Something for 2301s especially to chew on, especially as we begin to discuss the Constitution. This is a consequence of both the recent economic downturn and the bloated pension plans some states have designed for state workers. The question now is how states can deal with the position this has placed them in. It raises interesting constitutional questions.
From the NYT:
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired 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.
