Predictors of Municipal Bankruptcies and State Intervention Programs: An Exploratory Study

Similar circumstances, do not? This Article builds on the literature examining the causes and consequences of municipal fiscal distress by exploring specific factors that lead municipalities to seek help from the state and federal government. Viewing municipal opportunities and constraints through political, economic, and legal lenses, this Article helps to explain the nuances of municipal decision making.After identifying eight factors that may serve as predictors of municipal insolvency, we studied cities in fiscal distress with an eye toward uncovering the circumstances that led each of these cities into and, if applicable, out of, their financial predicaments. Union density, unfunded pension liability, and financial mismanagement were the three most prevalent factors in our sample population. Our analysis suggests that scholars and policymakers should focus their efforts on using bankruptcy relief in conjunction with state aid programs in order to address these primary sources of municipal distress more comprehensively.