RESPONSES TO RECESSION ERA FISCAL STRESS: LOCAL GOVERNMENT STRATEGIES IN NEW MEXICO.
In 1979, at the beginning of a period of fiscal retrenchment in government, Charles Levine wrote that "we are entering... an era dominated by resource scarcity" (179). In the aftermath of the Great Recession of 2008-2009, an era of resource scarcity returned with a force not seen in decades. The recession and resulting fiscal stress hit state and local governments especially hard. Almost all states (43 out of 50) and 90% of cities faced declining revenues and high levels of fiscal stress (Maciag and Wogan, 2017; Johnson, Nicholas, and Pennington, 2009). State and local governments responded by making deep budget cuts (McGranahan, 2002; Scorsone and Plerhoples, 2010). The overwhelming majority of cities (90%) made spending cuts during this period (Hoene and Pagano, 2009). Bankruptcy declarations by Stockton, CA and Detroit, Michigan were emblematic of the dire fiscal crises experienced by many U.S. cities (Bartram 2013; Williams, 2013). There is a need, anew, for research into how state and local governments manage their budgets in this era of fiscal stress (Dougherty and Klase, 2009; Scorsone and Plerhoples, 2010; Fehr 2012; Jimenez, 2013).
This study focuses on budgetary decision making by local governments in New Mexico, in response to fiscal retrenchment in the aftermath of the Great Recession. It examines the strategies used by local governments in the state; the impacts of cutbacks on government services; and the role of politics, strategic planning, policy research, and the extent of stakeholder participation in budgetary decisions. It also inquires into the relationships between the severity of the cuts vis-a-vis the form, type and size of local governments and their budget management strategies.
The next section briefly reviews the last four decades of literature on cutback management by state and local governments in the U.S. The sections following outline our research design, summarize the responses of local government administrators to our survey questions, and discuss our analysis of the results. This includes analyzing the relationship between the governments' perception of the severity of the budget cuts and their use of strategic planning and policy research or analytical studies, as well as their experience of political pressure. We also explore relationships among three major dimensions of cutback decisions, that is, the cutback strategies chosen, their impacts on services, and the degree of stakeholder participation in the decision making. We then discuss relationships between the size, type, and the form of local governments and those three dimensions of cutback decision making, as well as relationships between the size, types, and forms of local government and perceptions of the severity of the cuts, the use of policy/analytical research, and political pressure. The paper concludes with some suggestions for future research.
2. RELATED LITERATURE
Many studies have identified and categorized responses of state and local governments to fiscal stress and the contextual factors that influence the cutback decisions (Glassberg, 1978; McTighe, 1979; Behn, 1980, 1985; May and Meltsner, 1981; Plant and White, 1982; Jick and Murray, 1982; Downs and Rocke, 1984; Klinger, Lehnen, and Schervish, 1984; Poister and McGowan, 1984; Higgins, 1984; West and Davis, 1988; Macmanus, Rattley, Ungaro, Brown, O'Donnell, and Shalmy. 1989; Pammer, 1990; Forrester and Spindler, 1990; Stipak and O'Toole, 1993; Bartle, 1996; Ward 2001; Beckett-Camarata, 2004; Anderson, 2011).
There has been general agreement in the literature that local government managers should use policy and analytical research in making cutback decisions (McTighe, 1979; Higgins, 1984; Osborne and Hutchinson, 2005; Justice 2009; Scorsone and Plerhoples, 2010; Anderson, 2011). However, there are few empirical studies on the extent to which local governments actually use these tools in making cutback decisions.
Many cutback management studies have found that government budgetary cutback decisions are rational or systematic choices, indicating shifts in a governments' priorities. These studies emphasize that cutback decisions are rational and sequential responses to the degree of severity of fiscal stress and generally follow similar patterns in all localities (Levine, Rubin, and Wolohojian, 1981a; Rickards, 1984; Behn, 1985; Dougherty and Klase, 2009; Klase, this symposium; Yang and Justice, this symposium). Other studies, however, suggest that cutback decisions have little similarity from one jurisdiction to another, that there are no general patterns (Pammer, 1990; Bartle, 1996), and that responses to fiscal stress vary considerably, while the reasons for the variations are "largely contextual" (Bartle, 1996, 47).
Several studies have addressed the specific cutback management strategies used by state and local governments in response to fiscal stress. A study of Ohio local governments' cutback strategies found that, in order of importance, reducing non-workforce expenditures, attracting economic development, and freezing or reducing the workforce were the three most important cutback strategies (Beckett-Camarata, 2004). Skidmore and Scorsone, found that reducing capital spending was "especially responsive" to fiscal stress in Michigan cities (2011, 368). Cutting capital spending and decreasing cash balances were the two primary strategies in nine cities in New York (Bartle 1996). Expenditure reductions, alternative revenue sources and productivity improvements were the three major cutback strategies used by Charlotte, NC and Syracuse, NY (Higgins, 1984). Stipak and O'Toole (1993) found that Oregon cities, counties, and school districts made greater use of productivity improvement tools as fiscal stress increased.
