We now know, after the re-election of Governor
Perry, that Texas has a budget deficit of an estimated 27 billion dollars and
we are now in the same boat as is New York, California and New Jersey.
Because of this state level economic disaster, as opposed to the national level
economic disaster, some folks are talking about changing the bankruptcy laws to
allow states to file for bankruptcy, or to provide for some reorganization
process whereby states can get out of this mess.
Here is a quote from a recent article: "For
now, the fear of destabilizing the municipal bond market with the words "state
bankruptcy" has proponents in Congress going about their work on tiptoe.
No draft bill is in circulation yet, and no member of
Congress has come forward as a sponsor, although Senator John Cornyn, a Texas
Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the
possiblity in a hearing this month.
House Republicans, and Senators from both parties, have
taken an interest in the issue, with nudging from bankruptcy lawyers and a
former House speaker, Newt Gingrich, who could be a Republican presidential
It would be difficult to get a bill through Congress, not
only because of the constitutional questions and the complexities of bankruptcy
law, but also because of fears that even talk of such a law could make the
states' problems worse.
Lawmakers might decide to stop short of a full-blown
bankruptcy proposal and establish instead some sort of oversight panel for
distressed states, akin to the Municipal Assistance Corporation, which helped
New York City during its fiscal crisis of 1975."
is a link
Read more at
TexasLawyerBlog.com, a blog by Michael McBride.