Jeb Bush, Newt Gingrich: Allow states to declare bankruptcy - latimes.com

Better off bankrupt

States should have the option of bankruptcy protection to deal with their budget crises.

First, as with municipal bankruptcy, it would have to be completely voluntary. This means that neither the federal government nor state creditors could push an unwilling state into bankruptcy

Second, as with municipal bankruptcy, a new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations…The new law could also allow states an opportunity to reform their bloated, broken and underfunded pension systems for current and future workers.

Third, the new law should allow for the restructuring of a state's debt and other contractual obligations.

Fourth, the federal judge reviewing the state's reorganization plan would have the power only to accept the plan as permissible under the federal bankruptcy law, or reject it as inconsistent with that law.

Fifth, the new law should provide for triggering mechanisms to initiate the bankruptcy process that respect the sovereignty of the people of a state.

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