Bulletin n. 1/2012
June 2012
CONTENTS
  • Section A) The theory and practise of the federal states and multi-level systems of government
  • Section B) Global governance and international organizations
  • Section C) Regional integration processes
  • Section D) Federalism as a political idea
    • Gillette Clayton P.
    Fiscal Federalism, Political Will, and Strategic Use of Municipal Bankruptcy
    in University of Chicago Law Review , Vol. 79, issue 1 ,  2012 ,  284-331
    Municipalities in fiscal distress may seek to adjust debts under Chapter 9 of the Bankruptcy Code either because they are truly destitute or because they lack the political will to adopt difficult resource adjustments. Local officials of municipalities that enter bankruptcy proceedings nevertheless retain political authority over municipal fiscal affairs. The decision to enter bankruptcy, however, may have significant financial consequences for other municipalities or for more centralized levels of government. Those externalities induce central governments to consider bailouts for distressed municipalities. In order to avoid moral hazard problems, central governments typically impose harsh restrictions on local officials as a condition of bailout. This dual system of rescue for distressed municipalities—bailouts and bankruptcy—permits local officials to threaten to file under Chapter 9 and thus to impose costs on central governments, unless the latter modify the conditions of bailouts. In this Article, I suggest that allowing bankruptcy courts to impose resource adjustments serves to neutralize the strategic behavior of local officials and thus encourages localities to internalize the costs of their activities in a manner more consistent with the tenets of fiscal federalism Full text available at: https://lawreview.uchicago.edu/sites/lawreview.uchicago.edu/files/uploads/79_1/11%20Gillette%20ART.pdf
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