Revenue Cyclicality and Changes in Income and Policy

The past two recessions have proved alarming to state government finances. In 2001, a relatively shallow national recession led to a severe downturn in state revenues that took three years to unwind. In the wake of the recent economic downturn, signs of fiscal stress are readily apparent. In this paper, we investigate whether the revenue patterns surrounding these two recessions are the result of state government revenues having grown more sensitive to economic conditions. We find that the responsiveness of revenues to measures of business cycle conditions has grown since the 1990s. We use data on state government revenues, state‐specific information on economic conditions, and measures of state policy to examine fiscal performance and budgeting practice over the economic cycle. Our findings suggest that increasing income cyclicality, in particular of investment income, has made state revenues more responsive to the business cycle since the mid‐1990s. We also find that changes in policy making have served to increase revenue cyclicality.     

Interlocal Collaboration and Local Fiscal Structure: Do State Incentives Matter?

Interlocal collaboration is considered an important tool for cost-saving. States, therefore, have incentivized interlocal collaboration in different ways. To understand the budgetary consequences of interlocal collaboration and state incentives, we examine counties in Nebraska where the State uses two incentive mechanisms—resource restrictions and additional access to restricted revenues granted to counties with collaboration. This study finds that county expenditures are lower when they spend more through collaboration. While this lower spending is related to lower revenues in counties less constrained by state restrictions, the results for counties more constrained are unclear. State incentive structures may matter for such variations.     

Turning Up the Heat: The Impact of Electric Utility Competition on K–12 Education Funding in Ohio

Ohio, like many states, is currently-considering deregulation of the retail electric power industry. This issue is made more complex in Ohio because structural change in the delivery of electric power is also likely to have a negative effect on state and local government revenues. This effect occurs because of three main forces: the elimination of differential property tax treatment of utilities relative to general businesses, the likely decrease in state electricity excise tax revenues as a result of falling power prices and administrative difficulty in taxing out of state providers, and the potential for stranded costs to diminish the taxable value of electric generating equipment. This article provides an overview of these issues and a brief analysis of the extent to which these problems will be shared by other states. The article then demonstrates the impact of deregulation-induced tax changes on both state and local school district revenues in Ohio and concludes with a discussion of how the state's ability to insulate local governments from these adverse fiscal effects is made both more imperative and more difficult by a recent Supreme Court Ruling on school funding Finally, the issues discussed in the article are placed in a more general context of the challenges of adjusting tax policy to changing circumstances     

Which Nonprofit Organizations Borrow?

The tax benefit, bankruptcy value, and pecking-order theories of corporate capital structure are discussed in context of nonprofit organizations. A bivariate probit model shows that coefficients differ between models meaning mortgages and tax-exempt bonds are not equivalent forms of debt. Organizations with proportionally more program revenues, contributions, total assets, total revenues, and executive compensation are more likely to have a mortgage. Nonprofits that rely on special event fund-raising or contributions have a lower probability of using bond financing. The use of debt is also influenced by the nature of the organization's mission as measured through the NTEE classification.     

Embedded Government Control and Nonprofit Revenue Growth

This research combines insights from resource dependence and institutional theories to examine the growth of Chinese nonprofit revenues. The authors propose the concept of embedded government control (EGC) to capture the complexity of the government–nonprofit relationship along two dimensions: government regulation of nonprofits’ public fund‐raising qualifications and the political embeddedness of nonprofits with the government. Using a data set of 2,159 Chinese philanthropic foundations for the period 2005–12, the authors test hypotheses about the implications of EGC for nonprofit revenues in China following two major external shocks: the Wenchuan earthquake in 2008 and the Guo Meimei scandal in 2011. The empirical analysis shows that EGC can help philanthropic foundations obtain more government subsidies, donations, and market revenues. However, external shocks may either strengthen or weaken the enabling role of EGC in helping foundations acquire relatively more donations.     

Government Finances In Declining Central Cities

The relationship between population decline and changes in therevenue and expenditure patterns of 318 U. S. central citiesduring the 1970s are examined using both static and dynamicmodels. Declining cities experienced less growth in revenues,especially own-source revenues than growing cities. Decliningcities became more dependent upon other governments for fiscalrelief. But declining central cities were more successful atreducing the rate of growth in their expenditures. Populatindecline was not found to have any significant independent impacton changes in municipal taxing and spending levels. A city'sage was the most important predictor of fiscal change.     

Urban local government finance in Nigeria: The case of Lagos municipal area

One of the most important results of the global reform of local governments in Nigeria in 1976 was to initiate a progressive increase in the amount of monetary transfers to local governments (LGs) by federal and state governments (especially the former). The proportion of federally collected revenues devoted to LGs increased rapidly from less than 2 per cent in 1976 to 15 per cent in 1990. This has enabled Nigerian LGs to play a more visible role in total public expenditures. On the other hand, huge federal transfers have led to sharp declines in absolute and relative terms in locally generated revenues. The two Lagos municipalities are able to generate up to 50 per cent of their total revenues. In contrast, the average for all local governments in the country is 4–5 per cent. The relatively large internal revenue sources in the two Lagos municipalities results in generous surpluses, which they are able to channel into capital development or special project expenditures. The single most important internal revenue source is the property tax, which is not even collected in some other large cities, such as Kano, Ogbomosho and Sokoto.     

