Meredith Whitney isn’t exactly a household name, but she’s as famous as Cassandra on Wall Street. That’s because in 2007, Whitney was one of the first to note that Citigroup and other high-flying banks were on the verge of collapse. Now the same woman who predicted the Wall Street meltdown is warning about another calamity — our state governments are going broke, with possibly disastrous consequences. “I see a lack of transparency and an abundance of complacency on the part of investors and politicians, just as we saw before the banks imploded,” she recently told Fortune.
Whitney has released a 600-page report on states’ fiscal woes, warning of $192 billion in state budget shortfalls, which comes to 27 percent of all combined state budgets for the 2010 fiscal year. States have been borrowing heavily from health care and public pension funds, which are now underfunded by $1 trillion, to cover their debts. What happens when states can’t pay the bills?
