Identifying and Coping with Fiscal Emergencies in Ohio Local Governments

Abstract

This study examines the reasons fiscal emergencies occur in Ohio local governments and the strategies that local governments use to recover. In Ohio, fiscal emergencies have regularly occurred predominantly at the local level. This study aims to reveal the internal process that both bring on and ameliorates fiscal emergencies. Previous studies failed to differentiate between fiscal stress and fiscal emergencies and did not include the role of the Ohio Fiscal Emergency Law in assisting local governments in restoring long term fiscal health. This study finds fiscal emergencies in Ohio were caused by: (1) the increased costs associated with unfunded state-mandated programs and, (2) major economical downturns brought on by local plant closings. Local governments were found to have responded in the short run by strategies such as targeted expenditure cuts and in the long run by increased the use of economic development.     

Come,Let Us Pray! or,Modern Public Administration Has Failed

Abstract

By turning inwards and not using our collective expertise to become advocate “Cassandras” and “Jeremiahs,” who voice strongly and collectively that our society is in trouble in both the short and long run, our field of public administration has failed in its overall mission and has lost faith with the early public administrationists who were action-oriented rather than ivory-tower-oriented and who still managed to do a fair amount of publishing.     

Local Fiscal Stress in California: Out of Local Control and Driving Toward Growth

Abstract

Many regions of the United States have experienced rapid growth in recent decades with California being the best example of this growth. The dangers of such growth have been evident since the 1970s and yet, neither the state nor local governments have been very successful in implementing growth control policies. Why it is that government has been unable to rein in the growth has been the focus of much research in recent decades. There are essentially two schools of thought with regard to this question. One is that pro‐growth forces—essentially landowners, business elites, and elected officials—actively promote growth because it provides them personally with benefits. The other view, advocated most by Paul Peterson back in the early 1980s, is that elected officials do support and adopt pro‐growth policies, but not by choice. Cities, Peterson argued, are constrained by the economic situation around them and they must do what they can to raise revenues and reduce, or hold steady, expenditures. This research examines a region of southern California that has experienced tremendous growth despite the fact that surveys of resident attitudes within the region indicates that in general, residents favor growth control. This research contributes to an understanding of the driving forces behind the pro‐growth policies of local governments by considering how fiscal constraints placed on local governments by the state may limit the policy options of local elected officials, as Peterson predicted. This study finds that there is evidence to indicate that the revenue‐raising options available to cities may be contributing to pro‐growth policies. And this could help explain why elected officials continue to support growth within their cities despite the fact that residents express negative views toward growth.     

Political development and the intra‐regional balance of power

Planting and replanting of perennial crops confronts small farmers with a long‐term investment decision. In this study, we analyse the behaviour of rubber smallholders in Sri Lanka when faced with a replacement decision. An intertemporal profit maximizing model (maximizing discounted stream of expected future net revenues) predicts behaviour of larger, hired labour using farmers quite well. The model can also be extended successfully to smaller, family farms, when a lower than market wage rate is imputed to family labour to better reflect opportunity cost of labour, and risk considerations are incorporated in relatively simple fashion. The difference between a cash investment and a labour investment is crucial for the poorer family farmers and an appropriate cash subsidy can play a vital role in inducing them to undertake long term investments.     

Rewarding Fire with Fire: Effects of Retaliation on Terrorist Group Dynamics

Abstract

Comparative studies of the psychology of terrorism indicate that there is no one terrorist mindset, A theme in common among the disparate groups is the strong need of marginal alienated individuals to join a group of like‐minded individuals with a similar world view that “it's us against them, and they are the cause of our problems.” This strong need to belong gives particular force to the power of group dynamics. While the ideology is the glue that holds the group together and serves as the rationale for its actions, terrorists do not commit acts of terrorism for ideological reasons. The amelioration of the societal injustice which they indicate incites and justifies their terrorism does not reduce the lure of terrorism, because of the powerful hold of the group on its members.