Significant budgetary cutbacks mean a decline in organizational resources and in services and programs previously provided. Any decline in an organization's resources, especially reduction in personnel, is expected to affect employee morale and work effort negatively (Darley, 2004; Kelman, 2006), though it has also been found that the manner in which the personnel cuts are carried out has significant effect on employee morale and performance (Cameron, 1994; De Vries and Balazs, 1997).
There are some noteworthy gaps in the literature on fiscal stress and cutback management. Most cutback management studies, with few exceptions, are case studies that focus on one or two usually large cities (Levine, Rubin, and Wolohojian, 1981; Higgins, 1984; Anderson, 2011. Exceptions include Bartle, 1996; Beckett-Camarata, 2004; Klase, this symposium; Yang and Justice, this symposium). Those case studies do not provide an overall picture of cutback management in local governments, especially in small and medium size municipalities. They do not address many important theoretical assertions and questions raised in the fiscal stress and cutback management literature, for example, the importance of strategic planning, the use of policy and analytic research, or the influence of politics in cutback decisions. The literature also fails to consider budget reductions and revenue enhancement simultaneously (Scorsone and Plerhoples, 2010, 184), and pays inadequate attention to the impacts of cutbacks on services, including the extent to which levels of services are reduced, contracted out or eliminated altogether, and their impacts on in-house and long-term service capacity. While there is general normative agreement that citizen participation and stakeholder involvement in cutback decisions are important, there is little empirical study of the extent to which this is actually practiced by local governments (For an exception, see Jimenez, 2014). It is also generally assumed that cutbacks affect public support for and expectations of governments generally. However, there is little empirical data on the extent to which local government officials find this to be the case.
3. RESEARCH DESIGN
Our research surveys strategies for coping with fiscal stress across local governments in the state of New Mexico. It is designed to fill important gaps in our understanding of cutback decisions by local governments. The few extant empirical studies have focused on local governments in large urban, industrial states and on one or two local governments (Levine, Rubin, and Wolohojian, 1981; Anderson, 2011; Bartram, 2013). Folz and French claim that "[T]he paucity of academic research on the management and governance of small communities borders on the scandalous, especially considering that these cities comprise the vast majority of all incorporated U.S. municipalities. In 2003 "...80% of all cities had populations between 2,500 and 25,000..." (2005, 4). By comprehensively surveying the cutback management decisions by municipalities in New Mexico, this study fills two important gap in the literature. First, it is one of the few studies of cutback management in small municipalities, and second, it represents one of the seldom studied 40% of U.S. states that are sparsely populated largely rural. In addition, New Mexico is one of the poorest states in the union, thus making the recession and the resulting fiscal stress an even greater challenge than it would be elsewhere.
The study focuses on three major dimensions of responses to fiscal stress. First, it addresses the substantive strategies local governments use in dealing with revenue shortfalls. What specific cutback strategies are most commonly used? Second, it addresses the impacts of cutbacks on services that local governments provide and on their in-house service capacity. Third, it addresses the process of decision making. How are cutback decisions made? Do policy research and political pressure influence these decisions? Who participates in the decision making?
Our research is also designed to consider the relationships between various dimensions of responses to fiscal stress. The study analyzes the relationships between the perceived severity of the budget cutbacks by local government officials, the various cutback strategies they choose, the impacts on services, the role of analysis and politics, and the degree of stakeholder participation in decision making. Our study also explores the relationships between the size, types, and forms of local governments and the cutback strategies chosen, their impacts on services, and the degree of stakeholder participation in the decision making.
A questionnaire survey was designed to collect data from city managers or municipal administrators on the three major dimensions of their responses to fiscal stress. The survey was divided into three parts: substantive cutback strategies; impacts on services; and the decision process. In addition, we collected information about the general fiscal and political environments within which cutback decisions were made and the size, type, and form of the local governments.
The survey was sent to the municipal officials of all 75 municipal governments in New Mexico. (1) The survey included 36 questions, most using a five point Likert-type scale. Surveys were received from 38 respondents. Of those, three were incomplete and are not included in the analysis. Thus, we received 35 completed responses out of 75 municipalities, yielding a response rate of 46.7%. (2) Respondents were largely representative of municipalities in New Mexico (Tables 1 and 2) in terms of type of government (cities, towns and villages) and of form of government (mayor-council, council-manager and mayor-council with manager). The completed responses are largely representative of the overall universe of all municipalities in New Mexico. In New Mexico, 48% of the municipalities are classified as cities; 20% as towns, and 32% as villages. Of all responses, 51.4% are from cities; 14.2% from towns, and 34.3% from villages. Towns are somewhat underrepresented, while cities and villages are somewhat overrepresented. Of the 75 municipalities in New Mexico, 65.3% have mayor-council form of government; 21.3% are mayor-council with manager and 13.3% have council- or commission-manager form of government. Of those responding, 60% were from mayor-council municipalities, while, 25.7% were from mayor-council with manager, and 14.3% were from council or commission-manager municipalities.
Municipality sizes were defined as follows:
Large: Average number of full-time employees over 150 (2009-2011) with a total average annual budget over $30 million (2009-2011);
Medium: Average number of full-time employees between 51 and 150 (2009-2011) with a total annual budget between $9 and $30 million (2009-2011);
Small: Average number of full-time employees 50 or fewer (2009-2011) with a total average annual budget under $9 million (2009-2011).
