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01.26.11

States Most Likely To Go Bankrupt

Several states in the Union are discussing bankruptcy, despite opposition in Washington. How bad is it? The Daily Beast crunches the numbers of all 50 states to find who's in the deepest debt—and it isn't who you think.

On Friday, The New York Times reported that policymakers, cognizant that 44 states project budget shortfalls in 2012, were exploring ways to let these states declare bankruptcy. That possibility—forbidden under current law—has been debated all week.

Gallery: 50 States In Debt

So which states are the most vulnerable—in terms of indebtedness and unfunded liabilities—and thus more likely to consider this drastic option, should it be made available? The Daily Beast first ranked state indebtedness last August, measuring debt-to-gross domestic product ratio—the higher the ratio, the more likely a state would remain mired in debt. Now we’ve updated the data. These rankings reflect 2009 GDP (current dollars) data from the Bureau of Economic Analysis, while the 2009 debt figures are from the U.S. Census.

Meanwhile, debt is just half the story. The other half of our ranking is split evenly between each state’s percent of unfunded pension obligations, and unfunded health care obligations for retirees, based on a study by the Pew Center on the States.

Future budget shortfall levels are based on an independent analysis from the Center on Budget and Policy Priorities, which uses estimates of next year’s baseline budget spending compared to expected revenue.

It’s clear that debt is far from a Washington problem, and it belongs to both parties. Where does your state rank? Click here.