Association for Public Policy Analysis & Management

Panel: The Impact of Economic, Housing Market, and Demographic Changes on the Financing of Local Governments

(Public and Non-Profit Management and Finance)

The years since the end of the Great Recession in 2009 have been difficult ones for many local governments in the U.S. Although the municipal bankruptcy in Detroit has received much attention, recent data provides evidence that all types of local governments – municipalities, school districts, county governments, and special districts – have struggled with fewer resources. For example, the Bureau of Labor Statistics reports that in March 2015 local government employment in the U.S. remains half a million (3.4 percent) below its 2009 peak. The most recent Census Bureau data indicate that in real per capita terms, the property tax revenues of local governments are over eight percent below their peak, and a report from the Center on Budget and Policy Priorities found that in at least 30 states, state government support for public education in the 2014-15 school year was lower in real per student terms than it was in 2007-08. The purpose of this panel is to investigate the various impacts of changes in the economy on the fiscal conditions of local governments. Using data that starts in 2002, the first paper quantifies the linkages over the business cycle of changes in household debt and changes in government revenues and spending for a large sample of U.S. cities and school districts. The second paper explores the linkages between changes in housing conditions, measured by changes in housing prices and changes in mortgage delinquency and foreclosure rates, and changes in the property tax revenues of a sample of cities that includes most of the nation’s largest central cities. The third paper, uses county level data for the entire country for the period between 1977 and 2012 to investigate the asymmetric relationships between population changes and local government spending.