It is hard to imagine that a state with the tremendous amount of resources that California has could possibly go bankrupt. However, even with the budget plan finally passing, we are in a precarious position. If the economy worsens and revenues decline further, what will the state do?
When Orange County declared bankruptcy in the mid-90s (and I was always leery about allowing a guy who was really in to jade jewelry for himself control all of the county money), it was truly startling. Now imagine if the state of California were forced in to a similar situation.
Could it happen?
I'm told by reliable sources that a state cannot go bankrupt. There's simply no provision for it in the bankruptcy laws.
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