Does Benchmarking Encourage Improvement or Convergence? Evaluating North Carolina’s Fiscal Benchmarking Tool

Gerrish, Ed; Spreen, Thomas Luke

doi:10.1093/jopart/mux018

Cited by 30 publications

(31 citation statements)

References 17 publications

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“… 18. Given that these performance audits use benchmarking with peer districts, these results appear consistent with the results of Gerrish and Spreen (2017), which finds that local governments in North Carolina spend down their cash reserves following the introduction of a state fiscal benchmarking program. …”

supporting

confidence: 74%

The Effects of Performance Audits on School District Financial Behavior

Thompson

John

2019

Public Finance Review

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Performance audits are a form of weak financial oversight intended to curb inefficient spending and help alleviate financial problems. This study examines the effect of these performance audits on school district finances in Ohio, where performance audits are used on their own and within the context of the state’s fiscal stress labeling system—a strong financial oversight system. Using a difference-in-differences analysis, we find school districts do reduce expenditures as a result of these performance audits. These changes in financial behavior are found even for performance audits in nonfiscal stress districts, suggesting that weak oversight programs may be an effective means toward changing fiscal behavior. Despite the financial changes in nonfiscal stress districts that receive audits, there appears to be little impact on school district proficiency rates. These results suggest that audits may provide a useful mechanism for changing financial behavior of school districts without much associated efficiency losses.

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supporting

confidence: 74%

The Effects of Performance Audits on School District Financial Behavior

Thompson

John

2019

Public Finance Review

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“…The variation in unrestricted net assets is larger than that in the unassigned general fund balances. Similar to Gerrish and Spreen (2017), we may be observing a form of isomorphism in financial management when professional benchmarks of holding at least two months of operating spending in general fund reserves produce regression to the mean, whereas the lack of professional benchmarks with regards to unrestricted net assets results in less uniform practices (Figure 1). Figure 2 presents the distributions of both DVs and shows a moderate positive skew for unassigned fund balances and a mild negative skew for unrestricted net assets.…”

Section: Samplementioning

confidence: 75%

“…A local government's need for fiscal reserves may also be driven by the financial management practices of its neighbors, shared economic environments (Guo and Wang 2017), and financial performance standards propagated by states (Gerrish and Spreen 2017;Ványolós 2011). Though not being able to test the proximity hypothesis using spatial data similar to Guo and Wang (2017) or the hypothesis about financial performance convergence within states over time similar to Gerrish and Spreen (2017), we take a state-fixed effects approach similar to Thompson et al (2017). We interpret the share of variation explained by state fixed effects as evidence of the importance of state-level environments for local fiscal reserves accumulation (H5).…”

Section: Conceptual Framework and Hypothesesmentioning

confidence: 99%

Toward a Theory of Fiscal Slack

Gorina¹,

Maher

Park

2019

Public Budgeting & Finance

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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.

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“…Further, perceptions of behavior may differ from perceptions about other aspects like administrative systems. Second, previous studies have debated whether benchmarking (i.e., providing information about localities’ positions relative to their peers) encourages improvement or convergence in local performance (Gerrish and Spreen 2017; Pasha 2018). Although this study's evidence is too short term to produce conclusive results, our findings may support both convergence and improvement; on average, there was an improvement in performance among low performers, and, as a result, the performance gaps across localities diminished.…”

Section: Conclusion and Discussionmentioning

confidence: 99%

Performance Management Meets Red Tape: Bounded Rationality, Negativity Bias, and Resource Dependence

Hong

2020

Public Administration Review

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Governments around the world have implemented reforms to reduce red tape, but little evidence exists about whether they have achieved their goals. Utilizing a quasi-experimental regression discontinuity design, this research examines the impact of a policy implemented by the Korean central government to reduce local levels of regulatory red tape. The findings show, first, that the centrally designed reform significantly reduced local levels of red tape, but the reduction occurred only among low-performing localities. This supports the claim that organizations' responses to positive and negative performance information are asymmetric-the negativity bias hypothesis. This finding is explained by the bounded rationality view of organizational decision-making. Second, the impact was clearest among localities with high fiscal dependence on the central government. This supports the resource dependence hypothesis, which postulates that a policy's impact depends on the power imbalance between localities and the central government. Evidence for Practice • This research explores whether governments can reduce the level of red tape by implementing a performance management system. • The Korean central government implemented a performance management system evaluate local levels of red tape. • The reduction in the level of red tape was observed only among low-performing localities. • The more fiscally dependent on the central government a locality is, the greater its response to the performance management system.

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Does Benchmarking Encourage Improvement or Convergence? Evaluating North Carolina’s Fiscal Benchmarking Tool

Cited by 30 publications

References 17 publications

The Effects of Performance Audits on School District Financial Behavior

The Effects of Performance Audits on School District Financial Behavior

Toward a Theory of Fiscal Slack

Performance Management Meets Red Tape: Bounded Rationality, Negativity Bias, and Resource Dependence

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