Because there is no protection afforded to states in the U.S. bankruptcy code, the only thing a state can do is default, which would eventually lead to a Federal court issuing a writ of mandamus (We command), "issued by a superior court to compel a lower court or a government officer to perform mandatory or purely ministerial duties correctly", i.e. ordering the state to raise taxes, cut spending and pay its damn bills.
If a California court issues the order it is called a mandate.
From the Los Angeles Times' PoliCal blog:
Republican U.S. Senate candidate Carly Fiorina suggested that the state of California should consider declaring bankruptcy, apparently unaware that states cannot do that under federal bankruptcy law.
The comments were first reported Tuesday in the Riverside Press-Telegram. Fiorina, the former head of Hewlett-Packard, hosted a business roundtable at a cement plant in Colton, Calif., and a businessman asked her if the state should consider filing for bankruptcy.
"I think it should always be considered," Fiorina replied. "Whether that is the right approach now, I don't know. I think bankruptcy, as a possibility, at the very least focuses the mind on what has to be done to salvage a situation."
Under federal law, municipalities can declare bankruptcy, as Orange County notably did in 1994. But states do not have the same ability.A spokesman for one of Fiorina’s rivals in the GOP race to take on incumbent Sen. Barbara Boxer said the gaffe shows that Fiorina, who has never sought political office before and has failed to vote in many elections, is unprepared....MORE