Local Government Budget Stabilization

Volume 2 of the series Studies in Public Budgeting pp 141-169

Impact of Tax and Expenditure Limitations on Local Government Savings

  • Sharon N. KiokoAffiliated withMaxwell School of Syracuse University Email author 

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Local governments serve a pivotal role in the delivery of public services. However, since the late 1970s, their ability to deliver essential public services has been curtailed by widespread adoption of limits on taxing and/or spending authority. Studies show these limits fundamentally altered the fiscal landscape of municipal governments. Using data on county governments for the period 1970–2004, this analysis shows TELs had a negative impact on unrestricted cash reserves. This has wide-ranging implications on fiscal performance including the government’s ability to cope with negative revenue and expenditure shocks and their ability to retain resources for strategic purposes.