WASHINGTON (Reuters) – Senate Republican leaders afore~ on Tuesday they were considering introducing legislation to allow financially stressed U.S. states to declare bankruptcy, even though the No. 2 Republican in the House of Representatives has rebuffed the form.
“We’re exploring that as a responsible option,” Senator John Cornyn, who sits on both the Budget and Finance committees, told reporters.
Some Republicans be under the necessity embraced the bankruptcy option, which would allow states to sort public finances and renegotiate contracts with public employee unions, as an other to sending in federal aid.
Pension obligations to state workers including teachers and body of rules enforcement personnel pose a major burden on many states.
But analysts — and states themselves — are concerned that initiatory up a bankruptcy option would spook the buyers of state due, driving up interest rates and making borrowing more expensive.
Washington Governor Chris Gregoire and Nebraska Governor Dave Heineman uttered in a joint statement on Tuesday that states would not conversion to an act bankruptcy as a budget solution.
“The mere existence of a form allowing states to declare bankruptcy only serves to increase interest rates, set up the costs of state government and create more volatility in fiscal markets,” they said.
Senate Republican leader Mitch McConnell said ~t one decision had been reached on whether to introduce legislation that would unobstructed bankruptcy courts to states beset by financial troubles from the 2007-2009 recession.
But he closed along the option of Congress sending states large sums of money, viewed like it did in 2009 as part of the 4 billion incitement plan championed by President Barack Obama.
Republicans rode a wave of the world discontent over bailouts and burgeoning federal debt in November elections that handed them direction of the House and more seats in the Senate.
“There enjoin be no bailouts, I can tell you that. No bailouts,” McConnell afore~.
The bankruptcy option was dismissed by House Republican Majority Leader Eric Cantor, in successi~ Monday, meaning any bill will face an uphill battle in that apartment.
BIG GAPS
States are already projecting collective budget gaps that bear the greater proportion 0 billion for the fiscal year that starts in July because most states.
Because Federal Reserve Chairman Ben Bernanke has also balked at suggestions that the central bank could make provision assistance, bankruptcy may be the only option for beleaguered states, Cornyn afore~.
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