Showing papers in "Public Budgeting & Finance in 2013"
TL;DR: Popular financial reports are reports distributed to citizens and other interested parties who lack a background in formal government financial reporting but who desire an overview of the government's financial status and activities.
Abstract: Popular financial reports are reports distributed to citizens and other interested parties who lack a background in formal government financial reporting but who desire an overview of the government's financial status and activities. This paper examines the current state of local government popular financial reporting in the U.S. The results of a survey of large cities and counties indicate that 75 percent of these local governments have issued popular financial reports and that the types of reports and methods of distribution vary. Many of the reasons for providing popular reports relate to providing information and improving transparency and accountability by providing more user friendly financial reports. This paper concludes with a discussion on popular financial reporting in the context of government transparency and accountability, and offers a research agenda for continued study of the topic.
55 citations
TL;DR: In this paper, the effects of balanced budget requirements on three measures of state expenditure using data on 48 states for the years 1950-2004 were analyzed. And they found that the following rules are effective in constraining expenditures: (1) requiring that the governor submits a balanced budget; (2) placing controls on supplemental appropriations; and (3) prohibiting the carryover of a deficit from one fiscal year or biennium into the next.
Abstract: This study tests the effects of balanced budget requirements on three measures of state expenditure using data on 48 states for the years 1950–2004. We find that the following rules are effective in constraining expenditures: (1) requiring that the governor submits a balanced budget; (2) placing controls on supplemental appropriations; and (3) prohibiting the carry-over of a deficit from one fiscal year or biennium into the next. The latter two rules exert larger individual effects than the first.Allelseequal,statescanbestimprove theirprospectsofreigning inspendingby instituting technical rules that govern budgetary outcomes, as opposed to political rules that dictate how the budget is assembled and approved.
38 citations
TL;DR: In this paper, the authors review the funding status of state-administered pension plans and their impact on state credit quality and show that rating outlooks are sensitive to the fund ratio, especially for migration between stable and negative outlooks for states with lower fund ratios.
Abstract: This study reviews the funding status of state-administered pension plans and their impact on state credit quality. As the fund ratio (actuarial assets/actuarial accrued liability) of state-administered pension plans decreases, states are more likely assigned a lower rating. Moreover, rating outlooks are sensitive to the fund ratio, especially for migration between stable and negative outlooks for states with lower fund ratios. These results are a timely pretest to the 2013/2014 implementation of GASB Statements No. 67 and 68, serving as a benchmark to assess whether new reporting requirements will yield information to alter the market’s response to unfunded pension liabilities.
37 citations
TL;DR: The main problems with capital transfers in the Indonesian context are that grant funding has stagnated at low levels and the proportion of funding allocated to infrastructure has declined considerably, which suggests that economic growth in Indonesia may remain suboptimal for the near future as discussed by the authors.
Abstract: Indonesian policymakers intend to increase capital spending, especially on traditional infrastructure, at all levels of government in order to stimulate economic growth. Intergovernmental capital grants can have very significant impact on encouraging such spending at the subnational level. The main problems with capital transfers in the Indonesian context are that grant funding has stagnated at low levels and the proportion of funding allocated to infrastructure has declined considerably. Given current institutional constraints, the likelihood of increasing grant funding for subnational infrastructure is dubious, which suggests that economic growth in Indonesia may remain suboptimal for the near future.
35 citations
TL;DR: In this paper, the Blundell-Bond estimator was used to investigate the relationship between pension contributions and budget stabilization funds (BSFs) over the period 1997-2008.
Abstract: Despite the shortfalls in public employee pension funds, there is little known about the effect of fiscal institutions on pension funding. This paper focuses attention on the link between pension contributions and budget stabilization funds (BSFs) over the period 1997–2008. It employs the Blundell–Bond (1998) estimator in order to address the concern that the deposit and withdrawal rules that drive the management of BSFs may be endogenous to state pension contributions. Empirical results suggest that BSFs with strict deposit rules are associated with higher pension contributions, while strict withdrawal rules are associated with lower contributions.
20 citations
TL;DR: This paper examined the case of continuous budgeting both preadoption and postadoption in New York City and considered matters of forecast bias, rebudgeting, and the belief that New York city remains in structural deficit which has been cited as a continuing source of concern since New York's 1970s fiscal crisis.
