Most Voters Oppose Letting States Declare Bankruptcy

States are currently not allowed by law to file for bankruptcy, but former House Speaker Newt Gingrich and others have argued that bankruptcy might be the least painful alternative for taxpayers in heavily debt-ridden states like California, Illinois and New York. Voters aren't thrilled with the idea, but they like it better than higher taxes, and they're even more supportive if told government employees might have their pensions reduced in the process.

A new Rasmussen Reports national telephone survey shows that just 17% of Likely U.S. Voters believe states should be allowed to file for bankruptcy if they are unable to pay their financial obligations. Fifty-four percent (54%) oppose bankruptcy for states, and another 29% are undecided. (To see survey question wording, click here.)

But voter support nearly doubles to 32% when the question is phrased to include the possibility that government employees might have their pensions reduced if their state filed for bankruptcy. Fifty-one percent (51%) are still opposed to allowing states to declare bankruptcy, but only 17% remain undecided.

Twenty-seven percent (27%) of voters are willing to pay significantly higher taxes to keep their state out of bankruptcy, but 44% are not and prefer bankruptcy instead. Twenty-nine percent (29%) are not sure which course they like better.

Many states are finding unfunded or underfunded pension benefits for public workers to be one of their biggest deficit problems. A sizable majority (78%) of Americans say their states are now having major budget problems, and they think spending cuts, not higher taxes, are the solution.  But most expect their taxes to be raised in the next year anyway.

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The survey of 1,000 Likely Voters was conducted on January 21-22, 2011 by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence. Field work for all Rasmussen Reports surveys is conducted by Pulse Opinion Research, LLC. See methodology.