Article

The Role of Slack Local Government Finances

Authors:
To read the full-text of this research, you can request a copy directly from the author.

Abstract

The research presented here adopts an organizational approach to develop three regression models that examine why local governments accumulate slack in the form of unreserved fund balances, and what is the impact of slack resources on local governments' short-term fiscal conditions and decisions about spending and revenues. Using data on Chicago suburban municipalities and their governments, the first model estimates the effects of long-term and short-term conditions (fiscal and governing) on unreserved fund balances. The second and third models examine the impact of slack resources and other factors on year-end deficits or surpluses and changes in spending and own-source revenues. The results show that ending balances, expenditures (size), and long-term fiscal conditions have the greatest effect on fund balances, and that slack and current fiscal conditions have the greatest effect on ending balances and changes in revenues and spending.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the author.

... However, budget stabilization funds are not highly discretionary either, as they typically come with rules regarding deposit and withdrawal. Second, while budget stabilization funds are common among states, they are less so in localities (Hendrick 2006;Arapis and Reitano 2018). In other words, a discretionary aspect of unreserved fund balance and its prevalence among localities make it a proper choice for investigation of local savings behavior associated with an external crisis. ...
... This study controls the effects of two prominent institutions of local government in California: home rule and term limits on the city council. Home Rule indicates a city governed with greater independence from upper governments, known as a charter city in California, which potentially affects local fiscal resources (Hendrick 2006). Term Limits have been extensively studied, while two streams of argument still compete. ...
... Second, this study includes %Democratic Votes, which reflects city residents' political preferences (Levin and Tadelis 2010;Hendrick 2006), and Nonprofit Demand for Service to consider political pressure from nonprofit organizations (Rose and Smith 2012). Considerably dependent on government grants, nonprofits would be interested in whether government creates spending programs that advance their causes and, at the same time, increase their revenues. ...
Article
Full-text available
This study explores whether and how an economic crisis affects the spending of government savings by focusing on its political-economic benefit. Despite a great deal of discussion about the government’s tendency toward more spending, relatively few studies have attempted to identify the conditions that can reverse the tendency. Using data from 254 California cities during 1996–2009, this study finds a regular U-shape relationship between unemployment rates and government savings. Savings decrease until the unemployment rate reaches almost double digits (9.9%) and begin to recover after this point. The results suggest that an economic crisis curbs the spending tendency by modifying the incentives of legislators. This study contributes to public administration research by explaining local government savings and its delayed responses to a crisis from a political-economic perspective.
... Similar to state-level literature, many local studies have focused on understanding the role of fiscal risk in government saving behavior Hendrick 2006;Kriz 2015;Marlowe 2005Marlowe , 2006Marlowe , 2011Wolkoff 1987). Fiscal risk has been examined in terms of tax structures, including own-source revenue volatility and local reliance on external aid as well as fluctuations in financial conditions. ...
... In the first panel-data study of local reserves, Marlowe (2005) shows that unreserved general fund balances have a counter-cyclical stabilization effect in downturn years only. Hendrick (2006) finds that fiscal slack declines as financial conditions worsen and offers evidence that fiscal reserves are used to cover budget deficits whereas budget surpluses are used to replenish fiscal reserves. Several other local studies examine the countercyclical nature of reserves but report mixed results. ...
... In their analysis, property tax reliance is negatively associated with fiscal reserves during the Great 2. Between 2005 and 2018, we have identified 20 empirical studies on the determinants and use of local fiscal reserves in the United States. Ten studies have been published at the city level (note the chronological listing : Marlowe 2005;Hendrick 2006;Gianakis and Snow 2007;Gore 2009;Marlowe 2011;Snow, Gianakis, and Haughton 2015;Hand, Pierson, and Thompson 2016;Arapis and Reitano 2016;Thompson et al. 20092017Su and Hildreth 2018); six papers at the county level (Stewart 2009(Stewart , 2011Wang and Hou 2012;Stewart, Hildreth, and Antwi-Boasiako 2015;Stewart, Hamman, and Pink-Harper 2018;Guo and Wang 2017); and four papers at the level of school districts (Ványolós 2011;Duncombe and Hou 2014;Arapis, Reitano, and Bruck 2017;Barrett et al. 2018). Twelve, or 60 percent, of these studies, have been published in Public Budgeting & Finance. ...
Article
Full-text available
Though the fiscal slack literature has advanced over the past decade, more research is needed for a systematic understanding of the determinants and uses of fiscal reserves at the local level. This paper reviews theory and empirical evidence on the determinants of municipal fiscal reserves offers a conceptual framework for analyzing fiscal reserves accumulation and tests a series of hypotheses using a panel of 2007–2012 financial data for 145 U.S. cities from 21 states. Generalized least squares models show that unassigned general fund balances and unrestricted net assets are positively associated with general fund surpluses in the previous year and with local household incomes, while not being related to measures of fiscal risk, revenue effort, and voter characteristics. Overall, the findings suggest a relatively stronger influence of the capacity to save than the need to save on local fiscal reserves.
... Lacking a formally established rainy day fund or stabilization fund does not mean that these municipal governments have no financial slack. Many local governments maintain considerable amount of slack in their fund balances (Marlowe 2005;Hendrick 2006;Stewart 2009;Wang and Hou 2012;Wang 2015). Fund balance is the difference between a government's current assets and current liabilities at the end of a fiscal year, reflecting what is left after the fund's assets have been used to meet its liabilities. ...
... The first indicator is dependence on intergovernmental revenues. Financial professionals and researchers consider over dependence on intergovernmental revenues a risk factor in local finance because the amount of aid from state and federal government and the time of aid disbursement are not under municipal government's control (Bowman, Calia, and Metzgar 1999;Hendrick 2006 Certain spending categories may increase cash flow problems. For example, the amount of debt service expenses is not part of the annual appropriation process because it was pre-set at the point of bond issuance. ...
... City size is also associated with the independent variable-, . Studies have found that larger cities generally maintain less financial slack (Hendrick 2006;Marlowe 2012), suggesting that they may need more external financial resources for cash flows. ...
Article
Full-text available
Many municipal governments face the challenge of temporary cash deficits due to the mismatched schedules of cash flow-ins and flow-outs. To smooth the temporary deficits, they can use either internal financial resources such as financial slack or external financial resources such as short-term borrowing. This paper applies the pecking order theory to examine municipal governments' financial preference when they experience cash flow problems. Results show that municipal governments prefer accumulated financial slack to short-term borrowing when both options are available. This finding demonstrates financial slack's role as a convenient cash management tool in municipal financial management. It also suggests the applicability of the pecking order theory in future public financial management research.
... Governments have come to see UFB as a significant indicator of fiscal condition that influences credit ratings and therefore lending costs (although this belief has not been validated empirically) (Gold 1986;Marlowe 2008). Citizens may overlook the importance of UFB, but it indirectly affects items they do follow such as tax rates and public services provision (Hendrick 2006;Guo and Wang 2017). Finally, while UFB does provide managerial flexibility and organizational capacity, scholars have questioned whether it has diminishing returns as saving turns to hoarding (Marlowe 2008). ...
... A number of scholars over the past two decades have attempted to identify the primary generators of fiscal slack within state and local governments; including economic, organizational, demographic, institutional, and political explanations (Hendrick 2006;Stewart 2009 (Hendrick and Crawford 2014). Intuitively, fiscal slack generally increases during good fiscal times when operating surpluses are higher and decreases during downturns when revenues lessen; however, this may manifest itself in less fungible forms of slack such as capital and enterprise spending instead of more liquid "rainy day funds" or UFB (Levine et al. 1981;Dougherty and Song 2003;Hendrick 2004;2006;Marlowe 2012 (Hendrick 2004;Hendrick and Crawford 2014;Hendrick 2006;Stewart 2009;Wang and Hou 2012;Su 2019). ...
... A number of scholars over the past two decades have attempted to identify the primary generators of fiscal slack within state and local governments; including economic, organizational, demographic, institutional, and political explanations (Hendrick 2006;Stewart 2009 (Hendrick and Crawford 2014). Intuitively, fiscal slack generally increases during good fiscal times when operating surpluses are higher and decreases during downturns when revenues lessen; however, this may manifest itself in less fungible forms of slack such as capital and enterprise spending instead of more liquid "rainy day funds" or UFB (Levine et al. 1981;Dougherty and Song 2003;Hendrick 2004;2006;Marlowe 2012 (Hendrick 2004;Hendrick and Crawford 2014;Hendrick 2006;Stewart 2009;Wang and Hou 2012;Su 2019). A more complex, opaque municipal fiscal structure is also associated with lower levels of UFB as fiscal slack is stored beyond the spotlight shining upon the general fund (Gorina et al. 2019;Shon and Kwak 2020). ...
Article
Full-text available
Fiscal slack scholars have sought to identify the primary generators of unreserved fund balance (UFB) within local governments; including economic, organizational, demographic, institutional, and political factors. Guo and Wang (2017) extend this endeavor spatially; however, geography may mask the professional learning impact of sub-regional councils of governments (COGs). This study examines 265 Chicago suburban municipalities to reveal through a pairing approach that municipalities who belong to the same sub-regional COG generally have more similar UFB levels, independent of geographical proximity. Policymakers can therefore utilize COGs when making decisions regarding a municipality's most vital resource for strategic investments and fiscal stress.
... Different from state governments that keep savings in formally established funds, most local governments keep discretionary savings in the form of unreserved general fund balance (Hendrick, 2006;Marlowe, 2012). The general fund is a government's primary operating fund (GASB, 2007). ...
... Some researchers have explored local governments' accumulation of unreserved general fund balance. Hendrick (2006) studied a sample of suburban cities in Chicago metropolitan area and found that cities with higher debt burden accumulated less savings. The size of a city also mattered: larger cities maintained less savings. ...
