Responding to Municipal Fiscal Distress: An Emerging Issue for State Governments in the 1990s

Cahill, Anthony; James, Joseph A.; DeSanto, Frank; Emmett, Richard; Hall, Thomas; Horton, Bradley; Seliga, Ronald; Stoichess, Thomas; Stoner, Randall; Zurhellen, Dorrial; League, Pennsylvania Economy; Office, United States General Accounting

doi:10.2307/976554

Cited by 29 publications

(18 citation statements)

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“…Commentators have also examined the financial crises experienced by local governments in a range of other countries (e.g., Carmeli and Cohen, 2001; Bach and Vesper, 2002; Carmeli, 2003). In this context, a financial crisis could involve bankruptcy or loan default (e.g., the cases described in Cahill and James, 2002) but it has also been equated with a series of operating deficits (Cahill and James, 1992; Bach and Vesper, 2002).…”

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confidence: 99%

“…Others have suggested that distress is a consequence of a failure to adapt to economic downturns in general, or to the financial impact of unfunded mandates, as state governments shifted responsibilities to cities or municipalities without financial compensation or while restricting the capacity of local governments to increase revenues (Falconer, 1991; Beckett‐Camarata, 2004). Still others sought to explain local government behaviour in times of financial stress (for a review, see Cooper, 1996), or to describe state responses to municipal crises (see Cahill and James, 1992; Harvard Law Review , 1997).…”

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confidence: 99%

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Explanators of Local Government Distress

Jones

Walker

2007

Abacus

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This article develops a statistical model to explain sources of distress in local government. Whereas 'financial distress' in the private sector has been equated with a failure to meet financial commitments, here 'distress' is interpreted as an inability to maintain pre-existing levels of services to the community. Since the late 1990s local councils in an Australian state (New South Wales) have been required to estimate the cost of restoring infrastructure assets to a satisfactory condition (a requirement which predates that form of reporting on infrastructure condition introduced as an option in U.S. GASB 34). Information regarding the cost of restoring infrastructure is used in this study as a proxy for levels of distress (in contrast to the binary classification that characterizes much of prior private sector financial distress research). Data regarding service levels for a sample of 161 councils for 2001 and 2002 were used and a multiple regression model was estimated and interpreted. The main findings were that the degree of distress in local councils is positively associated with the size of the population they serve and the size and composition of their revenues. Road maintenance costs featured prominently in results, as higher road program costs were associated with higher levels of distress (particularly when interacted with other variables). However, the revenue generating capacity of councils had the strongest statistical impact on local government distress. Councils with lower percentages of rates revenue to total revenue and lower ordinary revenue levels to total assets were typically identified as more distressed. However, no systematic evidence was found that rural councils have higher distress levels than urban councils (i.e., both rural and urban councils serving larger populations were relatively more distressed than councils serving smaller populations). It is suggested that the model (or modifications thereof) may serve as an early warning system for those monitoring the circumstances and performance of local governments.

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confidence: 99%

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confidence: 99%

Explanators of Local Government Distress

Jones

Walker

2007

Abacus

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“…To restore financial integrity, a financial control board may have the power to restructure debt, limit borrowing, and install budgetary accounting systems and internal controls (Hren, Morelli, and Briggs 1997, 738). To balance budgets, the board may be authorized to raise taxes and cut services (Cahill and Jones 1992, 88). For instance, the state‐appointed manager of Hamtramck, Michigan, fired employees, replaced department heads, privatized services, cut pay raises, froze hiring, and suspended the pay of the city council and mayor (Carvlin 2003).…”

Section: Assist Local Units Immediatelymentioning

confidence: 99%

Preventing Local Government Fiscal Crises: Emerging Best Practices

Coe

2008

Public Administration Review

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What type of oversight should states exercise over local units in order to prevent fiscal crises? This article discusses a sequence of three best practices that some states use to prevent fiscal emergencies. They first monitor local government finances to predict fiscal distress. After detecting signs of fiscal distress, states actively assist local units in ameliorating the problem. Finally, assistance notwithstanding, if a situation becomes grave, states require local units to take strong remedial measures, including increasing taxes and reducing expenditures.

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“…Findings have suggested that practices range from virtually no oversight or assistance to that of an advisory role of how to alleviate fiscal stress and in some rare cases, state intervention with temporary control of local government finances (Cahill & James, 1992;Honadle, 2003;Honadle, 2004;Kloha, Weissert, & Kleine, 2005;Coe, 2008). Nearly all of the indicators used by states could be classified under one of 36 categories used by the International City/County Management Association (ICMA) (Groves & Valente, 2003).…”

Section: North Carolina Audit Oversight and The Local Government Commmentioning

confidence: 99%

Increasing Creasing Transparency and Efficiency: An Examination of County Government Note Disclosures

Modlin¹

2016

PAR

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Local government financial audits have provided increased transparency into the many transactions that take place over an entire fiscal year. In many of these cases, it can be determined if local governments have followed state laws, observed generally accepted accounting principles, and established proper internal controls. However, implementation of stricter state guidelines and more stringent accounting standards have not eliminated reporting errors. For these reasons, notes that accompany financial statements are not only useful for clarification and information purposes, but also to question various reporting aspects among statements. This study examines the fiscal year 2009 independent auditor findings among note disclosures in professionally administered county governments in North Carolina. Findings indicate numerous reporting problems within a majority of county governments ranging from employee retirement funding to inadequate insurance coverage and unexplained asset amounts. A more involved county manager, more internal staff dedicated to the audit process, and collaboration in auditor selection are all significant in reducing the number of note disclosure errors.

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Responding to Municipal Fiscal Distress: An Emerging Issue for State Governments in the 1990s

Cited by 29 publications

References 0 publications

Explanators of Local Government Distress

Explanators of Local Government Distress

Preventing Local Government Fiscal Crises: Emerging Best Practices

Increasing Creasing Transparency and Efficiency: An Examination of County Government Note Disclosures

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