Municipal reliance on fine and fee revenues: How local courts contribute to extractive revenue practices in US cities

By altering the distribution of fine and fee revenues, municipal courts provide a mechanism through which cash‐strapped city governments can increase revenues flowing into city budgets. Using a unique municipal court data set combined with city‐level financial information, this paper exploits state‐level differences in laws enabling municipal courts and differences in property tax effort across states to explore the relationship between local courts, fine and fee revenues, and municipal finances. I find that cities with municipal courts raise more fine and fee revenue than cities without a court; in cities with a court, reliance on these revenues decreases as per capita property tax yields increase; and these effects are more pronounced in cities in the bottom quartile of the population distribution. Taken together, results suggest that cities use municipal courts to fund the general operations of government and smaller cities and those with low property tax collections are more likely to do so.