... The size of a city may affect the accumulation of municipal savings. Prior studies find that smaller cities maintain more savings (Hendrick, 2006;Marlowe, 2012). One possible explanation is that larger cities have more connections that offer managers more options when circumstances change. ...
Article
Full-text available
Government savings can be a conundrum that perplexes taxpayers. Excessive savings indicate that taxpayers either pay unnecessarily high taxes, or they do not receive adequate returns on services. Insufficient savings leave government officials little financial flexibility. The Great Recession and its aftermath have renewed interest in understanding government savings. This article uses dynamic panel modeling to analyze the determinants of municipal discretionary savings. Results show that risk factors are the primary drivers of municipal savings, and high-risk factors have greater impact on the amount of savings. This finding confirms organization theory’s view of savings as a crucial buffer against risk.
... This study uses Massachusetts municipalities as a research sample to explore the determinants of the size of local government fiscal slack. Scholars have recently advanced research on this topic (Gianakis and Snow 2007;Gore 2009;Guo and Wang 2017;Hendrick 2006;Snow, Gianakis, and Haughton 2015;Wang and Hou 2012); however, the existing evidence is mixed or inconclusive. Two important research gaps exist in the related literature. ...
... Managerial factors inside government can also enormously affect government fiscal slack. Hendrick (2006) argues that the managerial capacity and professionalism of local governments may be more important than other political and socioeconomic factors in determining governments' fiscal management behaviours. Hendrick (2006) finds that professional management in Chicago's suburban municipalities helps increase their unreserved general fund balances. ...
... Hendrick (2006) argues that the managerial capacity and professionalism of local governments may be more important than other political and socioeconomic factors in determining governments' fiscal management behaviours. Hendrick (2006) finds that professional management in Chicago's suburban municipalities helps increase their unreserved general fund balances. Snow, Gianakis, and Haughton (2015) point out that sophisticated expertise, professional training, managerial experience, and commitment to professionalism are necessary components of governments' professional management of fiscal affairs. ...
Article
This research examines U.S. local governments’ fiscal slack in a framework involving the political, budgetary, and managerial dimensions, each of which is operationalized by an indicator. We use an unbalanced panel of Massachusetts municipalities as the research sample and collect data from the state government and through five rounds of local government surveys. We find that voters’ pro-spending preferences negatively affect the size of local government fiscal slack and that governments’ budgetary gaps exert a positive impact. Moreover, the effects of voters’ pro-spending preferences and governments’ budgetary gaps are moderated by a professional managerial structure inside government.
... At the local government level, research has examined the determinants of unreserved GFBs as slack (e.g., Gorina et al. 2019;Hendrick 2006;Su 2019). 4 Hendrick (2006) identifies a professional and reformminded governing culture, a home rule government form, the structure of administrative and fiscal professionalization, and residents' characteristics as determinants of financial slack within the local governments. ...
... At the local government level, research has examined the determinants of unreserved GFBs as slack (e.g., Gorina et al. 2019;Hendrick 2006;Su 2019). 4 Hendrick (2006) identifies a professional and reformminded governing culture, a home rule government form, the structure of administrative and fiscal professionalization, and residents' characteristics as determinants of financial slack within the local governments. She also finds that community spending needs, total expenditures, and debt are negatively associated with the unreserved GFBs in that they can shape financial burden and constrain spending flexibility. ...
... In disaster management, Burby and May (1998) find that government capacity comprising adequate budget, staff expertise, and authority to enforce rules has a positive relationship with the quality of hazard mitigation plans, when controlling for the severity of previous disasters. In light of fiscal reserves, Hendrick (2006) finds that level of professionalism measured as the residents' support for professionalization and reform or the presence of a municipal manager, administrator, or a finance director is positively associated with the levels of unreserved fund balance, suggesting the potential relationship between the government's professionalism and the capacity to build reserves. ...
Article
The increasing risk of natural and human-induced disasters has caused considerable costs to governments. Governments’ savings can function as a mechanism to mitigate such revenue or expenditure shocks due to disasters. While past studies have examined how recessions affect government reserves, to date, few studies have tested how a government’s past experiences of natural disasters affect the level of its savings. In this study, we use organizational learning theory as a framework to explain this relationship. We empirically parse out the effect of previous disaster experience on reserve funds (i.e., rainy-day funds) and general savings (i.e., unassigned general fund balance)We further test whether organizational capacity serves as a moderator of the relationship between past disaster experience and savings. For the analysis, this study employs a Generalized Method of Moments (GMM) to examine a sample of U.S. states for the years from 2002 to 2017. We find that an increase in cumulative damage from prior disasters is associated with an increase in rainy-day funds and this relationship is stronger in governments with a high organizational capacity. The results remain robust to estimations with alternative measures. These findings support the organizational learning theory, which suggests that governments learn from their past experiences to increase preparedness for future disasters. We also point out the importance of financial capacity in the process of organizational learning.
... However, an organization's ability to respond to various disorders depends on the organization's goals and maturity level in facing a risk [5]. Still, when an organization faces shocks and those affecting its financial crisis, organizational resilience is interpreted as financial resilience [31,37]. As mentioned, financial resiliency focuses on how a supply chain efficiently deploys the remaining financial resources and invests in maintenance and reconstruction to accelerate recovery. ...
... Innovative strategy A plan to grow market share or profits through product and service innovation [37,45,61] Competitiveness Possession of a strong desire to be more successful than others [8,24] Visibility Ability to observe the entire organization for a comprehensive assessment of the internal and external environment [3,38,54] Collaboration Ability to work with other institutions to benefit from mutual benefits [17,35,54] Flexibility Ability of the organization to adapt to the required changes with minimal time and effort [3,38,54] Agility Ability to respond quickly to unforeseen changes [7,14,38,47] Velocity The speed of adaptation determines the time required to recover from a doubt [14,18,38,55] Vulnerability The quality or state of being exposed to the possibility of being attacked or harmed [63,65,66] Research & development The set of innovative activities undertaken by corporations [49,55,57] Risk awareness The need to be aware of the risks associated with assets, process, organization [10,32] Technological capability An ability to apply knowledge into products and process to operate and to create technology [14,18,38,55] Risk management culture the values, beliefs, knowledge, attitudes and understanding about shared risk [13,16,22,38] Safety The condition of being protected from or unlikely to cause danger, risk, or injury [12,41,42,46] Supply chain structure The suppliers of raw materials, components and services that a company needs to manufacture and distribute its products to intermediate or final customers [10,11,20] Adaptive capability The general ability of institutions, systems, and individuals to adjust to potential damage [31,38,65] Trust Sharing risks among different members of the organization [14,18,38,55] Risk & revenue sharing distribution of revenue [14,18,38,55] Sustainability The ability to be maintained at a certain rate or level [7,14,38,47] Financial strength Power and financial status are one of the most important indicators to ensure the survival of companies in today's turbulent business environment [3,5,8] Knowledge management Efficient handling of information and resources within a commercial organization [3,10,13,41,45] Information sharing Exchange of information between different members of the organization to reduce risks [3,10,13,41,45] Redundancy ...
Article
Since the financial crisis of 2008, financial resiliency has gradually become a crucial tools employed by supply chains worldwide to resist external risks and shocks. Risks and shocks sometimes creating a turbulent environment can vary in intensity and frequency and may be attributed to a system's internal or external factors. Resilience is defined as the capacity to withstand risks that are more significant, rapid recovery after risks, and reduced degradation by virtue of a certain number of hazards. Financial resiliency focuses on how an organization efficiently deploys the remaining financial resources and invests in maintenance and reconstruction strategies to accelerate the recovery process. This study aims to identify and classify the criteria for measuring supply chain financial resilience using the hybrid Fuzzy Delphi Method (FDM) and intuitive fuzzy DEMATEL technique with interval values (IVIF-DEMATEL). For this purpose, by reviewing the literature, 29 criteria of supply chain financial resiliency were identified, and after screening by FDM, 12 criteria were finalized. In the next step, the desired criteria were classified into two category, and the importance of each was determined.
... They conceptualize government capacity in terms of fiscal reserves that are designed to avoid drastic spending cuts and tax increases in economic downturns. Like CCFC, organizational theory suggests that organizations with more slack have a "greater capacity" to buffer the effects of fiscal shocks on the organization (Hendrick, 2006). The logic of organizational adaptation provides important insights into how slack resources, consisting of BSF and GFB, affect state budget actions or strategies. ...
... The use of GFB and BSF comes from CCFC and the fiscal slack model (Hendrick, 2006(Hendrick, , 2011Hendrick & Hu, 2020;Hou, 2004;Hou & Moynihan, 2008;Marlowe, 2005Marlowe, , 2011Simon, 1969). ...
Preprint
Full-text available
This study explores how fiscal reserves, such as Budget Stabilization Funds (BSF) and General Fund Ending Balances (GFB), affect budget transparency and procyclical budget adjustments. To determine whether the effects of fiscal reserves depend on the types of budget actions, the study organizes budget actions according to 1) level, indicating the level at which budget actions take place, and 2) accessibility, denoting accessible budget-balancing strategies that face the least legal and political constraints. This classification of budget actions, which has not been attempted in prior research, enhances our understanding of government fiscal choices as it shows that the visibility and political costs of budget actions depend on available resources, levels, and accessibility. By using panel data from 45 US states from 2000 to 2019, the study finds that BSFs improve budget transparency, while decreasing budget cuts. The study also finds that BSF has a greater impact on budget transparency than revenue-raising actions. In contrast, an election year has a greater negative impact on budget cuts than budget transparency. These results support our classification of budget actions, predicting that budget cuts are used less in election years than in non-election years due to their visibility and political risk.
