Calz
1st March 2011, 15:12
State Budgets: Echoes of the “B’ Word—Bankruptcy
By MAUREEN MACKEY, JENNIFER DEPAUL, The Fiscal Times February 25, 2011
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Through the din of protests over state budget cuts in Wisconsin, Ohio and elsewhere across the nation, one word is now being bandied about with greater frequency: bankruptcy. Some Republicans, including Newt Gingrich, Jeb Bush and others, are not just floating the idea but going so far as to recommend it. “A bankruptcy option for the states would look very similar to Chapter 9 municipal bankruptcy, with some necessary modifications,” Gingrich, the former GOP House Speaker, and Bush, the former Florida governor, wrote in a recent op-ed.
Why? Try this on for size: All told, states now face a cumulative $125 billion operating deficit for fiscal year 2012, according to the Center on Budget and Policy Priorities. (The shortfalls for 2009 and 2010 and most of the shortfalls for 2011 — totaling over $430 billion combined — have already been closed through a combination of spending cuts, withdrawals from reserves, revenue increases, and use of federal stimulus dollars.) In addition, unfunded public pension liabilities may be as high as $574 billion, according to a new report by Joshua Rauh, finance professor at Northwestern. This fiscal promise is above and beyond the roughly $3 trillion (or $27,000 per household) in unfunded liability of all state‐sponsored pension plans in the U.S., so many cities are carrying substantial off‐balance‐sheet debt. “These [liabilities] are the largest loophole in balanced budget pledges,” said Rauh in recent testimony before a House subcommittee.
Top 10 States Likely to Declare Bankruptcy (see full story):
http://www.thefiscaltimes.com/Articles/2011/02/25/State-Budgets-Echoes-of-the-B-Word-Bankruptcy.aspx?p=1
By MAUREEN MACKEY, JENNIFER DEPAUL, The Fiscal Times February 25, 2011
--------------------------------------------------------------------------------
Through the din of protests over state budget cuts in Wisconsin, Ohio and elsewhere across the nation, one word is now being bandied about with greater frequency: bankruptcy. Some Republicans, including Newt Gingrich, Jeb Bush and others, are not just floating the idea but going so far as to recommend it. “A bankruptcy option for the states would look very similar to Chapter 9 municipal bankruptcy, with some necessary modifications,” Gingrich, the former GOP House Speaker, and Bush, the former Florida governor, wrote in a recent op-ed.
Why? Try this on for size: All told, states now face a cumulative $125 billion operating deficit for fiscal year 2012, according to the Center on Budget and Policy Priorities. (The shortfalls for 2009 and 2010 and most of the shortfalls for 2011 — totaling over $430 billion combined — have already been closed through a combination of spending cuts, withdrawals from reserves, revenue increases, and use of federal stimulus dollars.) In addition, unfunded public pension liabilities may be as high as $574 billion, according to a new report by Joshua Rauh, finance professor at Northwestern. This fiscal promise is above and beyond the roughly $3 trillion (or $27,000 per household) in unfunded liability of all state‐sponsored pension plans in the U.S., so many cities are carrying substantial off‐balance‐sheet debt. “These [liabilities] are the largest loophole in balanced budget pledges,” said Rauh in recent testimony before a House subcommittee.
Top 10 States Likely to Declare Bankruptcy (see full story):
http://www.thefiscaltimes.com/Articles/2011/02/25/State-Budgets-Echoes-of-the-B-Word-Bankruptcy.aspx?p=1