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States as fiscal sovereigns: implications for ability and willingness to pay in full and on time

In: State and Local Financial Instruments

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Abstract

This chapter analyzes how fiscal sovereignty has enabled state governments to create secure municipal securities backed by very strong repayment pledges. The tax pledge supporting general obligation debt and user charges and fees pledged by monopoly providers and other public benefit organizations on other debt, provide very secure repayment streams on most municipal debt. Fiscal rules and institutions provide a strong foundation supporting the debt issued by subnational governments, which contradicts the claim that the market is fundamentally weak and prone to systematic upheaval. The chapter also describes how local governments operate within the fiscal and legal framework provided by their state government, and the importance of local government debt management decision making in debt issuance, default and bankruptcy decisions.

Suggested Citation

  • ., 2021. "States as fiscal sovereigns: implications for ability and willingness to pay in full and on time," Chapters, in: State and Local Financial Instruments, chapter 3, pages 39-57, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:19966_3
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