... To test the resource hypothesis, we measure the slack resources using Fund balance ratio. Slack resources indicate governments' financial flexibility to deal with revenue shortfalls or expenditure overruns (Hendrick 2006). Unreserved fund balance ratio -the unreserved fund balance as a percentage of total expenditure -is a conventional measure of fiscal reserves used in prior studies to explore state and local governments' fiscal health (e.g., Hendrick 2006;Marlowe 2005;Wang and Hou 2012). ...
... Slack resources indicate governments' financial flexibility to deal with revenue shortfalls or expenditure overruns (Hendrick 2006). Unreserved fund balance ratio -the unreserved fund balance as a percentage of total expenditure -is a conventional measure of fiscal reserves used in prior studies to explore state and local governments' fiscal health (e.g., Hendrick 2006;Marlowe 2005;Wang and Hou 2012). The fund balance ratio represents governments' ability to 'continue service provision' (Rivenbark, Roenigk, and Allison 2010, 164) or operating solvency (Stone et al. 2015) since the unreserved funds can be utilised without any restriction on purposes. ...
Article
Fiscal transparency is widely promoted as an effective means to achieve government accountability. Although scholars have explored various drivers of fiscal transparency, the relationship between a government’s financial condition and fiscal transparency has received less attention. This study explores this relationship based on signalling, blame-avoidance, and resource hypotheses. Presuming that following the best practices in financial reporting leads to a higher degree of fiscal transparency, this study examines how a local government’s financial condition is associated with the probability of having a certification that represents the quality of financial reporting. Using a sample of municipalities in California from 2003 to 2015, we find that municipalities with a higher debt level and a lower fund balance ratio are more likely to pursue fiscal transparency in financial reporting.
... Researchers usually use general fund balances to measure financial slack of a government (Hendrick, 2006;Marlowe, 2005;Stewart, Hamman, & Pink-Harper, 2018;Su & Hildreth, 2018). The general fund is a government's primary operating fund. ...
... When municipalities experience large revenue decrease, which often occur in economic recessions, those with greater share of intergovernmental revenues implement further spending cuts possibly due to the concerns of raising own-source revenues and reduced state transfers. These findings confirm scholars and budget practitioners' view that overdependence on intergovernmental revenues is a risk factor in local budgeting and financial management (Hendrick, 2006;Hendrick & Crawford, 2014). The other two own-source revenues-property taxes and sales taxes-boost expenditure growth in the moderate revenue decrease scenario. ...
Article
Full-text available
Volatile revenues affect the quality and consistency of municipal service provision. This article investigates how cities use unreserved general fund balances to mitigate annual expenditure fluctuations when confronted with volatile revenues. Based on the analysis of a panel dataset of over two thousand American cities from 2003 to 2011, the fixed-effects regression results suggest that unreserved general fund balances reduce municipal expenditure fluctuations on a year-to-year basis. The expenditure-smoothing effects were more pronounced when municipal governments experienced large revenue changes. Results are robust when excluding large cities, using different cutting-points to define ‘moderate’ or ‘large’ revenue changes, and in recession and non-recession years. This article contributes to the local expenditure stabilization literature by recognizing the unreserved general fund balances’ expenditure-smoothing effects during ‘non-rainy days.’ It adds empirical evidence to the organizational theory that financial slack works as a crucial buffer against external changes and provides managerial discretion to local administrators.
... Economists generally hold a negative view of RDFs based on theoretical analyses and empirical evidence from the perspectives of the agency problem and Leviathan government (Niskanen 1971;Hendrick 2006). However, scholars in the field of organization science contend that organizations that face external uncertainties and internal goal conflicts are apt to use slack resources to protect themselves from environmental fluctuations and maintain internal coalitions. ...
... However, scholars in the field of organization science contend that organizations that face external uncertainties and internal goal conflicts are apt to use slack resources to protect themselves from environmental fluctuations and maintain internal coalitions. For organizations in both the public and private sectors, slack resources are useful instruments not only for maintaining the healthy operation of the organization but also for giving organizations more courage to invest in riskier opportunities (Hendrick 2006). In addition, Hou (2006) argues that an RDF can serve as a tool that helps governments enhance the planning function of the modern budget and can promote the multiyear budgeting practice. ...
Article
This study explores the stabilization effect of state rainy day funds (RDFs) on government general fund expenditures (GFEs). We discuss and explicitly illustrate the concept of stabilization effect. Moreover, we utilize the current year's actual RDF usage as the explanatory variable of interest rather than the previous year's RDF balance, which most existing studies focus on. A panel data set of states for fiscal years 1998 to 2014 is used in the empirical analysis. Due to the pro-cyclicality of the defined GFE gap and the countercyclicality of RDF usage, their positive correlation revealed in the empirical results demonstrates that the actual RDF usage helps to stabilize state government GFEs in both economic recessions and expansions. We also verify that the previous year's RDF balance, when interacted with RDF deposit and withdrawal rules, can influence government GFEs, thus demonstrating the importance of RDF rules.
... While budgets are generally required to balance, there is no universally agreed-upon optimal budgetary position at the end of the fiscal year. However, there is an expectation that neither deficits nor surpluses should exceed certain thresholds (Hendrick, 2006;Rose and Smith, 2011). The ratio of deficit or surplus to operating revenue is considered acceptable within a À3 percent to þ5 percent range, and this is taken to indicate a "balanced budget" (Barbera et al., 2016). ...
Purpose Studies on how accounting is involved in financial crises and austerity are limited. The context of austerity provides an interesting opportunity to explore the role of accounting in shaping governmental financial resilience, i.e. the capacity of governments to cope with shocks affecting their financial conditions. Design/methodology/approach Based on a multiple case analysis of eight Italian municipalities, this paper explores how accounting contributes to the government capacities which are used to anticipate and respond to shocks affecting public finances. Findings Municipalities cope with financial shocks differently; accounting can support self–regulation and can affect internally-led or externally-led adaptation. Different combinations of anticipatory and coping capacities lead to different responses to shocks. Practical implications The findings can be useful for public managers, policymakers and oversight bodies for strengthening governmental financial resilience in the face of crises and austerity. Originality/value The results provide evidence of the conditions, contexts, processes under which accounting becomes a medium which can support both anticipation of and coping with financial shocks, supporting cuts in some cases and resistance in the short run or driving long-term changes intended to maintain public services as much intact as possible. This highlights the existence of different patterns of governmental financial resilience and thus indicates ways of best preserving the service of the public interest.
... First, changes in environmental pressures may generate divergent perceptions among local officials about the urgency and necessity of utilizing resources for a 5 CONFIGURATIONAL ANALYSIS OF TECHNOLOGICAL INNOVATION ASSIMILATION specific task (Hendrick 2006). Thus, the influence of fiscal slack on technological innovation may behave differently under different environmental contexts (Johansson 2012;Thomann 2015). ...
Article
Prior studies suggest that fiscal slack may positively affect technological innovation in the public sector but yield inconsistency between theoretical expectations and empirical findings. To address this research gap, this study develops a configurational explanation combining fiscal slack and environmental pressures by employing fs-QCA in the context of Chinese provincial governments’ online public service provision. The findings reveal that the role of fiscal slack is environmentally dependent on explaining technological innovation and that environmental pressures seem to be more important. That is, fiscal slack is likely irrelevant to a high degree of technological innovation assimilation, while the demanding environments of multiple environmental pressures matter. Relative fiscal scarcity may be somewhat relevant to a low degree of technological innovation assimilation only when combined with a more relaxed environment. Several theoretical and practical implications are discussed.
... Typically, program offices do not budget "management reserve," yet program management best practices say that a reserve should be used (Frame, 2002;Project Management Institute [PMI], 2017). Similarly, the public budgeting literature cites the importance of having some slack in the budget (Hendrick, 2006;Schick, 2009;Tyler, 1993). If it cannot be budgeted for, then slack must be created. ...
Conference Paper
Full-text available
Recent research approaches the "use or lose" (UorL) phenomenon in public budgeting as an economic question and have employed principal-agent models that oversimplify the situation, resulting in recommendations that would likely be unworkable in practice. This paper views UorL as a governance problem rather than an economic one. By considering the laws, administrative rules, organizational structures, and institutional norms driving UorL behavior, it paints a more complete picture of the phenomenon. The paper begins with a more refined definition of UorL, reviews the literature for empirical evidence of it, describes the governance factors that influence it, critically evaluates the solutions proposed in the literature, and then makes new recommendations to improve the governance of programs and agencies to achieve better programmatic and financial outcomes.
... Thus, the allocation of budget funds becomes easier (Melkers and Willoughby 2005). Cities / municipalities should use long-term forecasting techniques to have time to fulfil future budget commitments or to avoid new obligations that cannot be met (Bahl and Schroeder 1984;Hendrick 2006). Critics often challenged the municipal budget because of their inability to include citizens' contributions. ...
Conference Paper
Full-text available
When Covid 19 crisis started, many of the companies began to think digitally. Companies in all sectors and regions changed the way of doing business. Overnight, businesses were forced to limit the number of people that physically go to work, to restrict in-person business operations, and to start telling people to work from home as much as possible. Technology had become an increag singly important part of the workforce even prior to the pandemic.Companies were looking at technology as a helpful means. It forced companies to look into creative digital solutions so that they could continue to function remotely and continue to serve their clients. Companies in NM were are also affected by the Covid 19 pandemic. The growth of e-commerce during the COVID-19 pandemic was influenced by digitalization concerning business operations which has led to a rise in the digital skills of the domestic companies. In order to research the impact of Covid on the digital transformation of companies, we conducted a survey of more than 100 companies. companies. The research aims to identify the implementation and usage of digital innovation in companies during the pandemic in North Macedonia, and the consequent opportunities and barriers that they face. The results show that half of the surveyed companies applied some kind of innovation or digitalization during the pandemic. Most respondents recognize the importance of technology as a critical component of their business, and not just a source of cost efficiencies. Respondents from the companies that have executed successful technological innovation in the crisis period made a range of technological capabilities that others don’t have including speed in experimenting and innovating, the use of more advanced technologies and filling the gaps for technology talent during the crisis
... 3 So, while absorbed and unabsorbed resources are indicators of a city's longer and shorter term financial health, they are not necessarily empirically related to one another. 2 Although there is a line of study in public financial management focusing on fiscal slack, it is largely focused on budgetary stabilization funds and their effects on expenditure stabilization or on the reasons why governments set aside pools of money (Marlowe 2005;Hendrick 2006) instead of explaining managerial or organizational decisions. 3 For example, Orange County, California mismanaged its investment pool in 1994, negatively affecting its ability to meet its financial obligations in the short term but it was ultimately unimpaired in the long run. ...
