FYI: – states have sovereign immunity under the Eleventh Amendment, which limits

FYI:
– states have sovereign immunity under the Eleventh Amendment, which limits federal courts’ ability to force states to pay certain debts unless the state consents.

– no federal bankruptcy court process for states, so courts cannot impose a structured reorganization plan.

– creditors may sue the state if disputes arise over prioritizing payments (e.g., bondholders vs. pension obligations)

– State defaults have been rare but not unprecedented. During the 19th century, several states defaulted on canal and railroad bonds (e.g., Arkansas in the 1830s). These were resolved through negotiations with creditors, often involving partial repayments or land grants.

– Modern examples are limited. Illinois came close to fiscal collapse in the 2010s due to pension underfunding and budget gridlock but avoided default through emergency borrowing and legislative compromises.

In other words – states have discretion over what they don’t pay when they can’t pay.