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Local Government Responses to Exogenous Shocks in Revenue Sources: Evidence From Florida

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  • Erich Cromwell
  • Keith Ihlanfeldt

Abstract

Little is known about how cities and counties respond to negative shocks in their fiscal resources, such as those that occurred after the Great Recession. We provide evidence from the state of Florida on the millage rate and expenditure adjustments that cities and counties make in response to a loss in their two most important fiscal resources — the property tax base and intergovernmental transfers. These adjustments are hypothesized to vary with the monopoly power possessed by the local government. Our findings support this hypothesis and indicate that fiscal stress results in higher millage rates and cuts in expenditures. The cuts are targeted toward capital expenditures and less essential public services.

Suggested Citation

  • Erich Cromwell & Keith Ihlanfeldt, 2015. "Local Government Responses to Exogenous Shocks in Revenue Sources: Evidence From Florida," National Tax Journal, National Tax Association;National Tax Journal, vol. 68(2), pages 339-376, June.
    • Handle: RePEc:ntj:journl:v:68:y:2015:i:2:p:339-376
    DOI: 10.17310/ntj.2015.2.05
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    Cited by:

    1. Jerch, Rhiannon & Kahn, Matthew E. & Lin, Gary C., 2023. "Local public finance dynamics and hurricane shocks," Journal of Urban Economics, Elsevier, vol. 134(C).
    2. Lavertu, Stéphane & Clair, Travis St., 2018. "Beyond spending levels: Revenue uncertainty and the performance of local governments," Journal of Urban Economics, Elsevier, vol. 106(C), pages 59-80.
    3. Daniel Shoag & Cody Tuttle & Stan Veuger, 2019. "Rules Versus Home Rule—Local Government Responses to Negative Revenue Shocks," National Tax Journal, National Tax Association;National Tax Journal, vol. 72(3), pages 543-574, September.
    4. Feler, Leo & Senses, Mine Zeynep, 2016. "Trade Shocks and the Provision of Local Public Goods," IZA Discussion Papers 10231, Institute of Labor Economics (IZA).
    5. Anna Maria Mayda & Mine Z. Senses & Walter Steingress, 2023. "Immigration and Provision of Public Goods: Evidence at the Local Level in the U.S," Staff Working Papers 23-57, Bank of Canada.
    6. Kevin Willardsen, 2021. "Measuring fiscal interactions in local federalism: Evidence from Florida," Papers in Regional Science, Wiley Blackwell, vol. 100(4), pages 891-923, August.
    7. Céline Du Boys & Emanuele Padovani & Alice Monti, 2017. "Vulnerability factors shaping municipal resilience throughout the global financial crisis: comparing Italy and France," Post-Print hal-02057637, HAL.
    8. Siodla, James, 2020. "Debt and taxes: Fiscal strain and US city budgets during the Great Depression," Explorations in Economic History, Elsevier, vol. 76(C).

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