What should happen if a state goes bankrupt?

I specifically prefaced my statement with "Notwithstanding a pension deficit of more than $128 Billion,..."

A simple reading of Title 11 United States Code demonstrates that States cannot file bankruptcy.

https://www.law.cornell.edu/uscode/text/11

The Constitution bars a State from enacting any laws that impair contracts (see Article I Section 10). When a State runs out of money to pay its contractual obligations, that will be remedied by legal action to extract proper payment.

Aside from that, the State would cut services, lay-off State employees and take other action to reduce its expenditures. States raise revenues by collecting taxes, and by issuing bonds. As a State's financial situation degrades, its bond-rating will decrease, causing investors to shy away.

The residents of a State will either accept the increased taxes and reduced services, or vote with their feet.

It's really a non-event, as nothing dramatic will actually happen when a State goes bankrupt.

 

On the federal level nothing should happen its the state's problem they will have to work out.

 

It probably wold be a 'non-event', until or unless anything happens to lessen or stop the welfare goodies from being shoveled out on a regular basis. At that point, you'd better have a few dozen extra boxes of ammunition stashed away "for a rainy day".... At that point, would "Uncle Sugar" have to come riding to the rescue...?

 

With a pension and retiree health care deficit of more than $400 Billion, a possible $6 Billion budget surplus this year is wildly irrelevant. The California debt swamps everything, it is the gigantic elephant in the room, it cannot be ignored. There is no upside in the California fiscal disaster.

 

Reforestation should be allowed to occur naturally.

 

The first thing to do would be to reduce the pay of those elected to govern, and to reduce/eliminate pensions related to elected government service. And if that is not enough, the same should be applied to those who are civil service employees, paid by the taxpayers. Of course there remains State owned property which can be sold off to private sector.

 

Print a trillion dollars and bail them out. If banks can be bailed out, why not states?

 

That devalues my money. That would spur inflation and it wouldn’t be the last time they asked for money.

 

Then secede. Just kidding.

This will devalue your money no more than QE1, QE2, QE3.

 

There needs to be consequences for financial misconduct. Have you ever had a family member that expects you to bail them out over and over again? It sucks.

When my grandmother died, she left her house to her 4 children, but stipulated that her daughters could stay in the house. The 2 daughters or some of their kids have now lived in this house for 22 years since my grandmother died. About 15 years ago, they got behind on the property taxes and were facing foreclosure. My dad and his brother in California were about to lose their share of their inheritance from my grandmother. My dad and his brother had to pay the $15-20k in taxes, sign the property over to the sisters, and put a lien on the property for repayment when the sisters sell the house. It's a mess and it sucks because my dad didn't really have the money to bail them out and my dad and his brother may never see anything from my grandmother's estate. My dad and my uncle are almost 80 now with health issues. My aunts live elsewhere now, but my cousin has lived in the house rent free for years.

I refuse to do bailouts.

 

I am with you 100%. One of the best decisions we ever made after I graduated from college was to move over 800 miles away from either of our families. I didn't select the Rocky Mountains for that reason, but it sure buffered a lot of crap I didn't want to get into. Fortunately, no one in either of our families ever suffered a great misfortune or needed "help".

And you're right anyway... actions should have consequences. When a person makes a decision, he may profit greatly, or he may splatter in the ditch. That choice should always be left entirely up to that person, and if he strikes it rich, I'll always cheer him on.

If a state in this nation can't make it, I have no pity. With the possible exception of catastrophic events like almost unimaginable earthquakes, tsunamis, volcanoes, or other devastation, there is no reason why a state cannot successfully maintain a budget. The first place to make budget cuts is to slash spending on those who take all and contribute nothing....

 

Well, think about it and give an opinion on top of the corrections. I have no where near enough knowledge to give a reasonable opinion, but I would guess that the Federal Government would have to pay their bills while the state sorts out restructuring for a start. That may be quite a while.

 

Well, I guess everything is bigger in Texas, even the bailout refusals.

 

Other. The state should deal with the bankruptcy laws and courts just like a company does.

 

All they should be allowed to do is cut State spending, raise State taxes, and sell State owned property.

 

To your list I would add that a state that has become financially unable to meet its obligations or "pay its own way" should be allowed to secede from the rest of the United States.

Every state in this country should have the RIGHT to leave the country. Every state in this nation was created as a sovereign entity... accordingly, each state should have the RIGHT to secede. This was just as true in the 1860's as it is today, but Abraham Lincoln, the president who smashed states' rights and wrecked the 10th Amendment to the Constitution exerted the power and tyranny necessary to make the central government supreme in all respects over all others -- in direct contradiction of the Constitution!

. "You piss-ant states can't go bankrupt, and, you can't leave! But, you can kiss my ass!"

 

The people who created the debt shouldn't be relieved of the obligation to repay their debt, so the people could secede or relinquish their citizenship and move elsewhere while the property could then be put up for sale to repay their debts. I would rather allow States who are without debts be allowed to secede if they wish. Sadly, the Federal debt is NOT broken down to indicate its amount proportionately by State relative to its creation. We became primarily a collectivist society beginning in 1913.

 

Bankruptcy and all that that incurs.
No further loans ever.

Gifts are still fine.

There should not be "one rule for them and another rule for us".