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Insolvency Frameworks for State and Local Governments

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  • Katharina Herold

Abstract

Insolvency frameworks stipulate rules and procedures to resolve debt in a prompt and orderly way. Such frameworks may serve to facilitate debt restructuring and the fiscal recovery even of subnational entities, including states and municipalities. They may even prevent subnational governments from sliding into insolvency. This paper identifies the benefits of setting up an insolvency framework for subnational governments, complementing existing budget rules and procedures. It analyses different design options of subnational insolvency frameworks by drawing on existing regimes for municipalities in Colombia, Hungary, South Africa, Switzerland and the United States as well as proposals for sovereign bankruptcy procedures in the literature. The paper also explores the main challenges for implementing subnational insolvency regimes and presents possible solutions.

Suggested Citation

  • Katharina Herold, 2020. "Insolvency Frameworks for State and Local Governments," OECD Journal on Budgeting, OECD Publishing, vol. 20(2).
    • Handle: RePEc:oec:govkaa:4fe1859f
    DOI: 10.1787/4fe1859f-en
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    Cited by:

    1. Unger, Eva-Maria & Bennett, Rohan Mark & Lemmen, Christiaan & Zevenbergen, Jaap, 2021. "LADM for sustainable development: An exploratory study on the application of domain-specific data models to support the SDGs," Land Use Policy, Elsevier, vol. 108(C).

    More about this item

    Keywords

    Subnational insolvency; municipal bankruptcy; debt resolution frameworks;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • K30 - Law and Economics - - Other Substantive Areas of Law - - - General

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