States as sovereign entities cannot go bankrupt and cannot be sued for default; that is my understanding, possibly wrong. But if they want to borrow in the future they dare not default.
Qualifying note: there is general obligation debt and revenue bonds (there is also short-term debt, not a big deal). The latter are tied to specific projects and revenue streams; default on them is not uncommon, but there are no legal consequences for the states' general funds. GO debt by contrast is backed by "the full faith and credit" of the state government. There has been no default on GO debt since the 30s (Arkansas). States will gut their budgets before defaulting on GO debt, since if they did default, their borrowing costs would increase, perhaps to a prohibitive level. High debt tends to be conflated with unbalanced budgets, but they are distinct. You can be way out of balance with no debt, where borrowing given BB rules is not feasible. My quick take on California is that its debt is not the big issue; its imbalance of revenues and outlays is. Kind of like Greece. Cities like all local govs are creatures of the state; they are at their mercy. On Wed, Aug 11, 2010 at 2:15 PM, c b <[email protected]> wrote: > For states that "require" a balanced budget, what's the punishment for > a legislature that doesn't balance its budget ? Removal from office > ? No. Receivership by the federal government ? No. > > There are no consequences for the state government as there are no > "higher powers" over the states on this, no ? > > Cities can be put into receivership by their states, however. > > Charles > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l >
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