Article
Public managers and organizations are often encouraged to take a proactive role in finding solutions to the challenges that face their communities. These challenges require meeting increasingly high expectations for public service provision with ever reducing resources. This research investigates the relationship between change in resource constraints—as measured by longer and shorter term financial condition—and the entrepreneurial orientation of US local governments. Theoretically, it remains unclear whether resource constraints foster or impede entrepreneurial actions (i.e., risk taking, proactivity, and innovation) in public organizations. While entrepreneurial actions may be related to increased organizational financial capacity, a decline in an organization's financial condition might motivate proactivity, innovation, and risk taking as problem‐solving mechanisms and a means to continue service provision. We explore this relationship using two sources of data: a 2012 national survey of managers in 500 cities and financial data from Comprehensive Annual Financial Reports. Our findings suggest that resource constraints are associated with increased entrepreneurial activity in US local governments.
... The build-up of English local reserves as a precautionary measure is unlike the use of reserves by subnational authorities in some other jurisdictions (e.g. Hendrick 2006), and is a rational response by local decisionmakers given the increasingly volatile intergovernmental financial framework in which English LGs operate. Hence, the findings of this study demonstrate the need to widen current scholarship on local government austerity management beyond the dominant focus on local level organisational factors and consider more carefully how interactions between different levels of government influence local financial strategy creation. ...
Article
Local government in England has experienced significant financial volatility in recent years due to cuts in central government funding and increased demand for service provision. Using a panel data set of English local governments over the period 2005–2016, this study investigates the impact of demographic factors on the financial reserves held by different types of English local governments. Dissimilar effects are traced on local governments’ saving capability of different grant funding mechanisms and whether local governments are involved in social care provision, and how they provide these services. Findings show that local governments actively act upon financial uncertainty by expanding their reserves through implementing changes in both their income and expenditure structures, including revenue generation through alternative sources such as capital investment. The potential, however, to expand reserves differs significantly between local governments and has reduced due to growing demand for social care services.
... While the troubles of the 1970s might have once been seen as an anomaly, the conventional wisdom now is that the public sector should anticipate that it will experience cycles of budget slack and budget stress (Bozeman 2010;Scorsone and Plerhoples 2010). Much of the work on managing these cycles has examined the revenue side (Gianakis and Snow 2007;Hendrick 2006; Thompson and Gates 2007), highlighting the need to generate revenue during the upturns as a buffer to mitigate the effects of downturns (Duncombe and Hou 2014;Marlowe 2005), and to avoid the negatively-reinforcing economic effect of raising revenues during economic difficulties. Most expenditure-based studies noted decremental approaches such as hiring freezes, travel restrictions, and capital spending cutbacks (Bowling and Burke 2006;Marando 1990;Packard et al. 2007). ...
Article
Full-text available
This study addresses managerial strategies to adapt public spending in anticipation of fiscal stress. It simulates a cutback to a federal agency, providing a decision tool that applies normative recommendations from the cutback management literature. Using agency data, we develop a menu of options that illustrate how different distributions of budget reductions affect organizational goals. We show five alternatives that consider the political, legal, and fiscal implications of the agency's responses to anticipated budgetary pressure. This simulation demonstrates that public agencies can apply existing data to generate rational and viable strategic plans for weathering fiscal stress.
... The process of public budget submissions involves bargaining processes among coalition members who require to achieve their goal congruence. It resulted legislative approved budgets already containing reserve funds that designated for the specific purposes of stakeholder Hendrick, 2006; Rose and Smith, 2011). It indicates that the government budgets contain budgetary slack. ...
Article
Full-text available
This study aims to analysis the effect of e-procurement capability to budgetary slack in Indonesia local government. It also analyze the moderation effect of IT adaptive culture in e-procurement capability to budgetary relationship. Questionnaires was delivered to a sample of e-procurement service unit (ULP) through electronic mail. ULP is the service unit for Indonesia government procurement implementation. Research finding shows that e-procurement is negatively associated with budgetary slack which was-0,19 (p<0,01). Another finding also indicates that for the high adaptive culture, the budgetary slack is negatively associated with e-procurement. It means that there is an interaction between IT adaptive culture and e-Procurement that affects budgetary slack. For users with high IT adaptive culture, increasing e-procurement capability will decrease budgetary slack.
... Property values Hendrick (2006) identifies property values as a measure of municipal taxing power. A significant majority of local governments finance their activities in part with ad valorem property taxes. ...
Article
Many governments offer other postemployment benefits (OPEB) to their employees, and discretionary contributions to OPEB plans are important to plan financial well-being. This paper reports a study of municipalities' actual annual contributions to their OPEB plans from fiscal year 2008 through 2015, a time span encompassing the Great Recession and subsequent gradual recovery. Giving effect to cities' governance structure (form of organization and extent of employee unionization) and certain fiscal and socioeconomic variables, we estimate a model of plan contributions normalized by the related actuarially required contributions. We find that Mayor-Council (MC) cities are associated with comparatively higher OPEB plan contributions relative to Council-Manager cities. We control for MC cities' discount rates to address the consequences of optimistic rate assumptions. The effect of unionization on contributions is evident directly, but unionization is not noteworthy when conditioned on form of government. This suggests that MC cities manage their OPEB plans in a fiscally accountable manner.
... In line with this view, Rose and Smith (2012) suggest that the consideration of uncertainty -separate from the limitation of forecasting inaccuracy -may lead to systematic bias in fiscal estimates, creating budgetary slack. To the extent that various fiscal conditions such as a state's revenue structure, the volatility in revenue and expenditure, and fiscal rules call for a larger financial buffer (Gorina et al., 2019;Hendrick, 2006;Shon & Kwak, 2020), state bureaucrats' conservative fiscal forecasts can result in the creation of budgetary slack irrespective of their slackmaximizing behaviors (Barrett et al. 2019). ...
Article
This paper examines whether the legislative adoption of performance-based budgeting (PBB) limits budgetary slack. Based on the model of slack-maximizing bureaucracy, we predict that the enactment of PBB laws is likely to shore up the legislature’s ability to control budgetary slack. By providing more information about the production costs of public services to the legislature as budget sponsors, the legislative adoption of PBB can mitigate the information asymmetry between bureaucrats and the legislature, which leads to more effective control of budgetary slack by budget sponsors. In US states, we document that the budgetary slack is reduced after a state legislature legally mandates the use of performance information in the budgetary deliberation. This finding suggests that the legislative adoption of PBB facilitates the budget sponsors’ use of prior-period budgetary slack information to reduce current-period slack, consistent with the notion of PBB as analytic tools for budget sponsors. // Citation: Park, Sung-Jin. & Sungkyu Jang. “(2021). “Asymmetric Information and Excess Budget: The Influence of Performance-Based Budgeting on Budgetary Slack in U.S. States,” International Review of Public Administration. 26(4), 353-372. // To get a free online copy of this article: ePrint Link: https://www.tandfonline.com/eprint/WTJMFUAMURZRBPUQD98C/full?target=10.1080/12294659.2022.2027599
... The volatility of expenditures following disasters is likely to be determined by social demands for government spending to compensate for damages. Yet, discussions of the vulnerability factors that can shape social demand are sparse in previous studies, which mainly consider financial indicators, institutional factors, political environments, and macroeconomic conditions as determinants of financial behaviors and government's budgetary decision (Hou 2004;Hendrick 2006;Rose 2008;Rodríguez-Tejedo 2012;Elder and Wagner 2013;Su 2019;Miao et al. 2018), excluding social vulnerability. ...
Article
Full-text available
Groups that are unable to prepare for disasters, or to recover from damage on their own, have a high dependency on government services, which inevitably leads to more government spending. Given this, governments can better project the entire cost of disasters and, in turn, effectively manage their finances, by proactively identifying high-vulnerable populations in anticipating financial costs of disasters. However, little attention has been paid to social vulnerability in assessing financial risks in the natural hazards or public finance studies. Thus, this article fills this gap by bringing the concept of social vulnerability from three different fields of study to propose a conceptual framework and corresponding applicable model for estimating disaster costs to inform governmental financial management: the sociological literature on disaster management, economics literature on risk management, and environmental literature of disasters. We review 134 articles on vulnerability from 1990 to 2021, assessing the different conceptualizations of social vulnerability, and the factors affecting vulnerable populations, in each literature. This study contributes to the natural hazards literature on financial and emergency management by integrating the existing literature on social vulnerability into a conceptual framework for measuring social vulnerability and relating it to efforts to assess the financial impact of disasters. Furthermore, based on this conceptual framework, we develop an applicable model for estimating the financial costs of disasters that researchers or governments may apply to assess and develop effective strategies for managing the financial risks associated with disasters. Specifically, the model, which we call the cost of social vulnerability to disasters model (CSVDM), suggests specific indicators from the literature to measure the costs of social vulnerability to more accurately predict the financial impact of disasters.