Paradoxically, a policy of reactive retaliation with the goal of deterring terrorist acts may have the opposite effect and reinforce the mind set of the terrorist. For the group under threat, the external danger has the consequence of reducing external divisiveness and uniting the group against the outside enemy. The survival of the group is paramount because of the sense of group identity it provides.

Identifying the locus of control is of crucial significance in estimating the effects of counter‐terrorist policies upon a terrorist group. For the autonomous terrorist cell, active retaliation may reinforce the cohesion of the group; for the corporate terrorist organization, issues of organizational survival may become paramount. Neither the terrorist group nor the terrorist organization can be forced to give up terrorism, for to do so would be to lose their reason for being. For state‐supported and directed terrorist groups on the other hand, the terrorist group in effect serves as a paramilitary group under central government control. In this situation, group and organizational considerations are less relevant, for the object of the counter‐terrorist policy is the government of the sponsoring state. Since the survival of the state and national interests are the primary values, retaliatiatory policies, can, in the short run, have a deterring effect. In the long run, the most effective anti‐terrorist policy is one which renders the terrorist career less attractive to potential members, facilitates terrorists leaving the group, and reduces external support.     

Local Fiscal Stress in Sub‐Saharan Africa: The Kenyan Example

Abstract

This article identifies the fiscal weaknesses of local government in Africa, with concentration of the fiscal stress that is endemic to their condition. It then examines Kenya, as a case study in sub‐Saharan Africa. It continues to focus down on three Kenyan cities—Nairobi, Mombasa, and Kisumu, and identifies their six major revenue sources: land based revenues, regulatory revenues, income‐based taxes, service revenues, user charges, and government grants. Although some of the data is problematic, it is possible to determine several reasons for local fiscal stress. These reasons include limited access to stable financial resources, unstable national economic performance, centralized governmental control, mixed results of decentralization, and institutional and managerial weaknesses, including corruption in the collection and use of resources. Four recommendations are advanced to help these local governments: the development of local credit systems, the use of non‐governmental organizations, the clarification of the use of foreign aid, and the development of a greater capacity for governance. This articles main theoretical contribution is the development of an analytic framework for examining the reasons for fiscal stress in sub‐Saharan Africa. By examining revenue and expenditure patterns of the three localities, the article develops a data set that highlights some of the reasons for local government financial problems—the governments do not know how much revenue can be collected from a particular revenue source, they do not have records of existing sources of revenue, and they only collect about 40–60% of their estimated collections.     

Incoherence between Tax and Development Policies: the case of the Netherlands

Abstract

This article discusses incoherence between tax and development policies, a relatively new area in the debate on policy coherence for development, using a case study of the Netherlands. Dutch business entities play a key role in tax avoidance structures of multinational corporations. We argue that the Dutch tax regime facilitates the avoidance of substantial amounts of tax revenues in developing countries when compared to the Dutch aid budget. As domestic tax revenues are an important source of financing for development, this suggests that the Dutch tax policy is incompatible with the Dutch policy on development co-operation. The lack of policy coherence is largely unintended but it has structural and political causes.     

Managing Local Intergovernmental Revenues: The Imperative of Diversification

Abstract

Municipal governments have employed a variety of strategies to address their ongoing revenue crises throughout the past several decades. One such strategy that has been employed with great consistency is the use of intergovernmental revenues (IGR). Given this trend, coupled with the fact that we know little about the dynamics of IGR, this paper presents one of the first multi‐year examinations of its use at the local level. Using data from 76 villages and cities in Cook County, IL (greater Chicago) for 1996–2000, we examine IGR use from the perspective of revenue diversification. The analysis indicates that during this period, local governments in Cook County (1) diversified their own‐source revenues and decreased dependence on the property tax; (2) maintained a consistent dependence on IGR; and (3) diversified and significantly altered their IGR structures. We also examine the demographic and organizational correlates of IGR diversification, and find it to be unrelated to characteristics such as population, property tax base, professional administration, and organizational capacity. As a result, we conclude that IGR diversification is a strategy that ought to be considered by all municipalities regardless of size or structure.     

