Today, governments function in an “anti-government era” and are forced to provide more services with fewer financial resources (Watson, 1997, p.1). To deal with this situation, they are creating savings or a budgetary cushion (e.g., unreserved fund balances) to stabilize taxes and expenditures (Wolkoff, 1987, Tyer, 1993, Shelton et al, 2000). But, prior research suggests that the recommended benchmark of savings is not adequate for stabilization. To move beyond this benchmark, researchers are seeking to identify those factors that influence the level of savings maintained by governments (Hendrick, 2006). Because there is no consensus on those factors, this research seeks to address this gap in the literature by using the Bounded Fiscal/Demographic perspective used by Marlowe (2004) to examine fiscal and demographic factors. It uses the Politico-Structure perspective also used by Marlowe to examine political factors. Moreover, it uses the organizational financial obligations perspective used by Hendrick (2006) to examine organizational factors that affect the accumulation of unreserved fund balances for Mississippi’s 82 counties. It focuses on the change in the unreserved fund balance as a percent of current general fund expenditures by examining the change between FY 1995 to FY 1999 of the unreserved fund balance during a period of fiscal plenty and the change between FY 2000 to FY 2004, a period of fiscal stress. Overall, Mississippi counties are maintaining either too much or too little of an unreserved fund balance. Their unreserved fund balances ranged from less than their current expenditures to over 10% of their current expenditures. Marginal support was also found for the Bounded Fiscal/Demographic, Politico-Structure, and Organizational Financial Obligations perspectives used to explain the behavior of the unreserved fund balances. More specifically, the findings suggest that Mississippi counties build reserves during times of fiscal plenty and dispense those funds during times of fiscal stress. Counties also showed a tendency to address short-term needs and demands of their residents when revenues were plentiful. However, during fiscal stress, they showed a tendency to be more cost-conscious by focusing more on maintaining rather than expanding current expenditures.

Thesis (Ph.D.)--New School for Social Research, 1988. / Includes bibliographical references (p. 361-386).

This dissertation explores how cities achieve fiscal sustainability—the financial capacity to consistently meet basic public service responsibilities regardless of economic conditions. Two research questions arise from the interplay between the local economy and fiscal sustainability. First, what management tools do cities use to achieve fiscal sustainability given that economic conditions are largely outside their control? Second, what explains the variation among cities in the financial management tools used to achieve fiscal sustainability? The financial management tools of interest in this study are revenue diversity and the size of the fund balance. It is conjectured that financial management tools interact with each other prompting the tools to function as policy substitutes for each other. Cities achieve fiscal sustainability by strategically choosing budget-balancing tools appropriate to their economic conditions. The study utilizes a cross-state comparison from 351 Massachusetts municipal governments using panel data from 2000 to 2009 and 993 New York municipal governments using panel data from 2001 to 2010. Using theories of fiscal sustainability and revenue diversification, several models are proposed that test the interactive effects of fund balance size and revenue diversity on fiscal sustainability. The results from the empirical analyses show that cities use various financial management tools to stabilize spending during economic downturns. Cities pursue strategies that help maintain fiscal sustainability. Furthermore, it is discovered that interaction of fund balance and revenue diversity on municipal expenditures is stronger as the level of revenue diversity decreases. This interaction has a large effect during periods of economic downturns as compared to periods of economic growth.

