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The effect of school district and municipal government financial health information on local tax election outcomes: evidence from fiscal stress labels in Ohio

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  • Paul N. Thompson

    (Oregon State University)

  • Joseph Whitley

    (Washington State Health Care Authority)

Abstract

A key informational asymmetry in local public finance is the lack of information available to local residents regarding the financial status of the school districts and local governments in which they reside. Given that voters in many states must approve property and income tax increases for these local entities, the lack of full information on the financial status of these local entities may lead to sub-optimal voting decisions. State financial intervention systems have begun to make financial problems more salient to residents, potentially alleviating these informational asymmetries. This paper examines the effect of the Ohio fiscal stress labeling program on voting outcomes and the tax-setting behavior of local officials for school district and municipal government tax referendums. We use a difference-in-differences approach to examine data from over 3000 school district and 2300 municipality property tax elections from 2004 to 2012. While we find minimal evidence that the yes vote share changed for school district referendums following fiscal stress label receipt, we find very large increases (15 to 23 percentage points) in the likelihood of referendum passage for school districts following label receipt. We do not find much evidence of changes in the likelihood of passage or the yes vote share following label receipt for municipalities, but we do find that these voting outcomes rise following label removal. We also find that local officials do not appreciably change their tax-setting behavior in response to these labels, as the size and likelihood of property tax proposal are largely unchanged following label receipt or removal.

Suggested Citation

  • Paul N. Thompson & Joseph Whitley, 2017. "The effect of school district and municipal government financial health information on local tax election outcomes: evidence from fiscal stress labels in Ohio," Public Choice, Springer, vol. 170(3), pages 265-288, March.
    • Handle: RePEc:kap:pubcho:v:170:y:2017:i:3:d:10.1007_s11127-016-0395-7
    DOI: 10.1007/s11127-016-0395-7
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    References listed on IDEAS

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    Cited by:

    1. Thompson, Paul N., 2019. "Are school officials held accountable for fiscal stress? Evidence from school district financial intervention systems," Economics of Education Review, Elsevier, vol. 72(C), pages 44-54.
    2. Thompson, Paul N., 2017. "Effects of fiscal stress labels on municipal government finances, housing prices, and the quality of public services: Evidence from Ohio," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 98-116.
    3. Darren Grant, 2017. "The ballot order effect is huge: evidence from Texas," Public Choice, Springer, vol. 172(3), pages 421-442, September.
    4. Grant D. Jacobsen, 2019. "How do different sources of policy analysis affect policy preferences? Experimental evidence from the United States," Policy Sciences, Springer;Society of Policy Sciences, vol. 52(3), pages 315-342, September.

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