What If Your State Goes Bankrupt?

Changes Will Hit Pensioners, Bond Holders Hardest, If a State Goes Broke

Under existing law, a state cannot go bankrupt. That's not because the action is forbidden. Not the U.S. Constitution nor any other piece of paper says a state cannot. The bankruptcy code simply does not address the possibility.

Now lawyers, politicians and other ingenious folk are looking for a way around that problem -- a fact that should come as no surprise, given the perilous financial health of California, Illinois and other states encumbered with crushing debts. The 50 states have spent collectively, in the past two years, half a trillion more dollars than they took in as taxes. Their pension funds, by some estimates, are underfunded by another trillion.

Like Titanic victims struggling in the water, they are desperately grabbing any orange crate that floats by, trying anything to stay afloat.

Arizona has sold off its state capitol. The investment group that now owns the Supreme Court building and the chambers of the house and senate is graciously leasing those buildings back to the people.

GO HERE to read more.