From the February 2009 Idaho Observer:

Forty-six of 50 states could be insolvent by 2009; 2010

It is becoming increasingly likely that a majority of the several U.S. states could be bankrupt by 2010. There is currently 46 states with high budget deficits. Montana, North Dakota, Wyoming and West Virginia are the only states operating in black ink.

California, with a $41 billion deficit as of Nov., 2008, is operating with the deepest deficit in the country. Illinois is running a distant second, operating at $4.2 billion in the red. Total shortfalls for the 46 states add up to $51.1 billion.

Forty-five of the states have looked ahead to 2010 and the combined deficit totals are nearly doubled at almost $94 billion. But that may be a rosy picture. The Center on Budget and Policy Priorities (CBPP), in its article "State budget troubles worsen" (cbpp.org, Feb. 10, 2009), estimate that other factors, like deepening recession, fewer revenues and greater demand on state programs, will likely boost the 2010 shortfall to $140 billion. CBPP predicts that, should the economic downturn continue, within three years combined state deficits will come in at $350 billion to $370 billion.

The first question that comes to mind is, "For how many years will the states be able to operate at a deficit?" The next logical question is, "Who will determine when to foreclose on a state and who will schedule the auction to pay back the creditors?"

The recently passed, pork-laden HR 1, also called the "stimulus bill" does provide for helping to stabilize state and local governments. The strings attached to states that accept federal stimulus funds have not yet been analyzed.

Many of the 46 states are attempting to cut costs, cut state-funded programs, raise taxes, not issue tax refunds to their citizens and borrow money just to survive 2009. Ironically, many banks—the same banks that received billions in federal bailout bucks—are refusing to loan money to the states.

Curiously, the bailed out banks are not loaning the some $700 billion "dollars" back into circulation. It is rumored that the recipients of these imaginary $billions are using them to buy up hard assets at firesale prices for themselves so they will own everything when the economy collapses. It is also speculated that the nearly $2 trillion in bailout/stimulus funds appropriated by Congress has been quietly collateralized by in-ground assets—that is, the underground and undersea resources that have not yet been extracted.

No U.S. state has ever filed bankruptcy, not even during the Great Depression. Several states are primed to declare bankruptcy in 2009.