MUNICIPAL FISCAL STRESS: SELECTED MAJOR CASES OF THE 21ST CENTURY

Joshua R. Zender
Humboldt State University

Keren H. Deal
Auburn University Montgomery

ABSTRACT

While considered uncommon in relation to U.S. corporate bankruptcies, an increasing
number of Chapter 9 municipal defaults have occurred in the past twenty-five years. Bankruptcy
has been voluntarily sought and, in most cases, successfully executed to overcome fiscal stress in
U.S. cities of all sizes. This paper recounts the complex tale of the three largest U.S. public fiscal
crises within the early 21st century: the City of San Diego, California, Jefferson County, Alabama,
and the City of Detroit, Michigan. Fiscal stress in a local government threatens the quality of
municipal services and diminishes citizen confidence in their local leadership. The cases
illustrated in this paper highlight the continued importance of studying the reasons for and
solutions deployed to overcome fiscal stress conditions in local government. The research findings
are of particular relevance to fiscal officers hoping to avert similar emergencies today.

Keywords: Accounting, bankruptcy, case study, public finance, public administration