???Bankrupt states???: Not just a metaphor?

With some forty-four states and the District of
Columbia projecting budget shortfalls for fiscal year 2012 (which begins in
July of this year), some cash-stricken states are quietly looking into the
possibility of declaring bankruptcy, GM-style. Although sovereign states are
barred from seeking protection in federal bankruptcy court, policymakers are investigating
workarounds that would allow states to get out from under crushing obligations—especially
the Cadillac pensions and healthcare plans promised to retired public workers
(including educators). By no means is bankruptcy the easy way out for
struggling states. Even the conversation of such has reverberating, and
sometimes destabilizing, consequences. (It could rattle the public sector bond
market, for instance.) However, discussions about something as grave as
bankruptcy (and the potential of public-union employees losing at least part of
their pensions) may give state lawmakers an unprecedented amount of leverage at
the bargaining table. Education reformers may no longer be able to buy off
defenders of the status quo with sweet-deal carrots, but they may now have more
power to make needed changes by waving this harsh but necessary stick.

Path Is Sought for States to Escape Their Debt Burdens
,” by Mary Williams
Walsh, New York Times, January 20,