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Report
How should suburbs help their central cities?
In this paper, we study the question whether suburbs should help finance the core public services of their central cities. We review three arguments that have been offered in favor of suburbs' fiscal assistance to their central cities. First, the central city provides public services that benefit suburban residents. Second, the central city may provide redistributive services to low-income central city residents that benefit suburbanites with redistributive preferences for such transfers. For efficiency, suburbanites should contribute toward such services in proportion to the benefits they ...
Briefing
State government budgets and the Recovery Act
State and local governments, with revenues reduced sharply by the recession, are responding by cutting services, increasing tax rates, and drawing down reserves; they are also receiving some relief in the form of stimulus funds provided by the federal government. The stimulus funds legislated in the American Recovery and Reinvestment Act only partly offset the recession-induced shortfalls and are scheduled to phase out before most analysts believe state and local governments will see fiscal recovery well underway. Thus, observers are concerned that the state-local sector will create a ...
Working Paper
Public investment and budget rules for state vs. local governments
Across different layers of the U.S. government there are surprisingly large differences in institutional provisions that impose fiscal discipline, such as constitutionally mandated deficit or debt limits, or specific tax bases. In this paper we develop a framework that can be used to quantitatively assess their costs and benefits. The model features both endogenous and exogenous mobility across jurisdictions, so we can evaluate whether the different degree of mobility at the local vs. national level can justify different institutional restrictions. In preliminary results, we show that pure ...
Journal Article
Can state and local governments rely on alternative tax sources?
State governments are much more likely than their local counterparts to depend on taxes other than sales, property, and personal income taxes. Excises on alcohol, beer, tobacco, gambling, and business taxes are among the alternative taxes. Local governments, on the other hand, are more likely to impose user fees. Reliance on these alternative state tax sources in aggregate has diminished over the past several decades, despite a pattern of rate increases and new gambling alternatives. Competitive pressures between states and with the federal government are likely to continue limiting reliance ...
Speech
Community development financial institutions: promoting economic growth and opportunity
a speech at the Opportunity Finance Network?s Annual Conference, Washington, D.C.
Journal Article
Effects of welfare reform on Western States
Working Paper
Designing state aid formulas: the case of a new formula for distributing municipal aid in Massachusetts
This paper designs a new equalization-aid formula based on fiscal gaps of local communities. Using conceptual analysis and simulations with Massachusetts data, the authors illustrate the tradeoffs that policymakers face in deciding on the policy variables in the formula and lay out several general guidelines for setting up these variables. When states are in transition to a new local aid formula, the issue of whether and how to hold existing aid harmless poses a challenge. The authors show that previous studies and the formulas derived from them give differential weights to existing and new ...
Working Paper
Output fluctuations and fiscal policy : U.S. state and local governments 1978-1994
What are the cyclical properties of U.S. state and local government fiscal policy? The budget surplus of local and, in particular, state governments is procyclical, smoothing disposable income and consumption of state residents. This happens over both short- and medium-term horizons. Procyclical surpluses are the result of strongly procyclical revenues, and weakly procyclical expenditures. The budgets of trust funds and utilities are procyclical. Federal grants are procyclical, exacerbating the cyclical amplitude of state level income movements; although they smooth the idiosyncratic ...
Journal Article
The fiscal position of the state and local government sector: developments in the 1990s
After a difficult period during the early 1990s, the fiscal position of state and local governments has improved considerably in the past three years. States, as a group, have fared relatively well, although some local governments are still struggling with fiscal difficulties. In addition, the sector as a whole continues to face persistent underlying structural problems. This article first examines the primary budget concepts that are generally used to evaluate the fiscal condition of state and local governments. Then it surveys the status of the various levels of government, and finally, it ...