... The Government Finance Officers Association recommends governments establish formal fund balance policies, define conditions warranting use, dictate a reserve requirement, and plan to replenish the fund should it decrease below the prescribed level (Government Finance Officers Association, 2015). Empirical evidence has found that local governments are more likely to report greater amounts of UFB with (1) a large share of revenues from property or sales taxes, (2) higher volatility of revenue streams, (3) less dependence on intergovernmental revenues, (4) lower spending on capital and debt, and (5) a political environment that leans Democratic (Arapis et al., 2017;Duncombe & Hou, 2014;Guo & Wang, 2017;Hendrick, 2006;Hendrick & Crawford, 2014;Lofton, 2021b;Marlowe, 2005Marlowe, , 2011Marlowe, , 2013Moulick & Taylor, 2017;Stewart, 2009Stewart, , 2011Stewart et al., 2017;Su, 2019;W. Wang, 2015;W. ...
Article
Public managers strategically use resources to smooth out cash receipts and disbursements. As a cash flow management tool, managers can use interfund transfers, which are flows of assets without equivalent return flows and without repayment. This study asserts that managerial professionalism, in the form of a full-time finance director, drives the likelihood of interfund transfers. Using 2010–2017 data from Georgia counties, hurdle model results indicate that full-time finance directors are more likely to use interfund transfers and increase their level. This finding demonstrates the role of financial management expertise in increasing the strategic options available to manage cash flows. Applications for Practice • Local governments with a full-time finance director use more interfund transfers as one working capital management strategy to manage cash flows. • Results from this study provide a justification for local governments to hire a full-time finance director to improve the array of financial management strategies accessed. • Local governments that increase tax base diversity have reduced engagement for General fund interfund transfers in, while higher levels of reported cash generate larger amounts of transfer activity.
... Fiscal professionalization may affect financial resilience differently in economic upturn and downturn years. Hendrick (2006) provides evidence that local government structures with accounting, finance, and budget professionals are more likely to build reserves, and the role of fiscal professionalization is more important during downturns. This suggests that governments with more risk-sensitive and fiscally conservative professionals might increase their reserves and, in turn, temporarily increase the volatility in downturn years. ...
Article
To sustain government services in times of disruptions, it is important to enhance the financial resilience of the government. This study explains the relationship between an organization’s financial resilience and its financial, human, and political resources using the framework of the resource-based view theory (RBV). The results show that the effect of government resources on financial resilience differs depending on the type of resources. Overall, while it is found that an increase in financial and human resources positively relates to financial resilience, an abundance of political resources negatively relates to resilience; and these findings are evident in the short-run model.
... Increasing the proportion of local expenditures means local governments are given more freedom in spending money. Overall, fiscal discretion helps improve local governments' fiscal health and fiscal slacks (Hendrick, 2004;Lubell et al., 2009), which enable local governments to invest in programs that require resource commitments (Hendrick, 2006) and to innovate (Fernandez & Wise, 2010;Walker, 2014). In the sustainability policy area, existing studies show cities with more slack resources can better adopt and implement environmental policies that require extra staff and resources (Kahn, 2006;Kwon et al., 2009;Wang et al., 2012a). ...
Article
While existing studies have examined the separate effects of local governments’ internal conditions and external environment on local innovation, few have paid attention to their interactive effects. This study examines whether state-level rules regarding local discretion moderate the effects of city governments’ slack resources and learning, using local sustainability innovation as an example. We distinguish two types of discretion (fiscal and statutory) granted by state governments. Applying a difference-in-differences (DDD) approach with a longitudinal dataset of 238 U.S. cities, we find that fiscal discretion strengthens the positive effect of fiscal slack while statutory discretion enhances the positive effect of learning. The findings uncover the complex interactions between multilevel institutional arrangements and local innovation mechanisms.
... Local governments, with varying levels of institutional autonomy and fiscal self-sufficiency, institutional constraints and higher levels of government financial support, and economic strengths, are ideal laboratories for analyzing the role of the bond market in local public finance. One stream of research attempts to conceive local governments as organizational systems (Hendrick 2004(Hendrick , 2006Levine 1978;Wolman 1983;). According to organizational systems theory, local governments are systems composed of the formal organization, the external environment, and the informal organization, such as culture and networks (Davis and Scott 2007). ...
Article
Full-text available
China’s municipal bond market suffers from a tension between centralized policymaking by the national government and the decentralized implementation of those policies by subnational governments. That tension and the recent policy transformations in the China’s municipal bond market provide important insights into the erosion of the fiscal self-sufficiency of China’s local governments and the long-term sustainability of a viable municipal bond market. Using panel data from 155 Chinese provincial-level governments between 2015 and 2020, this study develops fiscal indicators to measure the sustainability of China’s bond market given its institutional context. With these indicators, the research empirically explores the effect of fiscal institutions such as centrally-imposed debt limits on local governments’ sustainability to meet debt service obligations. It also investigates the capacity of local governments for selfsufficiency to meet their debt obligations and maintain debt sustainability. We find that debt limits have promoted local debt sustainability while local fiscal self-sufficiency has had little effect on debt sustainability in the long-term. The findings provide public finance and policy scholars with an understanding of the effectiveness of fiscal institutions such as debt limits imposed by China’s central government. It also assists local government officials in understanding the potential effects of debt limits on their capacity to manage debt risk and maintain fiscal sustainability. Moreover, China’s development of a municipal bond market illustrates both the advantages and limitations of a centralized administrative approach to governing. Finally, this research provides important insights and policy recommendations for moving toward a more financially sustainable bond market in China. Working Paper at Lincolin Institute of Land Policy https://www.lincolninst.edu/publications/working-papers/fiscal-self-sufficiency-debt-limits-fiscal-sustainability-in-chinas
Article
This study explores the extent to which intergovernmental fiscal factors affect fiscal reserves in municipal general funds. Statistical results from panel data of 87 major cities in the US for the period from 1995 to 2010 show that cities facing more restrictive limitations on local property taxation tend to maintain higher levels of unreserved general fund balances. Additional analyses also show that fiscally constrained cities accumulate surpluses in their general funds. This is consistent with the proactive approach in which municipal governments make fiscal decisions with the awareness of expected state constraints on their revenue-raising capacity. We call for consideration of relevant intergovernmental constraints in the determination of appropriate level of fund balances for municipal governments.
Article
The years during and after the Great Recession constrained revenue across all levels of government. Revenue shortfalls in states decreased intergovernmental transfers, which compounded the plight of local governments already facing large declines in own-source property taxes. Among the many casualties of this economic downturn were school districts, which responded by implementing a variety of financial management strategies to continue providing educational service provision to more than 50 million students across the United States. One strategy school districts continue to utilize is countercyclical stabilization of expenditures with fiscal slack, which raises an important—and, to date, largely unanswered—question of how school districts manage to accumulate fiscal slack, given both volatility and decreases in revenues in the years following the Great Recession. One approach is to use implicit slack from biased forecasts to generate explicit fiscal slack in the unassigned fund balance. This article provides evidence for this strategy by empirically testing it with data from Kentucky school districts from school years 2001-2002 to 2013-2014. The findings indicate that school districts are engaged in strategic planning with implicit fiscal slack, which allows them to accumulate explicit fiscal slack, a cornerstone of prudent financial management that can provide budgetary flexibility during financial uncertainty. The relationship between implicit and explicit fiscal slack is heterogeneous over the business cycle, providing further evidence of strategic planning. Practitioners can also use the findings of this article to support the strategic use of forecasts to help accumulate unassigned fund balance, particularly in the years after the Great Recession.
Article
Changing boundaries is a major method for municipalities to accommodate growth, expand economic and tax base, and optimize resource allocation. This study leverages variation in adoption of home rule charters in Texas to provide the first empirical examination of whether home rule adoption causes municipal boundary expansion. We employ fuzzy regression discontinuity and event-study estimation methods on actual boundary data for causal inference and find that home rule cities expand their boundaries to significantly greater total area than general law cities in Texas. This finding is robust to the voluntary Boundary and Annexation Surveys data used widely by extant studies. We also find evidence that annexations allow home rule cities to fiscally expand, primarily by broadening tax bases.
Article
Resources are essential for organizations to cope with challenges and to achieve their desirable outcomes. Although much scholarly attention has been paid to the type or level of resources allocated or used to enhance organizational effectiveness, relatively little effort has been made to analyze whether and how resource changes influence organizational performance. Considering today’s unstable fiscal climate, this study focuses on how government agencies respond to their budget fluctuations—both gains and cuts—and their distinctive impact on agency performance. Using data from the Performance and Accountability Reports from FY 2004 through FY 2014, we analyze the effect of budgetary resource changes on organizational performance in 52 U.S. federal agencies. Findings show that agency effectiveness is significantly influenced by budget changes. In particular, we find an asymmetric relationship between budgetary resource changes and organizational performance. It appears that budget cuts are not associated with changes in agency performance, whereas budgetary resource gains are associated with dampened agency effectiveness. Ultimately, this study provides insights into public organizations’ resilience and calls for considering change management perspectives when exploring resource–performance linkages.
Article
Data envelopment analysis (DEA) was used to assess the technical efficiency of special district libraries in the United States with respect to three cost-related outputs: operating cost per hour, program costs per visit, and program costs per attendance. A set of discretionary and non-discretionary inputs were used to obtain the technical efficiency scores of 999 special district libraries. The DEA input-oriented analysis shows that 30% of the libraries were technically efficient with respect to the use of the inputs to achieve their level of operating costs in 2015. The DEA analysis also shows that inefficient libraries need to make proportional reductions in the level of discretionary inputs to become technically efficient.
