text: Art is correct to my knowledge - state governments MUST pass budgets in order to spend, and technically I think they must even pass BALANCED budgets; they cannot deficit spend.  The Federal government, by issuing Treasury securities, does two things:  1) Funds it's operations when spending exceeds receipts + accumulated funding; and 2) provides citizens and most particularly the Social Security fund with a relatively safe, modest-return investment option.  States, while they can issue debt, don't really have the same powers in that regard as the Federal government.  And it makes sense really - would you buy bonds issued by a state to cover that state's current operating expenses?  I wouldn't, that indicates the state is in dire financial condition.  That's why I find the issuance of debt to cover state pension obligations so scary.  It may be necessary given the magnitude of the problem, but it is very much kicking the can down the road.