Abstract: This paper examines the case of continuous budgeting both preadoption and postadoption in New York City and considers matters of forecast bias, rebudgeting, and the belief that New York City remains in structural deficit which has been cited as a continuing source of concern since New York City's 1970s fiscal crisis. The asserted structural deficit is a rationale for reducing spending in the prebudget and postbudget adoption periods. Williams (2012), shows that New York City's revenue forecasts are biased to underestimation, exacerbating over longer horizons. This paper examines expenditure estimates, reductions and within-year modifications over the first decade of the twenty-first century. If there is a structural deficit, expenditures would exceed revenues in forecasts by more than offsetting forecast biases. However, there are other reasons expenditures may exceed revenues in forecasts. Late term increases in expenditure estimates suggest deliberate choices, which cannot be termed “structural.” Expenditure changes follow changing revenue particularly in the postadoption period. This rebudgeting practice does not reflect fiscal stress; it is part of a complex method of producing a surreptitious budget stabilization fund, reallocations favored by the mayor, and possibly shifting of the budget towards capital uses with little broad public discussion. These observed effects are somewhat consistent with effective financial management, but are nontransparent and inconsistent with democratic participation. Policy recommendations aim at restoring transparency and democratic oversight.
15 citations
TL;DR: This paper reviewed the main conceptual issues regarding the notion of Opportunity Cost of Public Funds (OCPF) and its use in normative economics and found that among the mechanisms that economists call "opportunity costs" the deadweight loss and administrative costs seem to be the most relevant, whereas the impact of the crowding out is more discussible.
Abstract: This paper reviews the main conceptual issues regarding the notion of Opportunity Cost of Public Funds (OCPF) and its use in normative economics. This notion occupies only a marginal and sometimes anecdotal role in the public economic literature and appears to be too often used without the definitional unambiguousness that would make it helpful for economic analysis. This situation is unsatisfactory considering the importance of (some of) the mechanisms described by the concept and the magnitude of these effects that are such as to heavily impact any budgetary practice. We find that among the mechanisms that economists call "opportunity costs" the deadweight loss and, to a lesser extent, administrative costs seem to be the most relevant, whereas the impact of the crowding out is more discussible. We also analyze how the question of opportunity costs is contingent upon some hypothesis about the financing mechanism of the public expenditures and we suggest that the most likely situation is the one where public expenses are financed through the eviction of other alternative uses of the public funding. We also provide a review of available quantifications and recommendations to the practitioners.
15 citations
TL;DR: The authors examined factors associated with credit rating fees using a decade of Texas municipal bond issuance data and found that rating fees are lower in a competitive environment, when issuers have experience and a relationship with the rating agency, and higher when the issue is large and more complex.
Abstract: Improving transparency of prices paid by government can improve market and government efficiency. Governments regularly pay to access capital markets, yet municipal bond issuance costs remain largely hidden from public view. This study examines factors associated with credit rating fees using a decade of Texas municipal bond issuance data. We find that rating fees are lower in a competitive environment, when issuers have experience and a relationship with the rating agency, and higher when the issue is large and more complex. The findings provide evidence that credit rating agencies (CRAs) retained pricing power following the credit crisis despite reduced reputational quality.
14 citations
TL;DR: This article investigated the effects of school district income tax on operating property tax revenue and found that despite reduced property taxes, greater income taxation is mostly to increase total revenues, by how much total revenues increase varies widely depending on the relative and absolute sizes of property and income taxes.
Abstract: Using a panel of 609 Ohio school districts from 1990 to 2008, this paper investigates the effects of school district income tax on operating property tax revenue. After correcting for endogeneity, the results do indicate a substitution effect that lowers the property tax levy. Despite reduced property taxes, greater income taxation is mostly to increase total revenues. By how much total revenues increase varies widely depending on the relative and absolute sizes of property and income taxes. We also find that school districts were able to increase the amount of the property tax by a greater amount than nonadopting districts in the years following the adoption of income taxes.
14 citations
TL;DR: The authors examined the effect of tax base composition on revenue volatility, with focus on state general sales tax and individual income tax and found that revenue volatility is significantly affected by how the tax base is composed.
Abstract: This study examines the effect of tax base composition on revenue volatility, with focus on state general sales tax and individual income tax. In doing so, extensive historical data (1992–2007) are presented on state taxation of various categories of sales and incomes that exhibit wide cross-state variations in taxable status, and revenue volatility is measured using the deviation-from-trend approach. Models of sales and income tax volatility are estimated using pooled OLS, and the analyses reveal that revenue volatility is significantly affected by how the tax base is composed. The paper concludes by discussing the policy implications of the results.
14 citations
TL;DR: This article examined the relationship between subjective and objective measures of fiscal condition and found little evidence that objective fiscal condition indices are related to subjective administrative assessments of the fiscal condition of Wisconsin counties during the Great Recession.
Abstract: Government Accounting Standards Board (GASB) Statement 34 has been in effect for a decade yet there is limited research examining government-wide financial reporting data. This study builds on our ability to delve into the fiscal condition of Wisconsin counties during the Great Recession. The principal aims of the research are: (1) expand on works utilizing GASB 34 reporting requirements; (2) report on county administrators perceptions of fiscal condition; and (3) examine the relationship between subjective and objective measures of fiscal condition. We find little evidence that objective fiscal condition indices are related to subjective administrative assessments of fiscal condition.