How Cities in California Have Responded to Fiscal Pressures Since Proposition 13

Fiscal pressures on California cities have been severe since the passage of Proposition 13. Federal and state aid policies have, in fact, exacerbated an already wrenching pattern of revenue losses since FY 77-78. State aid, in particular, has perversely dropped the most for those cities hit hardest by reductions in other revenues outside their direct control. Despite this, California cities have kept total real per capita revenues and expenditures constant over this period by increasing revenues from a variety of local sources—and especially from current service charges for enterprise activities. Furthermore, cities hit hardest by exogenous revenue losses have increased locally raised revenues the most. In short, cities in California have responded to reductions in revenues outside their direct control by increasing revenues from sources within their direct control, rather than by reducing expenditures and their revenue-increasing responses have tended to be in proportion to the losses they have faced in exogenous revenues.     

Fiscal Structure and the Post-Proposition 13 Fiscal Regime in California's Cities

Two and a half decades after the passage of Proposition 13 in 1978, California state and local governments continue to feel the intended and unintended effects of tax and expenditure limitations. While considerable time has passed since voters enacted Proposition 13, the effects of the property tax revolt continue to be dramatic. This article examines the fiscal structure of California's city governments from 1972 to 2002. The analysis reveals that California's cities have become less reliant upon property tax revenues and more reliant upon charges and fees, and have not increased reliance upon sales tax revenues as much as expected.     

Schoolhouses,courthouses, and statehouses after Serrano

The constitutionality of public school finance systems has been challenged in 43 states in the 25 years since the landmark Serrano decision. Using data on revenues from more than 16,000 school districts over the 1972-1992 period, this article assesses the impact of court-mandated reform on the role of the states in school finance. We find that resources from the state increased while revenues from local districts were roughly unchanged after successful litigation. States also followed a more aggressive redistribution policy in the aftermath of court-mandated reform; after successful litigation, state aid to the poorest districts increased and aid to the wealthiest districts remained unchanged. Finally, we find that reforms that were initiated by the states without judicial prodding were typically ineffective.     

The Equality of Public School District Funding in the United States: A National Status Report

For over 30 years, the distribution of educational opportunities and the equality of education funding across communities has generated considerable interest among policy makers, the public, and the courts. This article takes advantage of national data sets to examine funding equality across school districts in 49 states for fiscal years 1992 and 1995. It presents rankings of each state's funding equality and explores factors that may be related to the level of equality within states and to changes across years.
The analyses suggest that, overall, within-state equality improved slightly between 1992 and 1995, although most states' relative rankings changed little during the period. States with fewer school districts relative to students tended to have a more equal distribution of education dollars than states with more districts. States with higher proportions of revenues provided by state governments generally showed a more equitable distribution of resources than states in which districts were more dependent on local revenues.     

Tax Expenditures for Local Governments

Foregone revenues of state and local governments have been mostly unreported. This is still a neglected subject in governmental accounting. Such significant amounts can make a difference in the choice between direct and indirect spending, and more budget officers are expected to consider the tax expenditure report as a supplement to budget documents.     

What a Difference a Grade Makes: Evidence from New York City's Restaurant Grading Policy

Can governments use grades to induce businesses to improve their compliance with regulations? Does public disclosure of compliance with food safety regulations matter for restaurants? Ultimately, this depends on whether grades matter for the bottom line. Based on 28 months of data on more than 15,000 restaurants in New York City, this article explores the impact of public restaurant grades on economic activity and public resources using rigorous panel data methods, including fixed‐effects models with controls for underlying food safety compliance. Results show that A grades reduce the probability of restaurant closure and increase revenues while increasing sales taxes remitted and decreasing fines relative to B grades. Conversely, C grades increase the probability of restaurant closure and decrease revenues while decreasing sales taxes remitted relative to B grades. These findings suggest that policy makers can incorporate public information into regulations to more strongly incentivize compliance.     

Structure of State‐Level Tax and Expenditure Limits

While much consideration has been given to the approval process, base classification, and codification of tax and expenditure limits (or TELs), these factors tell us nothing about how they actually work. This study focuses exclusively on the technical elements of these limits and finds how states estimate their limits have over time eroded their potency. More specifically, if a state resets or rebases its limit annually by using actual revenues or expenditures for the preceding year, the limit will trend closely with actual revenues or expenditures, effectively restricting growth in spending as prescribed by law. However, if the law requires a state to estimate its limit using the appropriation limit for the preceding year instead of actual revenues or expenditures, that is, without rebasing, the limit will reflect cumulative changes to the base when it was first approved. Over time, the TEL cap is significantly above the states revenues or expenditures as it remains unaffected by the state's underlying fiscal and economic environment.     

