Fiscal First Aid

When Recovery Fails: State Intervention and Local Government Bankruptcy

When Recovery Fails: State Intervention and Local Government Bankruptcy

GFOA’s Fiscal First Aid program describes a comprehensive process for financial recovery. However, a government could fail to successfully navigate the recovery process. The purpose of this paper is to help local governments understand the more drastic options if recovery fails.

First, we will cover state intervention. This is where state government inserts itself into the business of the local government. The state government (either directly or through its agents) can encourage the local government to make decisions that will improve financial conditions.

Second, we will address bankruptcy. Local government bankruptcy is very rare, and GFOA strongly recommends that governments take every possible step to avoid it. Nevertheless, local government bankruptcy draws attention out of proportion to its prevalence. Therefore, we address common questions about local government bankruptcy to help local government decision-makers separate fact from fiction.


Download