The relationships between public finance issues, financial management issues, and conditions of fiscal stress in small and rural governments: the case of west Virginia

Abstract

Small and rural communities face severe fiscal constraints. Many factors affect governance in these localities. Because of this, a vital concern are the relationships between “Fiscal Stress” and other factors. Multivariate analysis techniques are utilized to examine these relationships based on data collected from a survey of West Virginia local public officials. The analysis showed that “Public Finance” and “Financial Management” factors affect Fiscal Stress while external factors, such as professionalism, population, and metropolitan status, have little to no impact on Fiscal Stress. Additionally, Public Finance and Financial Management issues are critical to explaining Fiscal Stress in small and rural governments and Fiscal Stress is critical in explaining Public Finance and Financial Management issues. However, the relationships are not of equal strength; Fiscal Stress and Public Finance influence each other more strongly than Financial Management factors.

Assessing the influence of socioeconomic drivers on Italian municipal financial destabilization

“…With respect to the international debate on what causes local 'fiscal stress', this analysis seems to give some support to those authors claiming that exogenous socioeconomic factors alone have limited relevance in explaining the causes of serious municipal financial trouble (Falconer, 1991;Clark, 1999;Dougherty et al, 2000). Yet, one cannot ignore that this analysis has included only a limited number of the variables identified in the abundant international literature exploring the relevance of exogenous factors in influencing the recurrence of local financial trouble.…”

“…Later studies seem to downsize the role of socioeconomic factors (Clark, 1999;Dougherty et al, 2000), claiming that they were relevant only when higher levels of government were unable to respond to economic recession (Falconer, 1991). More recent studies seem to provide further evidence about the relevance of socioeconomic downturns in producing local fiscal stress, as socioeconomic factors can substantially influence the revenue-generating capacity of local governments (Honadle, 2003;Edgerton et al, 2004;Beckett-Camarata, 2004;Watson et al, 2005;Carroll, 2005;Jones and Walker, 2007;Skidmore and Scorsone, 2011).…”

The Importance and Complexity of Assessing Urban Fiscal Health

“…The use of these techniques, particularly those highlighted in the text, is important to determine why fiscal health varies across cities, which indicators or conditions are important, and the impact current conditions could have on future conditions. Within the broader fiscal health literature, models have been developed to examine correlates of fiscal stress (Dougherty, Klase, and Song 2000), the development and use of stabilization funds (Snow, Gianakis, and Haughton 2015; Stewart 2009), and the degree to which fund balances impact expenditures (Marlow 2005).…”

Towards a comprehensive assessment system of local government fiscal health

“…Widely used signals of local mismanagement are the use of poor accounting methods, faulty estimation procedures, errors or omissions in financial reports, delays in financial reporting procedures and critical audit reports (e.g. Dougherty et al 2000;Ammar et al 2001a;Murray and Dollery 2005;Navarro-Galera et al 2015). Hendrick (2004) and Jacob and Hendrick ( 2012) use three sets of predictors of future fiscal health, namely 'balance', 'slack' and 'risk'.…”