TL;DR: In this paper, socioeconomic determinants were brought to the forefront of the analysis and their interaction with policy, showing that elected and appointed assessors perform similarly during mass reappraisals in terms of maintaining uniformity.
Abstract: Though property assessment uniformity has been repeatedly studied as a technical problem related to the difficulty of the task, popular, and policy sentiment against the property tax is frequently directed at the incidence of nonuniformity across socioeconomic groups. Using data from Virginia, this paper brings socioeconomic determinants to the forefront of the analysis and their interaction with policy. Unlike the previous literature that employs controls for the time passed since the last reassessment, this paper consider show policy and socioeconomic variables may exert different influences between assessments. For example, the results indicate that elected and appointed assessors perform similarly during mass reappraisals in terms of maintaining uniformity, but appointed assessors perform far better during nonassessment years.
TL;DR: In this paper, the impact of intergovernmental transfers on tax effort of Indian states depends on the composition of transfers (conditional vis-a-vis unconditional) and the asymmetry hypothesis, which states that subnational governments respond to increases in transfers differently from losses.
Abstract: This study examines whether the impact of intergovernmental transfers on tax effort of Indian states depends on the composition of transfers (conditional vis-a-vis unconditional). It also tests the asymmetry hypothesis, which states that subnational governments respond to increases in transfers differently from losses. The evidence suggests that tax collections, including both indirect and direct taxes, are inversely related to unconditional transfers irrespective of whether they are increasing or decreasing. Imposition of conditions on transfers has prevented the Indian states from substituting such transfers for tax collection (direct tax collection is an exception). Direct tax collection responds most sensitively to transfers.
TL;DR: The authors found that there are considerable transaction cost scale economies for California municipal bonds and that pooling bond sales would likely save substantial amounts of money, and they used data from 2007 to 2009 to test whether scale economies exist.
Abstract: As with any market, there are transaction costs associated with the sale of municipal bonds. Only a small number of studies have examined this topic, and therefore we have only a limited understanding of the magnitude and determinants of new issue municipal bond transaction costs. We use data on California municipal bond transaction costs from 2007 to 2009 to test whether scale economies exist. We find that there are considerable transaction cost scale economies for California municipal bonds and that pooling bond sales would likely save substantial amounts of money.
TL;DR: The authors examined county government participation in the state-sponsored investment pool, the North Carolina Capital Management Trust (NCCMT), during the recession years and found that sales taxes were the most influential revenue stream on NCCMT cash portfolio participation while the accumulation of alternative revenue sources decreased participation.
Abstract: This study examines county government participation in the state-sponsored investment pool, the North Carolina Capital Management Trust (NCCMT), during the recession years. Using panel data of all 100 counties in North Carolina with additional survey data from finance officers concerning annual practices between fiscal years 2008–2011, findings suggest that county sales taxes were the most influential revenue stream on NCCMT cash portfolio participation while the accumulation of alternative revenue sources decreased participation. The findings also determined that the NCCMT was the safest investment option for idle local government funds during the recession.
TL;DR: In this paper, a mixed-methods approach was used on a sample of local governments in Nebraska to investigate the details of defined contribution pension plan management, and they found several deviations from promulgated best practices, and substantial variation in administrators' knowledge of and role perception related to DC plans.
Abstract: Despite the growing importance of defined contribution pension plans in state and local governments, little research exists on how those plans are actually managed. Our study fills a gap in the literature through using a mixed-methods approach on a sampleoflocalgovernmentsinNebraska.Weemployamail-outsurveytogetbroadbased information on DC plan administration throughout the state, and use face-toface interview techniques on a subsample of plans to investigate the details of plan management. We find several deviations from promulgated best practices, and substantial variation in administrators’ knowledge of and role perception related to DC plans.
TL;DR: In this paper, a stylized budgeting framework is developed to analyze the effects of macroec onomic shocks and governm ent bond market co-ordination on public finances.
Abstract: This pa per develops a stylize d budgeting framewo rk to analyze the effects of macroec onomic shocks and governm ent bond market co nditions on public finances. We focus on the imp acts of primary fiscal bal ance shock s, grow th, and inter est rate shock s o n budgetary sustainab ility. W e consider the effects of financial sector bailout s, unce rtainty about aging costs and insta bility vi z. speculati on in governm ent bond m arkets. The frame work is appl ied to th e case of Belgium, where recently these issues have played an important role. A scenario analysis of budgetary adjustment under alternati ve hypothes es is carried out to analyze Belgian fiscal sustainability over the next 20 yea rs.
TL;DR: The authors assesses state and local pensions in the U.S. and examine recent pension reform in Atlanta, Georgia, showing that the city had the 12th lowest funding ratio for its general employee fund compared to all other city plans in Georgia.
