(CHICAGOBUSINESS.COM) — As Illinois’ fiscal crisis deepens, the word “bankruptcy” is creeping more and more into the public discourse.
While it appears unlikely or even impossible for a state to hide out from creditors in Bankruptcy Court, Illinois appears to meet classic definitions of insolvency: Its liabilities far exceed its assets, and it’s not generating enough cash to pay its bills.
Private companies in similar circumstances often shut down or file for bankruptcy protection. Legal experts say the protections of the federal bankruptcy code are available to cities and counties but not states.
While Illinois doesn’t have the option of shutting its doors or shedding debts in a bankruptcy reorganization, it seems powerless to avert the practical equivalent. Despite a budget shortfall estimated to be as high as $5.7 billion, state officials haven’t shown the political will to either raise taxes or cut spending sufficiently to close the gap.