This study uses multiple measures of fragmentation and decentralization to assess the effects of these conditions on total local spending in 126 metropolitan regions and 538 counties in the same regions in 2002. The measures are derived from a recognized scheme that distinguishes among total, horizontal, and vertical dimensions of these conditions, and the models control for other causes of total local spending, including sprawl and interlocal spending. The study finds support for the claim that total spending by local governments is higher in regions and counties with more single purpose governments (vertical fragmentation), but also jurisdictions where a greater percentage of spending is done by counties (centralization). Findings also vary by unit of analysis and type of special purpose government, which suggests that the effects of governing structure are not as straightforward as theory suggests.

Three general frameworks can be used to explain how fiscal stress affects states' share of aggregate state and local expenditures-fiscal federalism, the politics (or interest group) model, and the organizational model of fiscal slack.

Strategic planning has the potential to enable cities to weather the effects of fiscal crises. City officials can use the information gathered though internal and external scanning to implement fiscal policy changes that can minimize their governments' exposure to external fiscal shocks, and to experiment with alternative service delivery arrangements that generate cost savings. Linking strategic plans to budgets allows cities to focus on core services, and reduce expenditures for nonessential programs. Strategic plans can also provide a framework for operations, facilitating closer cooperation and coordination among managers and workers in preventing the further deterioration in the fiscal condition of their organization. Can cities that implement comprehensive strategic planning adjust better to the current fiscal crisis and minimize their budget deficits? The results of advanced econometric analysis are inconclusive. Adjusting for selection bias and endogeneity, strategic planning is associated with the perception of improving city government fiscal health. Planning, however, has no effect on actual deficits.

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