STATES INTERVENE IN FISCAL CRISES
A fiscal crisis of insolvency, default, or bankruptcy
raises grave concerns about the stability of a local
government. In the event of a fiscal crisis, states take
a more direct role in the management of the local government’s
budget. When audits reveal that local governments
have troubled fiscal conditions of ongoing
deficits or insolvency, states intervene in the dayto-
day operations to achieve budget stability and fiscal
solvency. Some states impose increasingly stringent
reporting and filing requirements regarding the fiscally
troubled local government’s financial obligations, contract
and purchasing actions, fund management decisions,
and general operational decisions. Other states
provide for receivers to take over the financial management
and governance of insolvent local governments,
and some states allow local governments to reorganize
debts in bankruptcy litigation.