Debt creation imposes an obligation to repay borrowed funds from a wealth base that for most local governments is capitalized in property values. Therefore, the ability to afford debt is tied to the local economy, a factor often overlooked by localities in the analyses of their own position. However, debt levels are also relative, as the many debt affordability studies among governments and by bond rating agencies suggest. We argue here that economic concentration and interjurisdictional coordination fundamentally provide a broader analytical approach to the question a locality asks: can we afford more debt?

This paper reviews the literature concerning when and in what way citizen participation can have an impact on budgeting. The first part of the paper conceptualizes, through the literature, five budgeting models, each having both problems and solutions for citizen involvement. The second section of the paper explores intervention designs that can be constructive in dealing with the larger problems connecting budgeting and citizen participation. The paper, therefore, seeks to determine where participation in budgeting can have an impact on citizen anger, estrangement, distrust and pessimism.Administration, Rutgers University at Newark. His teaching and research interests are in public budgeting and financial management, public economics, and methods of policy analysis and research.

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New York’s Metropolitan Transportation Authority (MTA) provides transportation infrastructure and services to nearly 15 million residents of two states. In 2002, the MTA violated a strong professional norm of debt management by refinancing $13 billion of long-term debt in a way that increased rather than decreased the cost of repayment. This behavior, heavily influenced by the informal advice of investment bankers, seemed to many observers to confirm the oft-decried tendency of debt-issuing public authorities to sacrifice their accountability to citizens in order to please the bankers and other debt-market participants on whom they depend for financial resources. Yet the MTA’s choice appears on closer examination to have fulfilled the common desires of contemporary fare payers, tax payers, voters, and elected officials to maximize current spending while deferring costs to future tax and fare payers. The MTA case highlights potential conflicts between the professional imperative of democratic accountability and the competing professional norms of cost minimization, sustainability, and intergenerational equity. The fundamental structure of this dilemma is also apparent in other policy arenas with intergenerational implications, such as social security and climate policy, and raises the question of when obedience to market, political, and hierarchical expectations can justify sacrificing professional principles.

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This article explores the way public‐sector financial managers cope with ethical challenges created by undue political pressure and demands for special treatment. A nationwide survey of financial managers revealed that fiscal stress exacerbates ethical pressure for most financial managers, including chief financial officers (CFOs) and those who report to CFOs. Financial managers do not work in an ethical vacuum; they respond to supervisors who encourage ethical action and to coworkers who demonstrate high standards of personal integrity. Supervisors of CFOs who emphasize political responsiveness in employee evaluations can threaten the ethical behavior of CFOs, while timely feedback can mitigate ethical pressure. In turn, CFOs as supervisors can temper the harsh work environment in fiscally stressed times by encouraging ethical action and by giving adequate feedback to those who report to them.