Will Illinois Go Bankrupt Because of Scott Brown? – A sharp reader offers the following hypothesis: Illinois is fundamentally bankrupt. It has less than $1 million in cash, pays vendors net 90, and owes its state university $450 million that it cannot pay. Oh, and it also has $60 billion in unfunded pension liabilities. Now that the Republicans have 41 votes in the Senate, Illinois can’t count on any federal aid. The President’s home state will thus become insolvent.(For some background on Illinois’s budget woes, see this link.)My reader expresses similar concerns about California (where Governor Schwarzenegger’s budget assumes $6.9 billion in federal aid) and New York.All of which raises a question for policymakers and municipal bond investors.
California Controller: State Will Be Out of Cash in March Unless Budget is Cut – State Controller John Chiang issued a stern warning Friday about California’s cash reserves, telling legislative leaders and Gov. Arnold Schwarzenegger they must act on nearly $9 billion in budget cuts the governor is seeking by March — or the state will run out of cash to pay its bills.Without making those cuts — which Chiang says will pump $1.3 billion into the state’s checking account — California would be broke by April 1, no fooling. The state wouldn’t climb back to what’s considered a safe level of cash on hand, $2.5 billion, until later that month, when tax revenues are expected to begin flowing into Sacramento.