Controlling “Uncontrollable” Agency‐Influenced Spending in the United States

Abstract

The present study is a comparative investigation of implicit and explicit parameters that exist to constrain agency actors from the rational pursuit of increasing agency‐influenced spending over time. The underlying assumption is that agencies that are relatively free from the constraint of budget structure and process will exhibit higher levels of related proportional spending. In particular, state mandatory spending is investigated through application of the tenets of institutional theory to the growth and expansion of Medicaid, which has been charged with inducing “uncontrollable” spending. Findings from a panel data analysis of states indicate that beyond the often‐cited drivers of Medicaid costs, states that are less restrictive in terms of budget rules exhibit higher proportional levels of Medicaid spending. The primary implication of the study is that a vigorous inquiry into the drivers of state expenditures must consider the institutional constraints that hinder programmatic growth and spending influenced by agencies implementing policy.     

Biased Budgeting in the Public Sector: Evidence from Italian Local Governments

Abstract

The purpose of this paper is to analyse, in terms of presence, determinants and purposes, the misrepresentation of expected revenues during budget formulation and the misrepresentation of actual revenues during budget execution. To this end, we use six-year panel data from Italian municipalities with populations above 15,000. Our results suggest that overestimations of current revenues are more frequent than underestimations, during both budget formulation and budget execution. In terms of determinants, our results highlight the impact on revenue misrepresentation of both political orientation and fiscal stress. Finally, in terms of purposes, we show that revenue underestimation during budget formulation and revenue overestimation during budget execution may contribute to the formation of surpluses. The former, in particular, may allow mayors to create a ‘war chest’ in non-election years, which can then be used to increase net borrowing on the eve of elections.     

Tax Innovations and Public Revenues in Sub-Saharan Africa

Abstract

We study the effect of two tax innovations – value added taxes (VAT) and autonomous revenue authorities (ARA) – on tax revenues in sub-Saharan Africa. The dataset consists of 47 countries over 1980–2010. We find that VATs have no effect on total tax revenues, neither in the short- nor in the long-run. ARAs lead to higher tax revenues in the short- and medium-run, but the effect dissipates over time. The main conclusion is that tax innovations are not a panacea to overcome the revenue shortages in African countries, but they are helpful in the short- and medium-run.     

Tax revenue instability,with particular reference to sub‐Saharan Africa

This article examines the temporal instability of tax revenues across a sample of developed and less developed countries. It is shown that instability is especially high in LDCs and is highest in open economies with low per capita income, high output variance and inflationary problems. Even allowing for these factors, revenue instability appears to be particularly high in sub‐Saharan Africa. Revenue instability can be expected, via the government budget constraint, to be associated with expenditure instability and/or instability in the sources of deficit finance. Cross‐section evidence for LDCs confirms that countries with high tax revenue instability tend also to have high expenditure instability. Time‐series evidence for six African countries however, suggests that revenues and expenditures do not move together in a uniform manner, and the direction of causality is generally ambiguous. There is some evidence however that foreign borrowing is used more to finance expenditure increases than to counteract revenue shortfalls.     

The Flypaper Effect Revisited: Intergovernmental Grants and Local Governance

Abstract

Local governance arrangements shape the incentives of local actors, which may in turn influence fiscal choices. By emphasizing the role of local government institutions in local fiscal choices, we seek to bridge between median voter and Leviathan models prevalent in the literature. We then offer some preliminary evidence to support this explanation by empirically testing several propositions regarding the flypaper effect in intergovernmental grants. One limitation of the median voter model is that the model does not consider political institutions and their influences on government expenditures. In this study, we attempt to capture the influence of political dynamics in determining public expenditures by considering institutional variables. Test results show that the political institutional variables could be one of the explanation variables for the flypaper effect.     

Challenging the "Received View": De-demonizing Hamas

Abstract

Violence against abortion clinics and other activities directed toward patients and staff of abortion facilities have been termed terrorism by the pro‐choice movement. However, the Federal Bureau of Investigation denies that these actions are terrorism. Instances of abortion clinic violence for 1982–1987 were examined in order to determine whether there is a correspondence between these incidents and definitions or models of terrorism. It appears that these incidents do fit the classification of “limited political” or ‘subrevolutionary” terrorism. Reasons why the FBI has made the decision not to include these acts as forms of terrorism are entertained. One is that current international tensions have resulted in a preoccupation with only certain types of events which for administrative, i.e., juris‐dictional, reasons have come to essentialize terrorism. Another explanation, posited by pro‐choice activists, is that the FBI's decision is a consequence of political influence: the current administration is openly anti‐choice.     

