by Calculated Risk on 10/04/2010 09:34:00 PM

From Mary Williams Walsh at the NY Times: Cities in Debt Turn to States, Adding Strain

Across the country, a growing number of towns, cities and other local governments are seeking refuge in [distressed-cities programs] that many states provide as alternatives to federal bankruptcy court. Pennsylvania will have 20 cities in its distressed-cities program if Harrisburg receives approval. Michigan has 37 in its program; New Jersey has seven; Illinois, Rhode Island and California each have at least one. ...

The programs, which vary by state, generally allow troubled communities to tap emergency credit lines while restructuring their finances with some form of state oversight.

The concern with the distressed-cities programs is that the cities become almost permanent wards of the state - and the states already have their own budget problems. And the list of distressed-cities keeps growing ...