Article
This paper analyzes the impact of economic downturns on the revenue and expense sides of city financing for the period 2003 to 2009 using a convenience sample of the audited end of year financial reports for thirty midsized US cities. The analysis focuses on whether and how quickly and how extensively revenue and spending directions from past years are altered by recessions. A seven year series of Comprehensive Annual Financial Report (CAFR) data serves to explore whether citiesʼ revenues and spending, especially the traditional property tax and core functions such as public safety and infrastructure withstood the brief 2001 and the persistent 2007 recessions? The findings point to consumption (spending) over stability (revenue minus expense) for the recession of 2007, particularly in 2008 and 2009.
Article
Studies find minimal evidence that general-purpose local governments draw down slack resources set aside during prosperous times to contend with economic downturns; although they maintain, in some cases, unrestricted fund balances well in excess of professionally recommended levels. Replicating divergence from the trend methodology in the state of Illinois that provides greater discretion to create and use savings, the analysis finds counties budget slack resources counter-cyclically (in downturn but not in upturn years) when controlling for political/institutional, revenue, economic, and demographic factors. This article discusses plausible alternative explanations for non-findings to explore in future studies.
Article
The determinants of outsourcing in local government are widely studied from a variety of frameworks. One concept consistently used to explain local government outsourcing is fiscal condition, with many noting that outsourcing is more likely when a local government’s fiscal condition declines into fiscal stress. Despite the ubiquity of this expectation in the outsourcing literature, several articles reviewed suggest that the findings for this relationship remain uncertain. As a result, the research presented in this article sought to examine and extend what is known about the relationship between fiscal stress and outsourcing in U.S. municipalities. The research includes previous measures of fiscal stress and adds new measures. In addition, it tries to overcome the limited theoretical testing of the relationship between fiscal stress and outsourcing by examining both direct and indirect effects of fiscal stress on outsourcing. It finds that municipalities in the United States that are experiencing fiscal stress are more likely to engage in outsourcing, particularly municipalities that are experiencing fiscal stress and have a positive evaluation of the external market to provide services.
Article
One of the most important predictor variables in multistate studies of American municipal cash reserves is the state in which a municipality is located, and to date no research has explored why. In this paper, we show that two broad categories of variables can account for a large fraction of this puzzle. Average differences in financial variables and state-to-state institutional differences combine to absorb over 80% of the importance of state fixed effects, with financial variables mostly accounting for why cities in some states save less than the national average, and institutional variables doing a better job of accounting for why cities in some states save more than the national average.
Article
Fiscal competition literature emphasizes the need to consider fiscal implications of the flow of labor and capital across jurisdictional boundaries. This open‐economy consideration raises issues for the analysis of fiscal policies, ranging from taxation and expenditure policies to the structure of intergovernmental relations and interjurisdictional competition. Using data on state population movement and pension reforms (2002−2015), this study examines whether the adoption of pension reforms was motivated by state government competition for the mobile tax base. The findings suggest that interstate migration has an influence on states’ enactment of pension reform, and the effect differs by state population density. Fiscal competition driven by interstate migration can act as a constraint on the government's policy choices and have an effect on limiting the government's rent‐seeking behaviors. Evidence supports that fiscal competition driven by interstate migration can influence a state's pension reform decision, and the impact of outmigration on pension reform adoption varies depending on state population density, with the effect being more pronounced among medium and low population density states. The prospect of resource mobility across jurisdictional boundaries is critical in studying fiscal competition and intergovernmental relationship, and that such mobility can be characterized as a hidden regulator of government behavior. State and local governments must compete for mobile capital and human resources, and the mobility of resources is bound to affect states’ revenues, expenditures, regulations, and other policy matters. Fiscal competition driven by interstate migration can act as a constraint on the government's policy choices and have an effect on limiting the government's rent‐seeking behaviors. Evidence supports that fiscal competition driven by interstate migration can influence a state's pension reform decision, and the impact of outmigration on pension reform adoption varies depending on state population density, with the effect being more pronounced among medium and low population density states. The prospect of resource mobility across jurisdictional boundaries is critical in studying fiscal competition and intergovernmental relationship, and that such mobility can be characterized as a hidden regulator of government behavior. State and local governments must compete for mobile capital and human resources, and the mobility of resources is bound to affect states’ revenues, expenditures, regulations, and other policy matters.
Article
This paper examines fiscal slack, in the form of unreserved fund balance, as a tool used by local governments to enhance economic resilience. It adapts ecological, engineering, and organisational definitions of economic resilience and investigate their relevance to local financial management in the United States after the Great Recession in 2008. Using group-based trajectory modelling, we identify different strategies of fund balances used by Michigan counties. The change of fund balance does not delineate any pattern theorised by the resilience concepts. We also find different factors that motivate local officials to manage their fund balances differently. The study suggests a nuanced understanding of fiscal slack used by local governments for economic resilience that goes beyond unreserved fund balance.
Article
Nearly 30 years since their inception in the United States, charter schools are now a well-established educational option for parents and students. Although they are an important education provider schooling more than 3.1 million students nationwide, we know little about their ability to accumulate fiscal savings for weathering rainy days and sustaining smooth service. Unlike most other fiscal savings studies focusing on the unrestricted fund balance, we examine both restricted and unrestricted fund balances across Pennsylvania charter schools, this study’s unit of analysis. Using a Newey-West regression and data spanning the years 2011–2019, we show that charter schools consider all fund balance classifications when making savings decisions; albeit the unrestricted was their primary savings vehicle. Given their limited revenue portfolio, they are left with only a few options for accumulating fiscal savings. Surplus from tuition payments and additional revenues from private funding sources appear as main fund balance boosters. Surprisingly, special education enrollment significantly increases the unrestricted fund balance, a finding that requires further attention from legislators and policy makers. Concerns are also raised about participation in the state pension system as it absorbs a significant amount of slack that otherwise could be used for other purposes. Overall, most charter schools retain inadequate fiscal savings not capable of insulating their operation from revenue volatility and other contingencies. Statutory fund balance minimums and the adoption of formal fund balance policies articulating how savings are accumulated, used, and replenished should, therefore, be considered.
Article
How does revenue diversification shape the budgetary solvency of city governments? Previous studies informed by the public choice/fiscal illusion perspective suggest that diversification leads to unsustainable government expansion and budgetary imbalance. In contrast, the organizational adaptation/modern portfolio theory suggests that diversification enables government to prepare for external fiscal shocks. We use different measures of revenue diversification and rely on audited financial information to develop general fund-based and government-wide budgetary solvency measures for more than 500 midsized and large cities in the United States from 2006 to 2012. Addressing omitted variable bias, the results of the econometric analyses indicate that the type of diversification matters. Specifically, diversifying to non-tax sources improves budgetary solvency as indicated by higher government-wide operating ratio and reserves, whereas diversifying within the tax structure produces the opposite effects. The contradictory results point to the need to rethink current theories of diversification, which do not recognize the different ways that revenue structures can be broadened, and how these produce distinct effects on fiscal performance. We lay out the critical first step in clarifying and further developing a more nuanced theory by proposing three causal mechanisms outlining the pathways through which the types of diversification can influence budget outcomes. APPLICATIONS FOR PRACTICE • • This study examines the relationship between tax and non-tax revenue diversification and government-wide budgetary solvency (structural budget balance). It is the first in the revenue diversification literature to consider the total revenues and costs of operating government and incorporates a broader base of tax and non-tax revenue sources including utilities. • • The results suggest that increased reliance on non-tax revenue sources, such as charges and fees, improves budgetary solvency. • • In contrast, we find evidence that increased diversification of tax instruments leads to poor budget outcomes. • • When financial managers and policymakers are considering adopting a new revenue source or expanding a current revenue stream, from a budgetary solvency standpoint, non-tax sources may be advantageous.
Article
Full-text available
In recent decades, the increase in the frequency and the severity of natural disasters has posed growing challenges to governments’ disaster response activities. Disasters can have a considerable financial impact on local governments, but this impact has not been systematically analyzed. This study assesses disaster impact using 17 years of panel data (between 1996 and 2012) from the city and county governments in New York state. The research examines many aspects of local governments’ financial conditions, including liquidity, fund balance, and debt. It tests whether governments’ financial conditions are affected by disasters and whether fiscal institutions moderate disasters’ impacts. The results show that a local government's unreserved fund balance and disaster reserve significantly affect its financial condition, while financial condition indicators are not significantly impacted by natural disasters when the fiscal institution variables are controlled.
Article
We empirically analysed the effects of revenue volatility on forecast errors using a panel data set of Korean local governments over the period 2002–2016. Panel data analyses, conducted for acquisition tax, local education tax, and total tax revenue, found that revenue volatility has statistically significant and consistent effects on forecast errors. These findings carry both theoretical and policy implications. In theoretical terms, they suggest that when identifying factors influencing forecast errors, one should take revenue volatility into account, in addition to the economic, organisational, and political factors that have been considered by previous studies. In terms of policy implications, in order to improve the accuracy of revenue forecasts, local tax administrators should analyse the cyclical variability of each tax and reflect the results in the forecasting models.
Article
Municipal governments in the U.S. tend to build and maintain substantial general fund balances to ensure expenditure stability and long-term financial sustainability. It is important to understand how municipal fund balances help stabilize municipal spending. This article examines the annual municipal general fund expenditure gap between 1996 and 2011. Using data from 100 large cities, the empirical evidence does not support the stabilizing effect of the unreserved fund balance on general fund expenditure. Furthermore, the undesignated portion of the unreserved fund balance helps stabilize municipal general fund expenditure during upturn years, whereas the designated portion plays a procyclical role. This article also finds that more restrictive local tax and expenditure limits lessen municipal expenditure gap during bad fiscal years and that residents with conservative ideology tend to support countercyclical fiscal policies at the local level.
