Developing a Framework for Ranking State and Municipal Governments on Fiscal Sustainability

Abstract

Abstract:Fiscally distressed governments tend to draw public attention only amid prominent events like bankruptcy filings, credit downgrades, and serious service cuts. Ideally, before the situation became so severe, the public would be able to quickly assess a government's financial health, both individually and relative to peers. Recognizing the challenge of consistently assessing governments' fiscal health, we developed a uniquely broad data set and proxy measures of fiscal health. For more than 10,000 state and municipal governments in the United States, we extracted comparable data points from audited annual financial reports (FY 2008(FY -09 to 2013. We then calculated a budget balance ratio, an asset flexibility ratio, and a pension funding ratio, which we used to rank governments' relative performance. Previous work largely focused on state-and country-level comparisons of fiscal condition using limited samples due to restricted data availability and great variability in accuracy, particularly at the municipal level. These limitations restricted comparability across governments over time and geography. However, we successfully compiled a broad, multiyear public finance database that makes comparisons across thousands of American cities, counties, and state governments possible. Furthermore, our high-level framework of analysis illustrates a way to create simple, broadly applicable measures of municipal financial health.

Decree or democracy? State takeovers and local government financial outcomes

“…We use a novel proprietary dataset, GovRank, to identify distressed governments that could plausibly serve as a counterfactual to the eight state takeover events we study. GovRank is a panel of audited financial statements for more than 8000 general purpose local governments spanning 2009 to 2014 (Kaldani et al, 2016). A significant advantage of audited financial statements over the Census of Governments data is that they contain government-wide financial data inclusive of all financial resources and obligations of each government in the accrual basis of accounting (Ross et al, 2015).…”

Analysis of the effectiveness of regulation on financial health of Spanish local governments

“…In addition, Bisogno et al, (2019) define this variable as 'the ability of a public sector organisation to raise sufficient revenues to cover its legally required expenditures without falling into deficit', which is in line with the concept of nonfinancial budgetary balance studied here. The asset information is also included as variables explaining financial sustainability by Kaldani et al (2016) and Gerrish and Spreen (2017). Trussel and Patrick (2018) use indicators related to debt that are similar to those in our study: debt service (our indebtedness) and debt per capita, and Robbins et al (2016) apply indicators linking debt to income and assets.…”

Analysis of Regional Financial Conditions in Local Governments of Enrekang Regency, South Sulawesi Province, Indonesia

“…Kim & Ryu (2017) revealed that financial condition covers a wide dimension, so it is very complex to understand. However, it is very important to understand that financial condition and financial health are often used interchangeably (Ramsey, 2013;Kaldani et al, 2016). Kloha et al (2005) Financial condition is the most widely used terminology (Casal et al, 2014).…”