Impact of Tax and Expenditure Limitations on Local Government Savings

Kioko, Sharon N.

doi:10.1007/978-3-319-15186-1_8

Cited by 10 publications

(16 citation statements)

References 49 publications

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“…The findings also suggest that the characteristics of decision makers influence the cash management choices that finance managers make and confirm previous scholarship that manager preferences reflect their personal values (Pasewark and Riley, 2010). Kioko (2015) observes that the TELs have altered the local financial landscape. She empirically investigates the effect of TELs on local cash reserves and finds that the adoption of TELs has a negative effect on local unrestricted cash reserves.…”

Section: Cash Management Practicessupporting

confidence: 85%

Institutional isomorphism and cash management practices in Mississippi

Nukpezah

Abutabenjeh

2018

JPBAFM

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Purpose The purpose of this paper is to draw on the theory of institutional isomorphism to investigate how Mississippi’s centralized cash management policy affects the cash management practices in the state’s rural and urban counties. Design/methodology/approach The study uses a sequential exploratory mixed methods design involving a qualitative documentary analysis and a quantitative analysis of a survey of Mississippi counties. Findings The study finds that institutional isomorphism drives cash management practices in the counties by influencing how they follow state and agency mandates. Moreover, while urban counties have superior socio-economic indicators compared to their rural counterparts, no differences exist regarding standardized financial indicators, which suggest that local governments in the state may be imitating the practices of one another. Practical implications First, states should consider the different financial and economic conditions of their local governments when prescribing cash management policies because uniform policies could stifle local innovation and reduce efficiency in cash management. Second, when there is pressure from a higher-level government or a state agency, local governments may end up imitating one another rather than exploring opportunities for innovation within state policies. Third, state policies should consider requiring education and training in cash management practices that help identify strategies to add value to public funds within the scope of local fiscal capabilities. Originality/value The study uses one state to investigate a unique case of centralized cash management practices. The lessons learned can apply to other states seeking to develop a policy for their small local governments without placing the larger ones at a disadvantage.

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Section: Cash Management Practicessupporting

confidence: 85%

Institutional isomorphism and cash management practices in Mississippi

Nukpezah

Abutabenjeh

2018

JPBAFM

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“…A preponderance of the local government financial literature has measured slack resources as cash holdings (Gore, 2009;Hand et al, 2016;Kioko, 2015;Lofton, 2021b), budget stabilization funds (Gianakis & Snow, 2007;Snow & Gianakis, 2009;Snow et al, 2008;Snow et al, 2015;Wolkoff, 1987), discretionary savings in general fund balances (Arapis et al, 2017;Duncombe & Hou, 2014;Hendrick & Crawford, 2014;Hendrick, 2006;Marlowe, 2005Marlowe, , 2011Marlowe, , 2013Moulick & Taylor, 2017;Stewart et al, 2017;Su 2019;Stewart, 2009Stewart, , 2011Su & Hildreth, 2018;W. Wang & Hou, 2012;S.…”

Section: Local Government Working Capital Management Literaturementioning

confidence: 99%

“…In fact, managers would likely adjust cash inflows and/or outflows to eliminate the need to use short-term debt, by, for example, relying on existing cash reserves to finance the cash-flow deficit. Empirical evidence suggests cash holdings are enlarged with increases in the coefficient of variation, more revenue diversification, and more dependence on federal aid for counties (Gore, 2009;Hand et al, 2016;Kioko, 2015). If existing cash reserves have fallen below policy recommendations or been restricted for other purposes, managers could alter the collection of revenues and/or the timing and level of expenditures to eliminate the cash-flow deficit.…”

Section: Short-term Debt Predictors and Testable Hypothesesmentioning

confidence: 99%

The use of short‐term debt by general‐purpose governments

Lofton

Kioko

2021

Public Budgeting & Finance

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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 longterm 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. Applications For Practice• Evidence supports that local governments use shortterm debt in conjunction with increases in long-term debt, revealing an additional cost of issuing longterm debt. • Policies established to manage the issuance of shortterm debt can acknowledge that lack of illiquidity, higher capital project costs, increasing long-term debt, and more frequent short-term debt issuance are more likely to increase short-term debt burdens. • Long-term debt management policies can include provisions for more short-term debt issuance.

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“…Kioko (2015) adds to this measure by including proceeds of bond issues to the cash reported. However, the Census Bureau's measure of cash holdings reports no designations in cash reserves for capital projects or special revenue funds, likely leading scholars to overestimate the level of cash held by local governments (Kioko, 2015). The current study specifies General Fund unrestricted cash, limiting evaluation to cash within the sole discretion of governments.…”

Section: Financial Slack Resource Of Excess Taxing Capacitymentioning

confidence: 99%

“…Governments are permitted to use financial slack to prevent a temporary cash-flow deficit, in which a unit's outflows are greater than its inflows. Public financial officials have the expertise to recognize that financial slack in the form of cash balances, budget stabilization funds, unreserved or unrestricted fund balances, and unrestricted net assets can be used strategically to sustain government operations (Gianakis & Snow, 2007;Gore, 2009;Hand et al, 2016;Hendrick & Crawford, 2014;Hendrick, 2006;Kioko, 2015;Marlowe, 2005Marlowe, , 2011Moulick & Taylor, 2017;Snow & Gianakis, 2009;Snow et al, 2008Snow et al, , 2015Stewart et al, 2017;Stewart, 2009Stewart, , 2011Wang & Scorsone, 2020;Wolkoff, 1987).…”

Section: Introductionmentioning

confidence: 99%

The impact of excess taxing capacity on short‐term resources

Lofton

2021

Public Budgeting & Finance

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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. Applications For Practice• 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.

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Impact of Tax and Expenditure Limitations on Local Government Savings

Cited by 10 publications

References 49 publications

Institutional isomorphism and cash management practices in Mississippi

Institutional isomorphism and cash management practices in Mississippi

The use of short‐term debt by general‐purpose governments

The impact of excess taxing capacity on short‐term resources

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