Abstract: This research assesses state and local pensions in the U.S. Concerns of locally administered pensions are addressed; actions taken and possible reforms to these plans are noted. Then, recent pension reform in Atlanta, Georgia is examined. In 2009, Atlanta had the 12th lowest funding ratio for its general employee fund compared to all other city plans in Georgia. Atlanta's story explains the depths of its pension problems, how the pension got into trouble and the changes necessary to advance fiscal sustainability. Such plans will require strict discipline by politicians, pension boards and financial managers, and tempering member expectations to reach sustainability.
TL;DR: In this paper, the authors explore the differential impact of revenue volatility measured by negative versus positive revenue deviation of from trend on state governments' decision in debt financing capital spending, and find that negative revenue deviation caused a state to decrease the issuance of general obligation (GO) debt and GO debt as a proportion of total long-term debt issuance when the magnitude of the deviation is below the medium range, but increase the issue of revenue debt and longterm debt only when the variance is high.
Abstract: Revenue volatility has been a major concern for many state governments as it affects public service delivery and government operation in various ways. Among those, revenue volatility often affects the extent to which state governments utilize borrowing to pay for their infrastructure. As state governments have been ever increasing their reliance on borrowing to finance their capital needs, this paper aims to explore the differential impact of revenue volatility measured by negative versus positive revenue deviation of from trend on state governments' decision in debt financing capital spending. These relationships are empirically examined by modeling various factors that explain state governments' reliance on debt financing with the US Census Bureau's State Government Finance database covering 1987–2004. Findings suggest negative revenue deviation caused a state to decrease the issuance of general obligation (GO) debt and GO debt as a proportion of total long-term debt issuance when the magnitude of the deviation is below the medium range, but increase the issuance of revenue debt and long-term debt only when the deviation is high. In the scenario of positive deviation from trend, both the direction and its magnitude increased the issuance of the GO and long-term debt as well as the GO share. Findings from this research provide new insight into the effects of revenue volatility on the financing choices of state governments. It also has important implications for state public administrators who aim to mitigate the negative impact of revenue uncertainty and exercise a proactive control over state debt burden.
TL;DR: In this article, the authors compared the Ticket to Work (TTW) legislation with the Congressional Budget Office cost estimate accompanying the legislation, and found that TTW savings were close to predicted savings, but economic conditions reduced the impact.
Abstract: This article compares Disability Insurance (DI) savings to those projected in the Congressional Budget Office cost estimate accompanying the Ticket to Work (TTW) authorizing legislation. Enacted with the goal of promoting employment among DI beneficiaries, TTW savings were close to predicted savings, but economic conditions reduced the impact. These findings suggest vocational rehabilitation policies need to incorporate strategies to address economic downtowns if they are to promote long-term independence. This article highlights some of the challenges inherent to evaluations conducted without an experimental research design, while illustrating the potential of ex post analyses to assess whether expected savings materialize.
TL;DR: This paper examined the use of POBs as a financing strategy to address the effects of unfunded pension liabilities on government operating budgets and found that districts issuing Pobs have not increased educational spending relative to other districts.
Abstract: We examine the use of pension obligation bonds (POBs) as a financing strategy to address the effects of unfunded pension liabilities on government operating budgets. POBs are publicly marketed as money-saving mechanisms that reduce pension system payments while allowing for increased spending on other government priorities. We review general POB usage and examine whether POBs altered school district spending patterns in Oregon and Indiana. Our results indicate that districts issuing POBs have not increased educational spending relative to other districts. Because POBs cost money to issue and manage, decision makers are encouraged to consider annual budgetary effects prior to issuance.
TL;DR: In this article, the authors compared qualitative predictions from two general types of agency lifecycle theories to the actual path of the EPA's budget, and test empirically several hypotheses regarding the effects of political, economic, and other variables on the agency's budget.
Abstract: Using three approaches, we attempt to explain changes in the Environmental Protection Agency's operating budget from 1970 to 2010. First, we compare qualitative predictions from two general types of agency lifecycle theories to the actual path of the EPA's budget. Second, we test empirically several hypotheses regarding the effects of political, economic, and other variables on the agency's budget. Third, we conduct detailed historical case studies of selected years. The results offer hints of support for theories predicting incremental change but do not support the hypothesized effects of external factors. We also uncover some historical anomalies that warrant further research.
TL;DR: Andrews argues that reforms often fail to make governments better because unrealistic initiatives do not fit developing country contexts and are not considered relevant by implementing agents as discussed by the authors, and this is a must-read that makes a substantial contribution to the field of institutional reform.
Abstract: Developing countries commonly adopt reforms to improve their governments yet they usually fail to produce more functional and effective governments. In this book Matt Andrews argues that reforms often fail to make governments better because unrealistic initiatives do not fit developing country contexts and are not considered relevant by implementing agents. Maria Kuecken finds this is a must-read that makes a substantial contribution to the field of institutional reform.