Michigan ranked 27th most likely to go bankrupt

An analysis of which states are most likely to go bankrupt puts Michigan roughly in the middle of the pack.

Taking into account each state’s debt, projected 2012 budget shortfall, gross domestic product and unfunded pension, health care and other liabilities,The Daily Beast ranks Michigan 27th most likely to go bankrupt — behind Colorado and ahead of Nevada.

#27, Michigan

Debt 2009: $29.6 billion
Projected 2012 Budget Shortfall: $1.8 billion
GDP 2009: $368.4 billion
Debt/GDP Ratio: 8.03%
Unfunded Pension Liabilities: $11.5 billion (16%)
Unfunded Health Care & Other Liabilities: $40 billion (98%)

Jeremy Winograd at the Detroit Metro Times sorted through the rankings:

Turns out New England is the worst off, with all its states placing in the top 20. Rhode Island, Connecticut and Massachusetts, with its astounding 20.43% debt-to-GDP ratio, making up the top 3. Meanwhile, the South and flyover country for the most part look to be in the best shape.

… nearly every state is planning to solve its debt woes by cutting superfluous entities like education spending, instead of doing something outrageous like making rich people pay slightly higher taxes.

States are not allowed to file for bankruptcy in federal court, but The New York Times reports that members of Congress are working on ways to changes this.

Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.