I doubt that a revision/extension to the US bankruptcy code to allow states to go BK would go through in the current political environment.
The idea is flawed, IMO. States are political sovereigns, and they have the power to either raise taxes or fix their budgets. Allowing them to default on their state debts puts the issue of taxes and spending into the bankruptcy courts’ laps, and that’s not a place we want to see state spending and taxation go.
The states will have to grow a pair and address their issues. This is why the new governor of NJ is attracting so much attention - because he grew a pair and decided to take the issues on without flinching, without apology and without delay.
C’mon... Blue State governors won’t do it. So we need to give them a tool to force changes at home. The unions can restructure pensions or let a federal judge make the changes. I think they’ll be mote receptive to what’s needed if they consent to those changes than having it imposed on them by a federal court.
NY, CA and ILL will not “grow a pair” with their current Democratic governors. The bill collector will arrive long before another election.
What will happen is that they will become “deadbeat states”, obligated on paper to pay a lot of bills but without the cash to do so.
Welcome to the new normal.
(If you are doing business with one of these states you need to demand cash on delivery or find other markets—these three states just flunked their credit check.)
Grab the popcorn to see which bills they decide to pay in what order.