Intervention analysis of electoral tax cycle: The case of Japan

This paper analyzed the impact of elections on tax policy in Japan using an ARIMA (autoregressive integrated moving average)-intervention analysis from 1953 through 1992. We used discretionary tax revenues, which means the changes in tax receipts attributable to changes in the tax code, rather than automatic tax revenues due to business cycles in the economy. The result of this study shows that there is a political tax cycle in Japan. That is, discretionary tax revenues decrease with a statistically significant amount in a year immediately before elections for the House of Representatives. This may be due to the fact that election timings in Japan with a parliamentary system become endogenous.     

Effects of the Form of Government and Property Tax Limits on Local Finance in the Context of Revenue and Expenditure Simultaneity

This paper examines the impact of the form of government and state‐imposed property tax limits on municipal finance. We suggest that municipal revenues and expenditures are determined concurrently and estimate revenue and expenditure functions as simultaneous equations. We use the instrumental variable approach and fixed effects to address revenue and expenditure endogeneity. By testing the model on a cross‐section of rich municipal data for fiscal year 2002, we find evidence that revenues and expenditures are simultaneously determined, that potentially binding state‐imposed property tax limits effectively restrict local revenues and that the form of government is a significant predictor of local expenditures.     

On the political and fiscal determinants of income redistribution under federalism and democracy: evidence from Germany

Several recent studies suggest that transfers from central to regional governments are motivated by political considerations. In this paper we examine if this is also the case for transfers from regional to central governments in the context of the German fiscal equalization system. We examine the factors that contribute to differences in tax revenues across German states. The evidence indicates that both fiscal incentives and political factors can explain these differences, although in Germany the former are more important. Moreover, accounting for fiscal institutions has important consequences for the empirical assessment of political influences on taxation. Overall we find that the political affiliation of the state governor is an important factor in explaining differences in state tax revenues. Thus, the right-wing party (CDU/CSU) is effective in relaxing the tax burden at the state level. In contrast, partisan alignment between the state government and the federal government loses its importance once fiscal conditions enter the empirical model.     

The Fiscal Consequences of Changing Federal and State Revenue Policies: The Case of Small Oregon Cities

This article examines the fiscal consequences for twelve, smallOregon cities of recent changes in federal and state intergovernmentalrevenue policies. Many small local governments have experienceddouble revenue reverses in recent years—reductions inown-source revenues because of economic decline as well as decreasesin intergovernmental revenues, especially federal aid. The twelvesmall cities are compared with all 241 cities in Oregon andthe 136 Oregon cities in the 1,000 to 49,999 population range.Using aggregate and interview data, a major finding is thatalthough stabilization and/or decline in federal-state revenuesharing and entitlement program funds have accentuated difficultlocal revenue situations, economic decline has been the moreimportant contributor to the fiscal stress of the twelve smallmunicipalities. Most of the twelve cities had limited fiscalcapacity—as indicated by low assessed property valuations—makingit difficult to produce sufficient revenue to meet basic publicservice needs. These cities were also unable to get citizenapproval of increases in property taxes.     

Tax and Expenditure Limitations and the Fiscal Response of Local Government: Asymmetric Intra-Local Fiscal Effects

This article empirically investigates the effects of introducing statewide measures to limit the ability of local jurisdictions to raise revenue or make expenditures. It does so in intervals of five years over a 25-year period, using fiscal observations for 31,804 units of local government in 787 metropolitan counties across the contiguous United States. Specifically explored is the effect of tax and expenditure limitations on the variation in revenues and expenditures between general purpose governments and school districts within county areas. Rather than imposing a uniform constraint across jurisdictions, tax and expenditure limitations (TELs) are associated with increased variation across both general purpose and school district revenues and expenditures and, by implication, increased service differentials. Effects are found to be asymmetric, with increased variation greatest within counties comprising the urban core and those with relatively more disadvantaged populations. The implications are that TELs are most constraining on the ability of governments serving economically less prosperous and at risk populations to meet public service needs. Such differential effects are of more than questionable merit and are the result of the application of blunt instruments to what is often an undemonstrated need. The outcome impairs both the efficiency and responsiveness of the local public sector.     

Building politics: The British Embassy Peking, 1949–1992

Abstract

Timor-Leste is among the youngest nations in the world. It began its independence under difficult circumstances: poverty is widespread, education is poor, the industrial sector is non-existent, and political turbulence is on the rise. On the positive side, future oil revenues are predicted to be substantial, which could potentially be a great help in Timor-Leste's struggle for development. This paper examines critically the possibility for Timor-Leste to use oil revenues to achieve economic development. It describes how difficult it is to estimate the future revenues because of volatile prices, territorial disputes, and insufficient seismological mapping. It continues with a discussion of the ‘resource curse’ – the difficulty of combining natural resources with economic development. Moreover, the particular challenges for Timor-Leste's development are dealt with at some length, as are possible ways to avoid the resource curse.