Article
A budget stabilization fund (BSF) is an important fiscal instrument for states to stabilize their budgets, but studies have found varying results regarding its impact. We conduct a meta-analysis to determine whether and under what conditions BSFs can serve as an effective countercyclical tool. By synthesizing a total of 540 effect sizes from 23 original studies, we find that on average, BSFs have a moderate positive effect on government savings and a small negative effect on fiscal stress. Additionally, strict withdrawal rules seem to attenuate the positive relationship between BSFs and government savings, and compromise the negative relationship between BSFs and fiscal stress. The presence of budget balance requirements, party conflict and some other environmental factors may also moderate the BSF-savings and BSF-stress relationships. This research contributes to the BSF literature and provides useful policy recommendations for state governments to consider when designing or revising their BSF legislations.
Article
This paper analyzes local government use of short‐term debt. Though long‐term debt, largely used for capital projects, is relatively well‐researched, predictors for the use of short‐term debt need to be further developed. We hypothesize that governments with limited cash reserves and expenditure flexibility are more likely to use short‐term debt. Further, we expect that governments use short‐term debt as an instrument to manage market timing for long‐term debt. Using a heterogeneous sample of New York local governments, our analysis finds more illiquidity, declining prior year surplus, more salary expenditures, larger capital spending, and the timing of long‐term debt increase the likelihood of using short‐term debt.
Article
Research suggests that increased reliance on digital sources (e.g., blogs, social media, online forums) exhibited by the emerging millennial workforce may affect procurement decisions. These arguments contend with studies which indicates that organizational buyers rely on decision shortcuts (e.g., brand, loyalty, and peer opinions) to mitigate risk or to simplify purchase decisions. One can argue that buyers gain more information from digital sources, which may attenuate the role of these shortcuts. At the same time, digital sources may be used to strengthen prior beliefs, which can increase bias towards decision proxies. This study draws from information processing theory to understand the role of digital sources of information in decision‐making, in the context of business purchasing. Based on the Accessibility‐Diagnosticity framework, we introduce a Digital Embeddedness construct to conceptualize the extent to which information from digital sources is integral to an individual’s decision‐making. Analysis of survey responses from 196 purchasing managers suggests that more digitally embedded buyers are more willing to adopt innovations, yet interestingly, focus more on vendors from strong brands and peer opinions. We also find that while more digitally embedded buyers feel more cognitively attached to their existing vendors, this attachment does not translate into purchase loyalty. We discuss implications for buyer‐supplier relations and B2B marketing. By elucidating individual‐level differences in the use of digital sources, this research also has implications for future work that examines the interpretation of digital information to inform business decisions.
Article
Local governments aim to accumulate slack resources to mitigate economic turbulence. Yet efforts to increase multiple slack resources could hinder accumulation. This paper examines whether increasing one form of slack is detrimental to the accumulation of another. By using data from 672 New York local governments from 1996 to 2016, this article examines the impact of excess taxing capacity, or unused property taxing authority, on unrestricted cash and short‐term borrowing. Regression results indicate that short‐term resources are reduced to boost excess taxing capacity for counties to suggest cash flows can be hindered by increasing political forms of slack. • Financial slack resources with lower visibility and monitoring, such as cash reserves and short‐term debt, are likely to be used to maintain the excess taxing capacity of local governments. • Subnational governments are justified in creating tailored approaches that alter short‐term resources while building up excess taxing capacity. • Suggestive evidence indicates counties and villages reduce unrestricted cash, counties increase short‐term borrowing, villages reduce short‐term borrowing, and cities are largely not impacted when excess taxing capacity is increased. Financial slack resources with lower visibility and monitoring, such as cash reserves and short‐term debt, are likely to be used to maintain the excess taxing capacity of local governments. Subnational governments are justified in creating tailored approaches that alter short‐term resources while building up excess taxing capacity. Suggestive evidence indicates counties and villages reduce unrestricted cash, counties increase short‐term borrowing, villages reduce short‐term borrowing, and cities are largely not impacted when excess taxing capacity is increased.
Article
The increase in the importance of countercyclical behavior has expanded the research on fiscal saving behavior to local governments. In particular, the Great Recession has shown that local governments are not immune to economic shocks, spurring interest in local savings behavior. County governments are particularly vulnerable to negative economic shocks, as they rely more on intergovernmental revenues. With a focus on the determinants of fiscal slack, we empirically examined the relationship between tax revenue volatility and unassigned fund balance in 57 California counties over the period of 2004 to 2014. Employing spatial regression models, our empirical analysis revealed that revenue volatility is positively associated with general unassigned fund balance in California counties, and revenue diversification has partially positive effects on the fund balance. We infer that tax revenue volatility threatens the stabilized delivery of local services, which suggests that local governments should look to the factors that potentially affect revenue stability to improve their capacity for financial management. The spillover effects from the findings suggest that spatial effects need to be taken into account in analyzing the determinants of local fiscal slack.
Article
Full-text available
This study presents a framework for assessing the financial condition and fiscal health of municipal governments, develops indices for some dimensions of the framework, and applies the indices to 264 suburban municipalities in the Chicago metropolitan region. The framework is based on a systems view of local government financial condition. It shows that fiscal health is a complex and multidimensional concept with varying time frames. Furthermore, the dimensions are related but often in indirect or nonlinear ways, indicating they must be measured separately rather than combined into a comprehensive indicator of fiscal health. Indices developed here for targeted dimensions of the framework are assessed and compared to alternative indicators of fiscal health developed by others in the field.
Article
Full-text available
The recession of the early 1980s prompted many states to establish budget stabilization (rainy day) funds. Initial examinations of rainy day funds find a limited impact by the funds in alleviating fiscal stress. In this article, we propose an enhanced model of rainy day fund impact. Using data from 48 states for the 1990-1991 recession, our analysis indicates that the presence of a number of structural factors and the maintenance of generally large balances in other funds entering recession helps to alleviate fiscal stress when a state's economy is in recession.
Article
Full-text available
A model of organizational change through adaptive search for new technologies is developed and explored. The model is in the tradition of behavioral models of organizational choice and learning associated with work by Winter, Nelson, and Radner, It permits the exploration of simultaneous organizational adaptation in search strategies, competences, and aspirations under conditions of environmental instability and ambiguity. The model exhibits the extent to which variation in organizational behavior and performance reflect the distributional consequences of simple adaptation in ambiguous environments, as well as some adverse consequences of rapid learning.
Article
States and many localities face the direst fiscal situation that they have encountered in the last 60 years or so, with revenues falling or stagnant while expenditure demands continue to grow. This divergence in incomes versus outgoes means that most states face recurring operating fund deficits that must be closed by one means or another. There is a multitude of means to accomplish such closure. The focus here is on the ways in which this can be done other than by actually raising tax rates or reducing spending. Rather, balance is achieved through changes in the balance sheet, in changing the assumptions that underlie the budget, in altering the timing and recognition of various flows, or in redefining what constitutes revenues and expenditures in a budget or, for that matter, the budget itself. Thus, budgets can be given the appearance of balancing. However, temporizing sleights of hand become fewer in number and more expensive to implement when deficits prove to be structural in nature and outflows persistently exceeds inflows. Illusionary budget balancing in the face of structural problems entails long-term costs and compound fiscal stress over time. How one views these results depends very much on one's political objectives.
Article
Hawley's theory that the distribution of system power in the urban community is related to its capacity for mobilization on public issues is examined in the framework of a model specifying mobilization, the scope of municipal government, the MPO ratio and organizational dimensions of system power (employment concentration and absentee-ownership) as consequences of the city's functional role in an urban division of labor. The model treats mobilization as an unobserved variable mediating the effects of community structure on three policy variables: municipal government expenditures, urban renewal and poverty program funding. Coefficients estimated under the model suggest that, while the MPO ratio is strongly dependent on urban function and organizational structure, its direct effect on mobilization is stronger than effects produced by these factors. The model postulating mobilization is then compared with the results of separate regressions calculated for each policy variable. The data indicate that it constitutes a reasonably good fit to regression estimates where municipal expenditures and urban renewal success are dependent variables but not in the case of poverty funds. With regard to the latter, the organizational measures of system power prove more important than the MPO ratio. Furthermore, governmental scope is found to be a moderately important variable intervening between elements of community structure and policy consequences, but its influence is considerably less than that of other variables in the model. In conclusion, general support is claimed for an ecological approach which views urban public policy as the end result of a sequence of conditions originating with city size and economic function.
Article
Understanding the relations between elected and administrative officials in council-manager cities is hampered by inadequate models for assigning responsibility for governmental functions. Practitioners tend to view their roles in terms of the traditional model based on dichotomy of policy and administration and, though aware of exceptions, are uncomfortable with them. Scholars, on the other hand, having rejected this model, see extensive overlap and have difficulty recognizing limits of the policy-making role of the manager. This paper draws on field observations in the five cities in North Carolina with populations of more than 100,000 and a review of the literature to consider a number of "existing" models of the policy-administration relationship and to propose a new formulation that is empirically sound and responsive to practitioners' concern for normative guides to behavior. The proposed model is based on a separation of responsibility for the definition of mission by elected officials and the management of programs by administrative staff. Policy and administration-which fall between mission and management-are viewed as the shared responsibility of elected officials and staff, with each having a legitimate role in both functions. Implications of the model for administrative ethics, council roles, and future research are explored.
Article
A study of enterprise fund transfers in South Carolina cities shows that municipally-owned electrical utilities result in increased spending on municipal services and a subsidization of the property tax by substituting utility fees from city customers and, more importantly, noncity customers for taxes. Moreover, cities with only water and sewer enterprise activities in some cases follow similar practices. A key factor in determining the amount of such transfers is the amount of control the city council has over the enterprise activites. The concepts of fiscal illusion and public avoidance are used to discuss the issues raised by interfund transfers, and a number of issues are identified which need further attention, such as accounting and auditing practices, revenue estimation, and management ethics.
