. Well, that;s the way it goes. Many of us are suffering now that we have Hussein as president.but what da hey. That’s the way it goes.
The citizens and non citizens in the states of Ill,Kal-y-4-nya and NY needs to sit back and enjoy their bankruptsy and or huge tax increases.
If not. Burn the damn place down. I for one don’t give a sheet.
US is past the point of no return anyway.
Corruption running rampant w/ pols/unions.Citizens breeding out of control knowing “They” won’t have to fund the costs of their indiscriminate breedings.Illegals breaking down the border/s to get in on the free stuff.Marxists and RINO’s encouraging both behaviours.Marxist wants the votes, RINO’s and corporations wants cheap labour.
Teachers teaching marxist mush to the chirrens at the order of their unions goon bosses.
Single mothers breeding wildly and letting their chirrens run rampant in gangs and drugs.No father figure at home. and they continue to keep the baby factories churning at 110% of capacity.
The total collapse Will come. Sooner rather than later.
That this country have elected a marxist says it all.
The NWO/OWG will come to power. Some of US don’t want it. But it will come anyway. Just like some citizens don’t want what is happening in their states. But it will happen anyway.
C. Schwehr
Posted on January 20, 2011 at 11:56pmThe states haven’t been “sovereign” for over 150 years! The federal government saw to that after the “War of Northern Aggresion”. It was finalized with the passing of the 17th Amendment which removed any remaining influence the states might have had with the federal government. Let the supreme court acknowledge this fact, and let the states that are past saving file bankruptcy so that they can re-organize and get out from under the impossible amount of debt they’ve voted themselves.
Report Post »It’ll probably destroy the United States as a nation, but then we haven’t been much of a nation for the last 20 years or so anyway. Either do it this way, or watch it all fall apart in the next 10 years. This way at least the individual states can be saved, and perhaps re-establish a new union where there is no “federal reserve” to suck the life blood out of the nation, no supremely powerful central government with the power to do anything it pleases while lying to the people…maybe it’s just time we let the cards land where they may and start over?
southernloyalty
Posted on January 20, 2011 at 11:44pmThey‘ll pass legislation to allow a bail out because they’ll say “it will be the end of the world if we don’t bail them out.” We’ll all complain for about a week about it. Then it will be forgotten, the people will go back to watching their favorite sports team while drinking their favorite beer. I‘ll be shocked if they don’t allow them to be bailed out.
Report Post »Moovyman1980
Posted on January 20, 2011 at 11:40pmA bailout for the states will only delay the riots. Spending cuts are the only COA available and that will not be an easy task.
Report Post »mhills51
Posted on January 20, 2011 at 11:36pmI hate to say this but the people have to pay. They are the ones that electe these people and they will never learn exept for tough punishment. end of story..
Report Post »unknown
Posted on January 20, 2011 at 11:34pmHey California, its time to start offshore drilling again.
Report Post »123gone
Posted on January 21, 2011 at 12:43amYeh! – Allow the States to redefine and control the EPA standards that initially started this financial mess. Perhaps then, the States will be able to attract business interests that were driven out of the States because of ridiculous environmental restrictions.
The States should be able to overcome their financial difficulties if the mandatory Government programs were modified by the States to suit their specific needs. Government agencies have mismanaged these programs and caused most of the financial grief faced by the States.
Abolish the Federal IRS and redirect the Income Tax revenue to the States, and let the States provide appropriate funding to the Federal Government.
Report Post »lbsm
Posted on January 20, 2011 at 11:34pmVery simple…Don’t spend MORE than you bring in !!!
Report Post »RightUnite
Posted on January 21, 2011 at 7:59amGee, I don’t know…. That sounds like it makes too much sense…. Since when have libs EVER done anything that made any sense? EVER……
Report Post »Moovyman1980
Posted on January 20, 2011 at 11:31pmWhiskey Tango Foxtrot. It’s about to get worse my friends. I believe if current trends continue, we will have Greece like riots by the summer.
