Defeating Fiscal Distress: A State Responsibility
New policy solutions at the state level are necessary to anticipate, prevent, and manage distress. Cities need better fiscal policymaking, particularly with regard to personnel spending, since salaries and benefits dominate cities’ budgets. States have a responsibility to eliminate the threat of contagion – so the fiscal distress of one municipality does not affect other cities’ access to credit. Because only states can assume control of city governments, they are in the best position to enact fundamental reforms to eliminate or reduce the potential for fiscal recidivism.