The Impact of Foreign Direct Investment (FDI) Inflows on Economic Growth in Barbados: An Engle-Granger Approach

The purpose of this article is to look at the impact of foreign direct investment (FDI) inflows on economic growth in Barbados in the long and short run from 1979 to 2008 with the use of the Engle-Granger two-step procedure. The study shows that in the long run, a 1 percent increase in FDI inflows will expand economic growth by 0.10 percent while in the short run, the relationship between FDI and economic growth will be positive but almost flat. These results imply that any policy by Government aimed at boosting economic growth using FDI inflows will have to be considered for the long run since Government could not rely on FDI inflows in the short run.     

The fiscal impact of privatisation in Latin America

The goal of achieving fiscal balance through privatisation is misplaced because the revenues generated are rarely large or timely enough to bring the budget deficit under control. In Mexico, Argentina, Brazil, and Chile fiscal crisis preceded and encouraged the decision to privatise, but only in Argentina did the revenues from privatisation contribute significantly to fiscal adjustment. The article develops a model, incorporating time preferences and longer term fiscal impacts, which shows that major fiscal benefits can be expected only under rare circumstances. Politicians continue to tout the fiscal benefits of privatisation perhaps to gain support or to signal their commitment to economic reform.     

Output effects of devaluation: Evidence from Asia

We study the effect of devaluation on output in six developing countries of Asia. In an empirical model that includes monetary, fiscal, and external variables, we examine the impact of devaluation as the effect of real exchange depreciation and alternatively as the effect of nominal devaluation and changes in the foreign‐to‐domestic price ratio. We find that with few exceptions a devaluation fails to make any effect on output over any length of time — short run, intermediate run or long run. Whatever effect on output we are able to uncover comes from the relative price level (the ratio of foreign to domestic prices) but not from nominal devaluation.     

Worlds in collision,worlds in collusion: The uneasy relationship between the counterterrorism policy community and the academic community∗

Abstract

This paper explores the tension and barriers to cooperation between the government and academic communities in policy‐relevant areas. In the field of political terrorism, the time urgency of dealing with violence or the threat of violence characterizes the government professional's approach, while the academic views terrorism with a long‐range perspective. Other differences in missions, role requirements, and attitudes within the two communities contribute to the gap between them. Exchanges of personnel, ongoing programs for the exchange of information, and increasing the number of academic advisors with security clearances are among the recommendations for narrowing the gap.     

Trade liberalisation,government expenditure and economic growth in Egypt

This article investigates the combined effects of growth in government expenditure, exports, investment and labour supply on economic growth in Egypt between 1955 and 1996. Using cointegration and error correction models, the article finds a long‐run relationship between the variables, but less evidence of one in the short run. To account for the important policy reforms in 1974 and 1991, dummy variables are added which show the reforms have significantly affected the relationship between government expenditure and growth in a positive direction, but have had a negative effect on exports and growth. This conclusion is further supported by the time‐varying coefficient analysis.     

Market responsiveness of peasant cultivators: Some evidence from prewar India

This study attempts to analyse the responsiveness of Indian farmers to changes in profitability with reference to non‐food crops, such as groundnuts, cotton, jute and sugarcane, over the period 1900–39. Various types of adjustment and expectations models have been used. The generalized distributed lag models have been formulated and some special forms have been applied to study the behaviour of farmers. Both ordinary least‐squares and two‐stage‐least‐squares estimates have been carried out. In the distributed‐lag analysis, short‐run and long‐run price coefficients and elasticities have been computed and compared with some of the other studies on the subject. The emerging conclusion from this study is that farmer s seem to respond to changes in profitability, expansion of irrigation facilities, varietal improvements and qualitative factors in the case of all the crops.