Report Post »Robbedagain
Posted on January 20, 2011 at 11:50pmI totally agree, this last summer I told my friends to have the best summer that you can have because next summer might really suck. Next winter, I don’t know. It’s getting ugly. What will be funny is watching liberals in the streets fighting over chicken bones!
Report Post »Moovyman1980
Posted on January 21, 2011 at 12:26amI try to stay apolitical during my analysis. I try to look at the facts without a conservative/liberal filter.
Report Post »IM_UR_HUCKLEBERRY
Posted on January 20, 2011 at 11:28pmNOBODY saw this comin.
Report Post »cheezwhiz
Posted on January 21, 2011 at 12:06amSorry
Report Post »Beg to differ.
Cloward and Piven saw it coming
C. Schwehr
Posted on January 21, 2011 at 12:07amBULLCRAP! The people who orchestrated this collapse knew it….
Report Post »IntheKnowOG
Posted on January 21, 2011 at 8:57amI appreciate your satire “Doc”. The others here don’t understand why you capitalized nobody.
Report Post »PlanetXenu
Posted on January 20, 2011 at 11:24pmmaybe if they spent the money in a way that it will take the load off the people in the states and allow them to dump more personal money (the people I mean) into the state or us as a whole then the flow of money will increase within our borders and the bail out would pay off… NO MORE HOOKERS OR BONUSES, GUYS! SERIOUSLY!!!
Report Post »:)
C. Schwehr
Posted on January 21, 2011 at 12:05amThen you had better follow the plan used by Warren Harding back in 1920….cut the federal budget in HALF, and cut tax rates to a point lower than those under Reagan…It won’t happen, and the invisible hand of economic principles will eventually force a collapse of the entire nation.
Report Post »The government is acting like a kid with a squirt gun at a four alarm fire….they are still thinking that the same Keynesian blundering that extended the last government caused depression by ten years will be the answer to this MUCH more serious blunder (again caused by the federal government). We only have two choices….either we do nothing (or almost nothing as is being done now), let the fire consume us and build again from the remaining foundation, or we take the hoses to the heart of the fire and PUT IT OUT NOW. The federal government is still thinking in terms of squirt guns…..what do you think the result is going to be?
idrathermisstotheright
Posted on January 21, 2011 at 12:31amThis reminds me of our retread governor in Oregon, he sat out 8 years and came back. In his first speech he discuss building a sound foundation for our future. I laughed since how do you it without removing the structure on top of it, leveling it, or jacking the structure up temporarily. Then I thought, didn’t you have this opportunity for 8 years 8 years ago, looks like you failed, but the people reward him with more service.
Report Post »Miser
Posted on January 20, 2011 at 11:19pmGee, you think unfunded programs mandated by the Feds might have something to do with it? How about taking tax money from citizens of one state to build a bridge to no where in another. You think that might be part of the problem?
Report Post »Xcori8r
Posted on January 20, 2011 at 11:17pmThe democrat states are counting on it and the Socialist Feds are more than willing to see the states abdicate the little detail of sovereignty and be owned by the federal government..
Report Post »C. Schwehr
Posted on January 20, 2011 at 11:58pmThe states became clients of the federal government back in 1913…..
Report Post »Xcori8r
Posted on January 21, 2011 at 12:39amYep, that’s when the citizens of every state began their permanent indentured servitude to the federal government and the states adulterated their control of the Senate.
Report Post »franknshadow
Posted on January 20, 2011 at 11:16pmIf it‘s a union problem then it’s a union problem.. Bankruptcy is the only way out of this mess that the unions have bullied the states into.. Get some minerals, stand up to these union thugs, and save your own states!!
Report Post »Mister President
Posted on January 20, 2011 at 11:49pmMost people in unions are good people. It’s the leaders of unions who are the problems. In theory, the idea of a union makes sense. However, they seem to corrupt beyond any point where they are worth having around.
Report Post »davecoolworld
Posted on January 21, 2011 at 12:44amDear Mister President (that sounds cool)….Unions are obsolete, Federal Law enforces what the unions began when the sweatshops were a plenty. Unions are corrupt, fat cats sucking money and REQUIRING members NOT to work when there is no union work. Unions workers have gotten used to a high hourly wage , but do not realize that when you factor in the “down time” they do not make what they believe, they have been spoon fed a lie that they are clinging to because they think that’s all they have. UNIONS ARE DESTROYING AMERICA at only 12% enrollment, imagine increasing the rolls.
