There’s an interesting discussion going on around the blogosphere, largely prompted by the financial nightmares a couple of states (California and Illinois, and possibly New Jersey) find themselves in. It brings up the of can a state go bankrupt legally? If not, why not? Should they? And how should it happen?
I’ve only skimmed the articles and comments, but I’m finding myself generally in sympathy with the idea that yes, we should allow it — but with some hefty restrictions.
The first is, the state must enter into it entirely voluntarily. Private firms can be forced into bankruptcy by creditors; that should never be the case with a state. I’d suggest it must be approved by a supermajority of their legislature (2/3 sounds good) and signed by the governor.
The second idea, culled from the Volokh Conspiracy’s comments, is that the state would have to forfeit its status as a state. It would revert to being a territory, directly governed by Congress, like Guam or Puerto Rico or the District of Columbia. The citizens of the ex-state would retain their rights as American citizens, including voting for president, but would forfeit their Congressional representation. They would have to come up with a plan to reorganize as a state (or, in California’s case, perhaps two states — it’s certainly big enough to split) and petition for readmission to the union, but only after they’ve gotten their finances in order.
This could also mess up the design of our flag, but I would say we just ignore that technicality and leave the flag as is.
I’ll have to give this idea some more hefty thought, but my gut instinct is pushing me towards favoring the idea of a state bankruptcy coupled with a forfeiture of state status, and a path back to full statehood outlined. It strikes me as an extreme measure, but desperate times call for desperate measures.