<p>För att komma till rätta med kommunernas och landstingens mångåriga underskott i början av 1990-talet, infördes god ekonomisk hushållning år 1992 för att skapa balans mellan inkomster och utgifter. Då det inte finns någon tydlig definition på god ekonomisk hushållning infördes balanskravet år 1998 som ett komplement. Balanskravet innebär att intäkterna ska vara större än kostnaderna, det vill säga att ekonomin ska vara i balans. Grundtanken och syftet med införandet av balanskravet är att varje generation ska bära ansvar för de kostnader som den generationen beslutar om och konsumerar samt skapa en långsiktig stabil utveckling av ekonomin. Om en kommun inte får ekonomin i balans och redovisar underskott ska det negativa resultatet enligt 8kap 5a§ Kommunal Lagen kompenseras inom tre år om det inte föreligger synnerliga skäl och kan därmed frångå en budget i balans. Balanskravet fyller sin funktion men när balanskravet utformades tog inte lagstiftaren hänsyn till kommuner med stark ekonomi utan kravet är främst utformat för kommuner med svag ekonomi, vilket skapat inlåsningseffekter av överskotten från kommuner med stark ekonomi. Kritiken av balanskravets utformning har belysts än mer på grund av lågkonjunkturens effekt, och även gjort regeringen medveten om problemet. Därför finns det intresse att undersöka hur en kommun med stark respektive svag ekonomi hanterar balanskravet.</p><p> </p><p>Syftet med studien är att undersöka hur Västerås kommun och Eskilstuna kommun hanterar balanskravet.</p><p> </p><p>För att analysera och förstå hur de två utvalda kommunerna hanterar balanskravet utifrån deras ekonomiska förutsättningar har den kvalitativa metoden använts för att uppnå en djupare förståelse.  Dessutom har den deskriptiva/induktiva metoden använts för att ta reda på varför de normativa teorierna inte varit framgångsrika i olika sammanhang. För att göra en jämförelse har en enhetlig analysmodell konstruerats för att påvisa kommunernas finansiella styrka.</p><p> </p><p>Resultatet av undersökningen visar att Västerås kommun och Eskilstuna kommun har olika förhållningssätt till hur de hanterar balanskravet. Slutsatsen visar att balanskravet inte är utformat och anpassat för att hantera konjunktursvängningar. Även att kommuner med stark ekonomi hämmas av inlåsningseffekten, detta har gjort att kommunerna själva skapat egna lösningar som fyller olika funktioner inom respektive kommun. Dessa lösningar går inte att finna i förarbetena till regelverket, men grundtanken i lösningarna har varit densamma; att underlätta hanteringen av konjunktursvängningar och komma runt inlåsningseffekterna.</p> / <p>To cope with the municipalities and county councils perennial deficits in the early 1990s, the concept of good financial management was inserted in 1992 to create a balance between income and expenditure. When there is no existing clear definition of the concept good financial management, introduced as a complement a specific demand of balance in 1998. The demand of balance means that revenue shall be larger than the costs, that are the economy shall be in balance. The basic idea and intent with insertion of demand of balance is that each generation in the municipalities, shall take responsibility for the cost they decides whether and consume, and create a long-term stable development of economy. If a municipalities not achieve to get the economy in balance and declare a deficit, shall the negative outcome according 8kap 5a§ Local Government Act compensated within three years unless there is no existing especial reasons, and can therefore depart from a budget in balance. The demand of balance satisfies its own intent and basic idea, but when the demand of balance was explicate did not the lawmaker make allowances to municipalities with a strong financial position. The demand of balance is specific explicated for municipalities with a weak financial position, which created the lock-in effects of the surpluses for municipalities with a strong financial position. Criticism of the demand of balance has been elucidated more because of the impact of the recession effect, and also made the Government aware about the problem. There is therefore of interest to investigate how a municipality with a strong respective a weak financial position manage the demand of balance.</p><p> </p><p>The purpose of the study is to investigate how Västerås municipality and Eskilstuna municipality manages the demand of balance.</p><p> </p><p>To analyze and understand how the two selected municipalities manage demand of balance based on their economic prerequisites have the qualitative methodology been applied to achieve a deeper understanding.  In addition, the descriptive/inductive method used to determine why the normative theories have not been successful in different contexts. To make a comparison, a unified analytical model has been designed to demonstrate the financial strength of the municipalities.</p><p> </p><p>The results of the study show that Västerås municipality and Eskilstuna municipality has different approaches to how they manage the demand of balance. The conclusion indicates that the demand of balance is not explicated and adapted to handle cyclical fluctuations. Although the municipality with a strong economy is hampered by the lock-in effect, this has meant that the municipalities created their own solutions that serve different functions in each municipality. These solutions cannot be found in the legislative history of the regulatory framework, but the basic idea of the solutions has been the same; to facilitate the handling of cyclical fluctuations and get around the lock-in effects.</p>

