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Governors Reject Bankruptcy Idea For States Governors Reject Bankruptcy Idea For States

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Governors Reject Bankruptcy Idea For States

Republicans and Democrats disagree on Washington's role in solving states' fiscal problems.


Gov. Chris Gregoire, D-WA, chair of the National Governors Association at the Winter Meeting in Washington on Saturday, Feb.26, 2011.(Chet Susslin)

The nation’s governors closed the door Saturday on the idea that states should be allowed to voluntarily declare bankruptcy in order to deal with their dismal financial circumstances.

The National Governors Association is meeting in Washington at a time when states collectively face a $175 billion budget gap, and recently some national Republican leaders have floated the idea that states be allowed bankruptcy protection as a way to fix the problem.


“Not only do we not want (bankruptcy protection), we want to stop the discussion,’’ said the NGA’s chairwoman, Democratic Gov. Christine Gregoire. “We want the leaders of Congress to say it’s dead.’’ Some nationally influential Republicans, including former Majority Leader Newt Gingrich and former Florida governor Jeb Bush, argue that states should have the option of reorganizing their finances to reform bloated pension systems and get out from under costly labor contracts, and that bankruptcy would allow that kind of reorganization.

The debate reflects one of the biggest flashpoints at the gathering of the nation’s governors: How much should states target public employee unions in order to balance their budgets? The NGA aims to be a policy-driven sanctuary from partisanship but looming over this year’s meeting are politically explosive protests in Wisconsin and Ohio over proposals to strip unions of collective bargaining rights. It’s the first NGA gathering since the 2010 election swept a record-setting 29 new chief executives into office.

“To be sure, the difference between Republicans and Democrats have never been sharper,’’ said Connecticut Gov. Dan Malloy, the first Democrat elected to lead the state in two decades and one of the party’s few victories in 2010. “Democrats are talking about job creation and building infrastructure. Republicans want to fight the battles of the last two years.’’


The standoff between Republican governors and the Democratic administration is striking. Twenty-seven states, mostly led by Republicans, are suing the federal government over President Obama’s new health care legislation. A handful of Republican governors, most recently Gov. Rick Scott in Florida, have rejected federal stimulus money for high-speed rail projects, arguing that states will bear the burden of increased spending over the long term.

“It’s a healthy debate over what states should be doing and what Washington should be doing,’’ Scott said.
While Gregoire described the states’ relationship with the federal government as a “partnership to restore fiscal discipline,’’ some of the Republican governors just want Washington to get out of the way.

“What the federal government can do for us is not money. It’s flexibility,’’ said Maine Gov. Paul LePage, a Republican. “Let us run our states with the resources we have and we will be very happy to work with you in dealing with the deficit.’’

With Democrats and Republicans in Washington at loggerheads over the federal budget, the governors are bracing for a possible government shutdown. “We are recovering but we are fragile. We are fragile,’’ Gregoire said. “Anything Congress does, whether it’s a shutdown or cuts that will directly impact the states are a considerable concern. We don’t need a hiccup right now.’’



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