Hartford

Well, that escalated quickly.

Just two months after Standard & Poor’s downgraded its general obligation debt to junk status, warning that the historic Connecticut capital could soon follow other once-proud cities like Detroit into bankruptcy, Hartford city officials confirmed as much when they warned on Thursday that the city could be forced into insolvency within two months if the state doesn’t provide emergency financial relief, the WSJ reports.

Judging by muni spreads, Illinois is widely considered the most financially troubled state in the country. However, preppy Connecticut, which has the highest per-capita income in the country and whose capital Hartford has been on the verge of bankruptcy for months, isn’t far behind.

One week ago, Illinois passed its three year-overdue budget in hopes of avoiding a downgrade to junk status, however in an unexpected twist, Moody's said that it may still downgrade the near-insolvent state, regardless of the so-called budget "deal." In fact, a downgrade of Illinois may come at any moment, making it the first U.S. state whose bond ratings tip into junk, although as of yesterday, credit rating agencies said they were still reviewing the state's newly enacted budget and tax package.

While the public's attention is keenly focused on whether Illinois will reach a budget deal in the next 2 days ahead of the next fiscal year which begins on July 1, avoiding the first ever downgrade to junk for a US state as the state piles up some $15 billion in unpaid bills and now oews more than $800 million in interest on the unpaid balances alone, the financial peril facing Connecticut is just as dire.