What If Your State Went Bankrupt?

It has not been uncommon for cities to go bankrupt. Detroit has done so recently as has Flint. New York went bankrupt back in the 1970s. However, a US state has never gone bankrupt and they simply aren’t allowed to do so. However, thanks to a new bill in Congress, state bankruptcy could be on the table. This is particularly important right now as many states face budgetary shortfalls from Covid-19 and many states face unfunded worker pensions. Between these double barrels of being forced to pay out pensions and reduced tax revenue coming in, states will begin to issue new debt. What if they can’t pay it back? What happens next? That’s the problem Congress is trying to solve.