Article
Recent research indicates that cities with poor fiscal policy practices are more likely to experience fiscal stress. This analysis of the fiscal policy practices of community planners in 132 micropolitan Florida communities indicates that community attributes influence how public policy choices are derived and implemented.
Any shifting of responsibilities from the state or federal governments to local governments would fall mostly on the shoulders of general-purpose governments, namely, cities (municipalities) and counties. This study explores city and county revenue decisions associated with general funds—the governmental fund most likely to be affected by state requirements for greater local financing responsibility for new or devolved programs. The results suggest that state control over local revenue authority affects decisions regarding the imposition of financial burdens on residents, and that intergovernmental aid to cities and counties does not necessarily mitigate those burdens. Despite evidence of healthy financial reserves, especially for cities, shifting responsibilities from the state to city or county governments could place cities and counties in difficult fiscal positions. Given the importance of own-source revenues to current budgets, and in view of the questionable impact of intergovernmental aid on city and county residents' revenue burdens, questions persist about the ability of city and county governments to maintain (and, if necessary, to expand) services during economic recession.
Article
Organizational slack has been widely discussed, but only in its role as an antecedent of performance, political behavior, bankruptcy, and other phenomena. A model that describes the antecedents of organizational slack is presented here. It contains three sets of predictors: environmental contigencies, organizational characteristics, and the values and beliefs of dominant coalition. Hypotheses detailing how each set of predictors leads to the development of different levels and types of slack resources are presented.
Article
Starting from the position that power is an attribute of a social system rather than of an individual, this study examines the relationship of the extent of power concentration to urban renewal success. The ratio of managers, proprietors, and officials to the employed labor force measures the concentration of power, and success in urban renewal is represented by arrival of cities at the execution stage in that program. The relationship is found to be statistically significant and remains so under a series of controlled observations. Thus it appears that the conception of power employed offers a promising procedure for comparative studies.
Article
Revenue diversification and balanced use of revenue sources have long been held as desirable policy aims by many tax policy analysts, especially the Advisory Commission on Intergovernmental Relations. Ladd and Weist asserted that revenue balance is not a valid policy goal in and of itself. The disagreements between the two schools of thought have been difficult to sort out in part because of differences in perspectives and in part because of the lack of an acceptable quantitative measure of diversification and definition of balance. This article uses an empirical method for determining diversification and shows that past definitions of revenue balance have been overly narrow. However, in contrast to Ladd and Weist, the empirical measures of diversification do show that revenue balance is related, at the margin, to improved fiscal performance, and thus that balance remains a worthwhile policy aim.
Article
This article suggests that there is an inverse U-shaped relationship between slack and innovation in organizations: both too much and too little slack may be detrimental to innovation. Two related mechanisms governing this relationship are proposed: Slack fosters greater experimentation but also diminishing discipline over innovative projects, resulting in the hypothesized curvilinear relationship. Comprehensive worldwide data on 264 functional departments of two multinational corporations support the prediction.
Article
Local government officials are operating in a policy void when it comes to the establishment and use of reserve funds. In part, this is due to confusion about the distinction between reserve and contingency funds. The limited research that has been conducted shows that relatively large sums of money are maintained in reserve by many local governments. Some governments refer to these sums as reserve funds and their intended use is clearly indicated in one or more local documents, such as a budget or audit/financial report. Others simply maintain an unreserved fund balance. This article identifies rationales for using reserve funds, discusses the alternative ways reserves are accumulated, and outlines key issues a local government financial plan should address when reserve funds are utilized.
Article
Budget execution traditionally has been defined as a straightforward process of implementing the budget as approved. Research into the process has been limited, particularly with regard to local government budgets. This article examines the rebudgeting process using a case study of 15 West Virginia cities. Rebudgeting displayed a consistent pattern for the various budget categories—personnel, contracts, commodities, capital, and contributions—closely resembling the “increase-then-decrease” pattern seen in the overall budget. Empirical data on budgetary adjustments and structured interviews with city finance officials helped to describe budget changes and explain probable causes and effects of behavior during budget execution for these smaller cities. Budget changes were found to be the result of managerial necessity and the exercise of discretion to generate and distribute surpluses.
Article
This article strictly defines the budget stabilization fund (BSF) as a counter-cyclical reserve, and with a panel data set examines the effects of BSF and general fund unreserved undesignated balances (UUB) on stabilizing state general fund expenditure during downturns. The article finds that BSFs bolster spending in lean years: each percentage point increase of BSF balance as a percent of general fund expenditure can minimize negative expenditure gap by a quarter percentage point. But the article does not find evidence that UUB is a counter-cyclical fiscal tool, indicating that wide adoption of BSF may have changed the nature and use of UUB.
Article
State rainy day funds have increased in popularity as countercyclical planning devices over the past 15 years. The view is widely held that all states need a rainy day fund balance of five percent in order to guard themselves against the threat of budgetary dislocation. This article compares the actual balances in state rainy day funds in 1997 to several factors affecting budgetary volatility. Little relationship is found between rainy day fund balances and the actual level of volatility in a given state. The article finds no justification for a “one size fits all” approach; each state should design policies based on its own peculiar needs.
Article
There is a rich literature on how state governments use slack fiscal resources - most often in the form of rainy day funds and budget stabilization funds - to minimize the effect of economic downturns. This paper presents the first known examination of whether slack resources have the same counter-cyclical effects at the local level. It uses a panel data set to determine whether one particular form of local fiscal slack, general fund balance, stabilizes current annual expenditures among a sample of 103 Minnesota cities from 1990 to 2000. The findings suggest different fund balance portions have marginal but nonetheless important effects on expenditures.
Article
The author reports that city fiscal directors are still pessimistic about fiscal conditions. Until or unless municipalities' tax rates and tax bases improve dramatically, the fiscal position of cities for next year will not be significantly improved, the author writes.
Article
The author tries to determine the optimal level of fund balances for local governments. The author says that results suggest that a simple 5 percent balance rule for local governments is far too simplified and is likely to be inadequate to maintain even moderately high growth rates of government expenditures over extended periods of time with much confidence.
Article
This article examines the degree to which rainy day funds eased the fiscal stress experienced by states during the 1990–1991 recession. In the first section, a state fiscal policy of neutrality over the business cycle is used as a benchmark for evaluating the use of budget stabilization funds. The next section looks at data from the last three recessions to see how recessions have affected the taxes and expenditures of states. A measure of degree of fiscal stress experienced by each state during the 1990–1991 recession is then calculated. These results are used to empirically investigate the impact of explicit state rainy day funds in easing state fiscal stress. Next, the article examines whether states that had rainy day funds in 1989 were more likely to have less fiscal stress, and whether the specific deposit and withdrawal provisions of these funds made a difference.
Article
This study examines the trends in revenue diversification in approximately 240 suburban municipalities in the Chicago metropolitan region between 1988 and 1997. It then tests a model of revenue diversification’s impact on tax effort using data from 1993 to 1997, and separated by home rule and non–home rule municipalities. Trends show that suburbs with higher increases in diversification tend to be home rule, younger, less residential, experiencing more growth, less reliant on property taxes, and more reliant on sales taxes. Model estimates show that communities with more revenue diversification have lower tax effort when controlling for other determinants of tax effort, and this effect is stronger in non–home rule municipalities.
Article
Over the past decade it has become increasingly clear that many of our larger cities are slowly and steadily moving toward fiscal hard times. Often this trend has been hidden by the polish, glitter, and glitz of showplace downtowns, shopping plazas, and highrise office complexes. Other times it has been hidden by defrayed maintenance of infrastructure, a subtle erosion of services to specific sub-groups in the community, or the collapse of capital improvement planning.
Article
This paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits. More restrictive state fiscal institutions, such as 'no-deficit carryover' rules and tax and expenditure limitations, are correlated with more rapid fiscal adjustment to unexpected deficits. Political factors are also important. When a single party controls the state house and the governorship, deficit adjustment is much faster than when party control is divided. In gubernatorial election years, tax increases and spending cuts are both significantly smaller than at other times. Copyright 1994 by University of Chicago Press.
The Cost and Value of Slack.'' In Advances in Financial Planning and Fore-casting
  • George P Tsetsekos
George P. Tsetsekos, ''The Cost and Value of Slack.'' In Advances in Financial Planning and Fore-casting, Volume 6, ed. C. Lee (Greenwich, CT: JAI Press, 1995), 135–151.
Chapter 3The Positive Theory of Public Bureaucracy'' in Perspectives in Public Choice
  • William Niskanen
  • Bureaucracy
William Niskanen, Bureaucracy and Representative Government (Chicago: Aldine-Atherton, 1971), Chapter 3. Terry Moe, ''The Positive Theory of Public Bureaucracy'' in Perspectives in Public Choice, ed. D. Mueller (Cambridge, UK: Cambridge University Press, 1997), 455–480.
Evaluating Financial Condition: A Handbook for Local Government
  • M Sanford
  • Maureen Groves
  • Valente
Sanford M. Groves, Maureen Godsey Valente, and Karl Nollenberger, Evaluating Financial Condition: A Handbook for Local Government, 4 th ed. (Washington, DC: ICMA, 2003), 68–69.
City Government Structures: An Attempt at Clarification,'' in The Future of Local Government Administration: The Hansell Symposium
  • S Victor
  • Tari Renner Desantis
Victor S. DeSantis and Tari Renner, ''City Government Structures: An Attempt at Clarification,'' in The Future of Local Government Administration: The Hansell Symposium, eds. H.G. Frederickson and J. Nalbandian (Washington, DC: ICMA, 2002), 71–80.
The Financial Analysis of Gov-ernments
  • Robert Berne
  • Richard Schramm
Robert Berne and Richard Schramm. The Financial Analysis of Gov-ernments (Englewood Cliffs, NJ: Prentice-Hall, 1986), 324–331.