Subject: Accounting and not for profit

State and local governments do not have the economic ability to run fiscal deficits. They cannot encourage aggregate demand like the federal government. Most state governments are required by law or their constitution to balance their budgets, while others place constitutional caps on state indebtedness or have other spending limits. Federal government can raise money by selling treasury securities. This option is not available to state and local governments. In state and local governments, the availability of revenues is a necessary prerequisite to the incurring of expenditures. Some governments may operate at a deficit temporarily, but it is generally conceded that they may not do so for several consecutive periods

Question: What happens if a state cannot pay its bills as they come due?