Detroit is not the only municipality facing serious financial difficulties. Across America, thousands of municipal officials are grappling with budget crises created by dwindling federal funds, public pension promises that cannot be fulfilled, expensive union contracts and government growth unsustainable by revenues.
For Detroit and cities big and small buried in debt, the question should be asked, "Is Chapter 9 bankruptcy the right way to go?" A recent city-commissioned report by an actuarial firm found that 83 cents of every Detroit police and fire payroll dollar is spent on pensions. Cities and municipalities falling on hard financial times is not new, but it is rare that any such entity files for bankruptcy as a way of addressing its massive debts. Out of nearly 89,500 municipalities in the country, there were just 239 municipal bankruptcy filings between 1980 and 2010.
Now, a slew of high profile municipal bankruptcy cases have increased the visibility of municipal bankruptcies.
To explain the complexity of the bankruptcy process, State Budget Solutions released "Municipal Bankruptcy: An Overview For Local Officials." It is designed to help state and local officials understand both the intricate process and the implications of municipal bankruptcy.
It must be said that while bankruptcy may be the best choice for some municipalities, it is not, however, a replacement for fixing the fundamentals driving fiscal crisis.
Michael Barnhart , chairman of State Budget Solutions
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