Well, I don't know about that.

Hey New York your next after California

The top honor goes to California, which is projecting that it will fall about $25 billion short come fiscal 2010. Taking second place is New York with a projected $17.6 billion deficit for fiscal 2010, according to the National Conference of State Legislatures, a bipartisan policy research organization in Washington, D.C.

However on a per capita basis a lot of other states could be a lot worse.

My AZ Asphaltistan could quickly be in the very worst shape if a whole bunch of Cali-consumers bail out and relocate here. But it is now our blazing heat season, therefore my guess is that any relocating Calis are probably headed more North. Is Cascadia ready?

Part of it is housing, of course. But part of it is also we're so dependent on sales tax as a revenue source. I read somewhere--sorry I can't provide a link--that 55% of our revenue has shrunk because of sales tax falling as well as other taxes here.

Our legislative drama this spring has been as dramatic as California's, but doesn't get the same coverage in the media. I've had friends, working in State government, go to half time for a few weeks and then go back to 38 hours a week. This is in the agency I used to work in before I retired. Two or three staff able to retire did so in face of having to go to half time. That saved the agency some money. this is a small agency and non-essential to state services. If there's no budget by next Tuesday, my friends will spending a lot of time at home!

Negotiations are underway but they could fall apart. this is a nasty argument between a republican dominated legislature and a Republican governor. She was not elected; she took over after Janet napolitano went to D.C. In my view, the governor is practical and humane, she supports a small tax rise, subject to the approval of the voters this fall. the legislative republicans look like really mean minded next to her.

just my 2 cents and anecdtoal look at the situation,
Shamba

That writing has been on the wall for a long time. Almost every time I hear about some grand project that will go on in Chicago, I hear "it will only cost this much, it is a deal". Then several years after the project was supposed to have been finished and multiple cost overruns, the politicians say "that is they way things go". I still cant figure that out, if a project is supposed to cost say $100 million and take 3 years. Then why are the contractors getting more business when the project eventually costs $200 million and takes 5 years. I believe there is some major corruption going on somewhere. Say you want your roof redone. You agree on a price and half now and half when it is done. If the contractor loses their ass because of not figuring things out correctly, then their loss. In the other world, if things don't work our exactly as planned, then we will just charge more. Plus, I would like to know who does the financial planning for those projects. I cannot recall any major projects that have been accomplished in Chicago in the last several years that actually came within budget. That is why they are bankrupt. Dont worry--Saint Obama will save the day. Dont forget that mayor Daly and him are chums.

I don't think it will happen. I think there will probably be some kind of bailout.

NYC almost declared bankruptcy, 35 years ago. They had a plan:

The statement, which pointedly invoked the comptroller, Harrison J. Goldin, a sometime Beame adversary, went on to say that the city had applied for and obtained a court order to preserve its assets from creditors.

It said that “rational and humane” priorities had been approved to make payments in this order: police, fire, sanitation and public health services; food and shelter for people dependent on the city; hospital and emergency medical care for those with no other resources; bills from vendors of essential goods and services; school maintenance; interest on city debt; and payments due the retired and aged, beyond those from pension funds.

What would a state do? Well try going into one of the social services offices and asking about a fictitious person who qualifies and what services are available.

I did and it was not a fictitious person. I was serious as it was my 91 year old mother...I was told quite up front that they had NO money and I would have to put her on a list...next stop was the Senior Citizens office and was told that NOTHING was available and to get on a list there as well. All low income housing was totally locked up as well for new tentants.

Then our road and crew departments are cutting way back. Laying off those in county departments. Taxing the hell out of us as well.

The other aspect was they tried to raise everyone's property appraisals by a very large amount. Some didn't fight it. I did and a few others...

Property values dropping like a rock in a pond and they try to raise the values as a way of getting more revenue. Not the rates just the value...which is beyond belief.

Another is to threaten that they will turn some jailed criminals loose. Scare tactics or not that is one of their MAJOR responsibilities ,,to protect the public..But.............

Airdale

For one thing, the rating companies will make California bonds "high risk" which will make bond interest rates very high. Note the above financial recomendation article recomends that readers dump California paper ... quick.

To make ends meet, thousands of state jobs will be cut and unemployment benefits will be minimalized. This is in a state with the highest unemployment already.

Californians will live in interesting times.

i don't have a source on this, but saw on TV.

There is no provision for bankruptcy for states, only for cities, and people.

The bond holders can sue the state for judgements to sieze state assets. So for example, XYZ hedge fund trades bonds for Golden Gate Bridge, and makes a toll bridge. After the judge approves. It is just like a person having lots of illiquid assets with no market for the assets.

States are not subject to bankruptcy

With a few minor exceptions, bankruptcy laws are a federal matter (Article 1, Section 8, Clause 4 of the US Constitution gives Congress the authority to enact uniform bankruptcy laws across the states). I am not a lawyer, but to the best of my knowledge, there are no provisions in federal law for a state to declare bankruptcy. Chapter 9 of the federal bankruptcy statutes provides for reorganization (but not liquidation) of municipalities and counties, but does not apply to states. California may become insolvent next month, but I don't believe there is any means for the State or its creditors to seek protection in federal bankruptcy court.

As for "turning off" services, there are some constraints. In particular, services which are funded in part by the federal government often have strings attached that preclude the State from shutting the service down very quickly. Examples: (1) the federal Food Stamp program (now SNAP) is mandatory; states must administer the program; (2) Temporary Assistance for Needy Families (the program that most people mean when they say "welfare") is voluntary, and California has put shutting the program down temporarily on its list; (3) unemployment insurance is voluntary, but in states that do not run a "conforming" program, the feds will run one, but the immediate result in most states would be a tripling of unemployment insurance taxes levied on businesses (UI financing is peculiar).

As a result of these strings, you tend to see many states all making the same decisions. Furloughs, wage cuts, and layoffs for employees where it can be done. Shut down the subsidized state parks. Cut K-12 education funding. Stop paving projects and other construction.

A state (as far as I know) has never gone bankrupt before. Back in the 19th Century bankruptcy laws were changed so that some recovery plan could be implemented to help railroad companies recover so that they could make money again rather than have a complete liquidation.

Any ideas on what a state bankruptcy would do (in practical terms)?

Indiana effectively declared bankruptcy after the "Mammoth Internal Improvement Act" fiasco and the 1837 Panic. They then adopted a new constitution which forbid the state government from borrowing money, and the state from then on operated on a "pay as you go" basis (at least up through the late 1980s, I haven't been there since then and I don't know if that is still the case).

And the most marginal will go first with the most critical last at all levels simultaneously.

But not to worry, the S&P 500 50 day simple moving average is rising and crossing the 200 day SMA. This is a very bullish signal.

Even though we're of the same mind, really, I've not been a fan of Greer's writing, but this is spot on. It's also something you have little or no understanding of, apparently.

I suggest you read it.

http://thearchdruidreport.blogspot.com/2009/06/thermodynamic-economy.html

Cheers