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Comment by rayiner | Hacker News Reader

Insolvency means your liabilities exceed your assets, or you can’t pay your debt as it comes due. If you’re a state like Illinois that has a constitutional restriction on reducing future pension obligations through a change in the law, then you’re cooking the books if you don’t count them as liabilities. And if you do, Illinois is almost certainly insolvent under the first definition. And since it’s not able to pay its bills in due course, it’s probably insolvent under the second definition too.

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> Insolvency means your liabilities exceed your assets, or you can’t pay your debt as it comes due. If you’re a state like Illinois that has a constitutional restriction on reducing future pension obligations through a change in the law, then you’re cooking the books if you don’t count them as liabilities. And if you do, Illinois is almost certainly insolvent under the first definition.

You seem to be discounting assets, like taxation power (now, the politicsl consensus necessary for the state to use that power may not exist, but that's unwillingness to use an asset, not lack of assets.)

> that's unwillingness to use an asset, not lack of assets

That’s like marking at 100 a bond trading at 30 while arguing the problem isn’t the asset, it’s buyers’ unwillingness to pay the right price. In any case, potential to raise taxes is like potential to raise prices. It isn’t an asset until it’s signed and producing.

That's when you say that it's held-to-maturity and claim that it's not impaired.

  assets, like taxation power

Now we go straight from a misdefinition of "bankruptcy" to outright fabrication of "asset". Each of us may have earning power, for example, but that doesn't make it an asset we can legitimately put on a balance sheet.

And taxation power is constrained by the US and IL Constitutions and even US and IL law.

Insolvency is a legal term meaning that one cannot pay their debts when due (see the UCC).

Illinois can currently pay its debts as they come due, so it is currently solvent. It is likely to become insolvent in the future, but that is not the current state.

Actually they can't. They currently have somewhere north of 5 billion in unpaid invoices. Their slow payment on contracts have driven some organizations into bankruptcy themselves. Many small business owners I know now refuse to do business with the state because thay can't wait years to be paid.

> Actually they can't. They currently have somewhere north of 5 billion in unpaid invoices.

There's a difference between not having the money to pay debts as they come due (which is insolvency) and just paying late by choice, incompetence, or -- as happens with in some jurisdictions with budget delays -- legal prohibition on using existing funds [0] (none of which are insolvency, though they may be default on the individual debts).

[0] Which, looked at one way, is a subset of choice, since the actors not making the necessary choice to remove the legal roadblock are the political leadership of the state.

Do you have a cite for that? Because the only articles claiming that size of a backlog predate the budget resolution they passed last year after 2 years of no budget. They're currently on track to be out of deficit-spending within 2 or 3 years (possibly this year, if the Trump is to be believed) due to a combination of massive spending cuts ($6 billion in total cuts between 2015 and 2017) and tax revenue increases.

> Illinois can currently pay its debts as they come due, so it is currently solvent.

It almost certainly can, if it chooses to, but it hasn't been choosing to, if you consider the pension fund distinct from the state.

isn't the US then the same by your reasoning? we should flee the US as well.

The US is not bankrupt or insolvent: https://en.wikipedia.org/wiki/Financial_position_of_the_Unit...

US Federal debt is in USD term so it can always repay its debt with printed USD. Technically it is not insolvent.

The US can always pay its debt because it is denominated in US dollars - it can print sufficient US dollars to meet its debt obligations. States do not have this ability.

It might be if it had a constitutional amendment saying Medicaid, Medicare and/or Social Security were untouchable. It doesn't. There's no spending in the US that's not on the table. When or if push came to shove it's not hard to imagine some or all of those programs being cut just as it's not hard to imagine taxes going up.

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