För att komma till rätta med kommunernas och landstingens mångåriga underskott i början av 1990-talet, infördes god ekonomisk hushållning år 1992 för att skapa balans mellan inkomster och utgifter. Då det inte finns någon tydlig definition på god ekonomisk hushållning infördes balanskravet år 1998 som ett komplement. Balanskravet innebär att intäkterna ska vara större än kostnaderna, det vill säga att ekonomin ska vara i balans. Grundtanken och syftet med införandet av balanskravet är att varje generation ska bära ansvar för de kostnader som den generationen beslutar om och konsumerar samt skapa en långsiktig stabil utveckling av ekonomin. Om en kommun inte får ekonomin i balans och redovisar underskott ska det negativa resultatet enligt 8kap 5a§ Kommunal Lagen kompenseras inom tre år om det inte föreligger synnerliga skäl och kan därmed frångå en budget i balans. Balanskravet fyller sin funktion men när balanskravet utformades tog inte lagstiftaren hänsyn till kommuner med stark ekonomi utan kravet är främst utformat för kommuner med svag ekonomi, vilket skapat inlåsningseffekter av överskotten från kommuner med stark ekonomi. Kritiken av balanskravets utformning har belysts än mer på grund av lågkonjunkturens effekt, och även gjort regeringen medveten om problemet. Därför finns det intresse att undersöka hur en kommun med stark respektive svag ekonomi hanterar balanskravet.   Syftet med studien är att undersöka hur Västerås kommun och Eskilstuna kommun hanterar balanskravet.   För att analysera och förstå hur de två utvalda kommunerna hanterar balanskravet utifrån deras ekonomiska förutsättningar har den kvalitativa metoden använts för att uppnå en djupare förståelse.  Dessutom har den deskriptiva/induktiva metoden använts för att ta reda på varför de normativa teorierna inte varit framgångsrika i olika sammanhang. För att göra en jämförelse har en enhetlig analysmodell konstruerats för att påvisa kommunernas finansiella styrka.   Resultatet av undersökningen visar att Västerås kommun och Eskilstuna kommun har olika förhållningssätt till hur de hanterar balanskravet. Slutsatsen visar att balanskravet inte är utformat och anpassat för att hantera konjunktursvängningar. Även att kommuner med stark ekonomi hämmas av inlåsningseffekten, detta har gjort att kommunerna själva skapat egna lösningar som fyller olika funktioner inom respektive kommun. Dessa lösningar går inte att finna i förarbetena till regelverket, men grundtanken i lösningarna har varit densamma; att underlätta hanteringen av konjunktursvängningar och komma runt inlåsningseffekterna. / To cope with the municipalities and county councils perennial deficits in the early 1990s, the concept of good financial management was inserted in 1992 to create a balance between income and expenditure. When there is no existing clear definition of the concept good financial management, introduced as a complement a specific demand of balance in 1998. The demand of balance means that revenue shall be larger than the costs, that are the economy shall be in balance. The basic idea and intent with insertion of demand of balance is that each generation in the municipalities, shall take responsibility for the cost they decides whether and consume, and create a long-term stable development of economy. If a municipalities not achieve to get the economy in balance and declare a deficit, shall the negative outcome according 8kap 5a§ Local Government Act compensated within three years unless there is no existing especial reasons, and can therefore depart from a budget in balance. The demand of balance satisfies its own intent and basic idea, but when the demand of balance was explicate did not the lawmaker make allowances to municipalities with a strong financial position. The demand of balance is specific explicated for municipalities with a weak financial position, which created the lock-in effects of the surpluses for municipalities with a strong financial position. Criticism of the demand of balance has been elucidated more because of the impact of the recession effect, and also made the Government aware about the problem. There is therefore of interest to investigate how a municipality with a strong respective a weak financial position manage the demand of balance.   The purpose of the study is to investigate how Västerås municipality and Eskilstuna municipality manages the demand of balance.   To analyze and understand how the two selected municipalities manage demand of balance based on their economic prerequisites have the qualitative methodology been applied to achieve a deeper understanding.  In addition, the descriptive/inductive method used to determine why the normative theories have not been successful in different contexts. To make a comparison, a unified analytical model has been designed to demonstrate the financial strength of the municipalities.   The results of the study show that Västerås municipality and Eskilstuna municipality has different approaches to how they manage the demand of balance. The conclusion indicates that the demand of balance is not explicated and adapted to handle cyclical fluctuations. Although the municipality with a strong economy is hampered by the lock-in effect, this has meant that the municipalities created their own solutions that serve different functions in each municipality. These solutions cannot be found in the legislative history of the regulatory framework, but the basic idea of the solutions has been the same; to facilitate the handling of cyclical fluctuations and get around the lock-in effects.