Posted By thestatedtruth.com on January 20, 2011

Hmm…They’re really getting serious about this.  These pensions will never survive in the current form.  Only a matter of time!

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.

Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.

More at: http://www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html?_r=2&src=busln

Categories: Commentary, Economy, Finance, Interest Rates, Bonds, National News, Wall Street, World News
Tags: State Bankruptcy, State Pension Problems