Report Post »Carl1
Posted on January 20, 2011 at 11:12pmThey just need to Borrow and spend more.
Report Post »cheezwhiz
Posted on January 20, 2011 at 11:27pmI have a solution for CA.
Report Post »Lets bring in a million more illegals and have them all breed anchorbabies as fast as they can.
Then we can give them multiple IDs and put them ALL on welfare in multiple jurisdictions under multiple names. At the same time lets raise taxes on businesses and repeal Prop 13.
It will work this time, believe me . CA will be the Golden State again .
IM_UR_HUCKLEBERRY
Posted on January 20, 2011 at 11:29pmLet’s finish bailin out Europe first.
Report Post »So much money, so few places to put it.
Mister President
Posted on January 20, 2011 at 11:42pmInformation on the Municipal Assistance Corporation: http://www.library.ca.gov/crb/95/notes/V3N1.PDF
[It's in PDF form, so you need Adobe Acrobat Reader or Foxit Reader (way better)]
I don’t like this. No bailouts. The Federal government wasn’t in nearly as much debt then, either. And, it won’t work. Not on this scale.
Appendix A is most interesting. “In 1995 dollars, that is almost 40 billion dollars of debt.” According to a 2009 inflation calculator, that would be about 55.77 billion dollars of debt in 2009 dollars.
California has about 365 BILLION dollars of debt. This won’t work. The Federal government literally cannot bail out the states like it did with the city of New York. My state has about 46 billion dollars in debt. Total state debt is more than 1.1 trillion. (usdebtclock.org) It simply will not work. These states need to default on their debts, make draconian budget and benefit cuts in pensions etc. There is no other way.
Report Post »Mister President
Posted on January 20, 2011 at 11:46pmNot all states need to default. Not even most. But all need to make draconian cuts, or it’s only a matter of time before they will have to.
Report Post »GONESURFING
Posted on January 21, 2011 at 12:15amWhy are so many Democrat run states in such deep trouble ? Just asking.
Report Post »RobertCA
Posted on January 21, 2011 at 12:16am@ CHEEZWHIZ
You should see their tax return , how much money they get without even paying taxes , but since she have 6 to 7 kids & she’s pregnant ……………
Report Post »idrathermisstotheright
Posted on January 21, 2011 at 12:24amThe people continued to vote these numb nuts in office while the numb nuts continued to pander to the unions so the people deserve the government they are afforded.
The morons put unsustainable pension systems into place and now comes the time to pay.
Enact a new accounting standard like government did to private business “not allowing unfunded pension liability on the books, it has to be booked and funded.” They forced this upon business years ago but gave themselves a pass from accountability.
Oregon has one of the highest debt per ca pita ratio even higher than CA but doesn‘t get the news since the total number isn’t as huge. We are looking at shaving 2.5 billion off our state budget but our numb nut politician will certainly look to raising taxes so they can protect the union pensions so they can continue getting the votes. The well will run dry one day, hopefully soon……
Most of these states have public lands so they should start selling assets off just like business does.
Report Post »TruthTalker
Posted on January 21, 2011 at 12:46amernm No cope. Do what you need to do,
Report Post »cheezwhiz
Posted on January 21, 2011 at 12:46am@ RobertCA
You should see their tax return , how much money they get without even paying taxes , but since she have 6 to 7 kids & she’s pregnant ……………
Report Post »———–
and the best part is they don’t even need a SS# to get tax “ refunds” from IRS
( although EVERYONE with fake / stolen SS# never forgets to apply and get a tax “refund” too ).
They use multiple TIN #s , provided by……you guessed it …. ..IRS itself !
And who fills out their forms for their ” tax-returns“ for ” refunds” ?
