Fiscal Stability Act

R.I. General Laws Chapter 45-9 (Fiscal Stability Act) was created for the express purposes of (1) to provide a mechanism for the State to work with the cities, towns and fire districts undergoing financial distress that threatens the fiscal well-being, public safety and welfare of such cities, towns and fire districts, or other cities, towns, or fire districts or the State, and (2) to provide continuing access to the municipal credit markets for Rhode Island and its cities, towns and fire districts through a predictable, stable mechanism for addressing the issues facing cities, towns and fire districts in financial distress.

The Fiscal Stability Act was structured to provide multiple tiers of State support for, or control over, fiscally unstable cities and towns.  The first level of support is the appointment of a “fiscal overseer” whose primary role is to review, supervise and/or approve certain municipal matters and to develop an operating and capital plan to achieve fiscal stability in the municipality or fire district.

If a fiscal overseer reports that the city, town or fire district is unable to present a balanced budget, faces a fiscal crisis that poses an imminent danger to the safety and welfare of the city, town or fire district or its property, will not achieve fiscal stability without the assistance of a budget commission or should not be granted approval of its’ tax levy for the fiscal year, then the State’s Director of Revenue may appoint a budget commission.  A budget commission has significantly broader powers than those granted to a fiscal overseer, including the authority to exercise all powers of a city’s, town’s, or fire district’s elected officials.

However, if a budget commission determines that its powers are insufficient to restore fiscal stability to a city, town or fire district, then the Director of Revenue must terminate the budget commission and appoint a receiver.  A receiver has all of the powers of the budget commission, but is also provided with the power to file a federal Chapter 9 bankruptcy petition for the city, town or fire district. Under the Fiscal Stability Act, if the Director of Revenue, in consultation with the Auditor General, determines that a fiscal emergency exists, a receiver may be appointed without a fiscal overseer or a budget commission first being appointed.