Federal Policy for Financially-Distressed Subnational Governments: The U.S. States and Puerto Rico

54 Pages Posted: 19 May 2017

See all articles by Cheryl D. Block

Cheryl D. Block

Washington University in St. Louis - School of Law

Date Written: May 18, 2017

Abstract

This article uses Puerto Rico’s ongoing financial crisis as an opportunity to explore complex policy issues that arise when a federalist regime’s central government must decide whether – and how – to assist a struggling subnational government entity. It first describes Puerto Rico’s dramatic economic decline to the point that its very existence as a going concern was threatened, and then describes and critiques the federal government’s response in the 2016 Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). The heart of the article explores sovereignty, market, and equity-based arguments for a presumption against federal government intervention to assist financially-distressed subnational governments, contrasting the application of these principles to U.S. states and the unincorporated territory of Puerto Rico. It then addresses similarities and differences in rebuttal arguments that the states and Puerto Rico might use to overcome the initial presumption against federal assistance. The article was published just days before the presidentially-appointed Financial Oversight and Management Board established by PROMESA authorized Puerto Rico to file for bankruptcy-like debt restructuring protection available under Title III of the Act.

Suggested Citation

Block, Cheryl D., Federal Policy for Financially-Distressed Subnational Governments: The U.S. States and Puerto Rico (May 18, 2017). 53 Washington University J. of Law & Pol'y 215 (2017), Available at SSRN: https://ssrn.com/abstract=2970771

Cheryl D. Block (Contact Author)

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States

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