East Cleveland is on track to become the first Ohio municipality to have a court pick a person called a receiver to manage and make decisions about its finances. The move is made possible under a new state law passed as part of the state’s most recent budget and takes effect Sept. 30.
A receiver is supposed to be a neutral third party who can step in and help counties, cities, villages or townships stabilize budgets when other state efforts, such as placing them in a “fiscal emergency” have not worked.
What is a receivership?
When a court determines that a business or organization – or, in rare cases, a local government – can no longer handle its own finances or affairs, a judge can select a receiver to make those decisions. A receiver can have wide authority to pay debts, sell assets or make decisions to keep a business or city services running.
How can a city be put under a receivership?
The new Ohio law that takes effect Sept. 30 allows the Ohio Attorney General to ask the state’s Court of Claims to pick a receiver for a municipality that has been in a fiscal emergency for more than a decade or twice in the same decade.
A receiver can also be appointed if the local government:
- Isn’t following the state’s budget and spending laws. (Municipalities aren’t supposed to spend more than they bring in.)
- Doesn’t comply with a set financial plan.
- Takes on debt without approval from financial supervisors appointed during a period of fiscal emergency.
- Makes administrative or legislative decisions that don’t follow the approved financial plan.
What are the different ways the state can step in before a receivership?
The state auditor, whose office keeps tabs on local governments that are in financial distress, has options that flag issues. The actions can escalate based on the seriousness of the issue.
Fiscal caution is sort of an early warning that the auditor’s office has noted that a municipality has budget problems or worrisome financial practices.
Fiscal watch can be triggered if a city, county, township or village has a high amount or number of past-due bills, if a certain number of municipal funds are in deficit or if there’s a projected deficit in the general fund, which pays for daily operations. If any of those things happen, the state auditor can start a review. If the auditor declares a fiscal watch, the government has 90 days to create and submit a financial recovery plan.
Fiscal emergency can be declared by the state auditor if any one of a set of triggers takes place, including if a local government defaults on debt it owes for more than 30 days, it doesn’t have money on hand to pay its workers or if deficits in funds or unpaid bills reach a certain level – a sixth of the general fund budget– at the end of the year. After releasing a report with a fiscal emergency determination, a state financial planning and supervision commission is created to oversee finances.
Since the 1980s, more than 60 municipalities, villages, and school districts have been placed in fiscal emergency, according to the auditor’s office. As of September 2025, 13 Ohio communities were in “fiscal emergency,” according to the state auditor’s office.
East Cleveland has been under fiscal emergency for almost 13 years. Before that, the city was under fiscal emergency for 17 years September from 1988 until February 2006.
What powers would a receiver have?
A receiver appointed to oversee a city in fiscal emergency can:
- Consult with local officials or take action on their own to reduce costs, raise revenue and get to a balanced budget. That could include laying off staff or other financial cuts.
- Make sure the government is following an approved financial plan and if one doesn’t exist, the receiver can work with local officials to create one or take on the responsibility to submit a plan to the commission overseeing the local government’s finances.
- Share monthly written progress reports with the commission and the county or municipal government. Do the same thing four times a year in an open meeting that the public can attend.
- Use any additional powers a court specifically outlines.
What can’t a receiver do?
The receiver generally has to follow the law and the court’s order. When lawmakers considered the new law, they included language that would have allowed a receiver to initiate bankruptcy proceedings to deal with local government debt if there had not been progress within several years. Gov. Mike DeWine vetoed that part of the law.
A local government with a receiver could still file for bankruptcy, according to State Auditor Keith Faber. City leaders would need permission from the state taxation department to file under state or federal bankruptcy laws.
How long does a receivership last?
Receiverships are supposed to be temporary until finances are stabilized.
The court can terminate the receivership once the local government has stable finances and the conditions that put it into fiscal emergency are resolved, according to the new law.
Who pays the receiver?
A receiver is paid for their work and they can also hire attorneys, accountants or other experts to advise them as they carry out their duties. The law says fees must be paid from funds appropriated to the Ohio Office of Budget Management during the period of fiscal emergency. It’s not clear what that means, we’ve reached out to state officials and will add more information when they respond.