LaRaza and other such criminal enterprises, funded by ……….US taxpayers….wooohooo
Cobra Blue
Posted on January 21, 2011 at 1:21amWARNING! This is serious stuff folks. Think this through for just a moment. All these states like Illinois, New York..California…They are going bankrupt because their tax base is moving away. So what are they going to do. The Fed is going to bail them out just like GM and the big banks. As a result, the very prople that left these states because of the burdensome taxes, along with you and me and the rest of the folks in the country, are going to support the government and union jobs along with their corresponding pension funds.. You can run but you cannot hide. And where does it end. As more and more people flee more and more states there will be more and more bailouts to support more and more government and union jobs and the corresponding pensions. Once the cycle starts it will not stop. Once we head down this road it is over. REALITY CHECK! The cold hard facts about this country and the situation we are in is this. THE COUNTRY IS ALREADY GONE. We are on life support. The US of A we all grew up in is gone. The progressives have control whether you want to believe it or not. And with each passing day all we are seeing and hearing in the news is the progressive machine just rolling out their agenda piece by piece. Keep putting your support in a bunch of guys in Washington and the end will be here before you know it. Sorry…not a pessimists. Just being honest with the reality I see right before my very eyes and ears.
Report Post »bbdarthchris077
Posted on January 21, 2011 at 1:21amHa ha haaa. aaaaaaggggggggghhhhhhh we are all going to die GOD help us all. We told you so, we told you so. WE ALL TRIED TO GIVE ALL OF YALL A HEADS UP but yall did not want to hear it, you just wanted to make everybody happy well I suggest everybody put on there rain coats before brown smelly stuff hits the fan.
Report Post »TexasCommonSense
Posted on January 21, 2011 at 6:58amNo! Let the tax payers in each state fix the problems they let their state legislatures created for them, themselves. Few states are in perfect fiscal shape, but most of us can fix it ourselves.
Report Post »oldguy48
Posted on January 21, 2011 at 7:17amcobrablue: A lot of us realize what these “people” have done to the country, and us. Make sure you are ready for what is coming.
Report Post »IntheKnowOG
Posted on January 21, 2011 at 7:37amCertain states rebelled for lesser federal offenses.
Report Post »79USMC83
Posted on January 21, 2011 at 7:41amSo just like the GM bailout the BOND holders are having their money that they INVESTED in to help GM and now the states try to prosper will be RIPPED off because of POOR MANAGEMENT !!! All bond holders of any kind through out this country should CASH in NOW !!!!! This is nothing but THEFT !!! The GM bond holders out of good faith invested their hard earned money just to be GIVEN to the UNIONS !!!! If this is not STEALING then what is !!!! BOYCOTT GM and any state that is asking for a bailout!! I will NEVER own another GM car the rest of my life!!!
Report Post »mtnclimberjim
Posted on January 21, 2011 at 7:50amLet’s see, if I follow their logic then it’s OK for me to borrow money to pay off my credit cards. Go! unions go!!
Report Post »snowleopard3200 {cat folk art}
Posted on January 21, 2011 at 10:11amCan anyone say – the great collapse is upon us and it is going to be huge!!!
Report Post »Sam I am
Posted on January 21, 2011 at 10:24amHow is it the states that need bailing out are all liberal paradises.
NY, IL, CA, MI ?
The people made their choice, now let them enjoy the results.
Report Post »Kalish
Posted on January 21, 2011 at 12:01pmCalifornia Declares Fiscal Emergency
Jerry Brown, California’s governor, declared a state of fiscal emergency on Thursday for the government of the most populous US state to press lawmakers to tackle its $25.4 billion budget gap.
Yea these idiot in CA just re-elected Boxer and Brown, don’t bail them out, let them fail, If all the people who pay taxes leave the state, then what are they going to do ? It‘s a shame that the small percentage of people in CA that actually have logic have to put up with the large percentage that don’t. it used to be a nice state
Report Post »docvet
Posted on January 21, 2011 at 1:26pmEvery Governor of a failing state needs an injection of chrischristyite so they can tell their citizens the real cause of their legal woes and the crash course needed to fix the problems. Then do it! And that includes having the common sense to lay-off non-essential personell and not the state police or other critical departments needed to run the state.
Report Post »