4. SURVEY FINDINGS
Severity of the Cuts
To provide an overall context for the fiscal stress faced by local governments and its impacts on all three dimensions of cutback decisions, local government administrators were asked about the severity of the cuts they faced. About equal numbers, 31%, considered the cuts either very severe or not severe. The remaining 37% considered them to be moderately severe (See Table 1).
Politics or Policy Research
In the cutback management literature, there is general agreement that local government managers should use policy and analytical research in making cutback decisions (McTighe, 1979; Higgins, 1984; Osborne and Hutchinson, 2005; Justice, 2009; Scorsone and Plerhoples, 2010; Anderson, 2011). In addition, many cutback management studies have argued that government budgetary cutback decisions are and should be rational or systematic choices that indicate shifts of governments' priorities, rather than decisions made under political pressures (Levine, Rubin, and Wolohojian, 1981a; Rickards, 1984; Behn, 1985; Dougherty and Klase, 2009).
Responses from local government officials in New Mexico, however, reveal that these two expectations are not actually met. Almost 73% of the local government administrators in New Mexico did not use analytical studies or policy research in making their cutback decisions (Table 1). When asked whether they used strategic planning in making their cutback decisions, 59% said that their municipality did so; only 12.5% indicated that they used it little or not at all. These responses present a paradox. It suggests that while local government administrators believe they focus on strategic planning in managing cutbacks, not many use any analytical or policy research to inform their cutback strategies.
More than 75% of local government officials also said that political pressures create a significant challenge in making cutback strategies decisions. These political pressures may, at least in part, explain the failure to use policy or analytical research in cutback strategy decisions among a majority of local government administrators in New Mexico.
In their analysis of the International City/County Management Association's 2009 State of Profession Survey data, Yang and Justice (this issue) found local governments' fiscal responses to the Great Recession to be largely rational. Dougherty and Klase in their study of eight states found that the more severe the cuts were, the "more reasoned and analytical" states' responses were (2009, 616). This was not the case in our study. Respondents' use of strategic planning and policy analysis did not increase with the severity of budget cuts.
Use of strategic planning was significantly related to municipality's focus on combining expenditure reduction with revenue enhancement; and in making equity an important consideration in their cutback decisions. Municipalities that used strategic planning were more likely to consider a comprehensive strategy for managing cutbacks that included tax increases, expenditure reduction, efficiency improvements, and equity considerations.
Studies of state and local government responses to revenue shortfalls in the 1980s and early 1990s found that the governments then responded with both budget cutbacks and tax and borrowing increases (Braun, Johnson and Ley, 1993; Poterba, 1994). Scorsone and Plerhoples (2010) found that in the recession of 2008-2009, in contrast to earlier economic downturns, governments relied more on expenditure reduction than on revenue increases. Since the early 2000s, state and local governments have primarily relied on budgetary cutbacks as the main response to fiscal stress (McGranahan, 2002). In order to fill a gap in the literature to consider the extent to which local governments use both revenue increases and budget cuts simultaneously (Scorsone and Plerhoples, 2010), we asked local government officials the extent to which they use each of these two strategies, separately and simultaneously. Three quarters of local governments in New Mexico used both revenue increases and budget cuts simultaneously to some extent. However, increasing revenue was an important part of the strategy for only about a quarter of them, while about one quarter relied on only one strategy, most likely budget cuts. Among local governments in New Mexico, budget cuts far outweighed revenue increases (66% to 26%) as an important strategy for dealing with revenue shortfalls. Almost all local governments (90%) used budget cuts. Almost half (48%) of local governments used cutting personnel costs as their most important strategy. More than three fourths of the local governments (80%) deferred or cancelled capital projects and used fund transfers and shifts as a way of dealing with revenue shortfalls.
While budget cuts far outweighed increasing revenue (66% to 26%) as an important strategy for dealing with revenue shortfall, almost half (47%) of New Mexico local governments used additional fees and charges as an important strategy for raising additional money. For at least two-thirds of the local governments, though, increases in property and gross receipt (sales) taxes were not important strategies for increasing revenue. Rather, for vast majority of local governments, additional fees and charges were the most important while property and sales tax increases were the least important ways to raise additional revenues.
Bartle (1996) in his study of local governments in New York State and Levin, Ruben, and Wolohojian (1981a) in their study of four cities found that the municipalities they studied increasingly focused on expenditure reduction, especially reducing personnel costs, with increasing severity of budget cuts. Municipalities in New Mexico seemed to focus on expenditure reduction, particularly on reducing personnel costs. Severity of budget problems was related to municipalities' focus on reducing expenditures and cutting personnel costs. However, municipalities in New Mexico also utilized a combination of expenditure reductions and revenue increase strategies as the budget cuts became more severe.
Local governments in New Mexico generally focused on cutting budgets to deal with revenue shortfalls. They used personnel cuts, deferral of capital projects, and fund transfers as their major responses to fiscal retrenchment. Reducing municipal services or health care costs were not important methods for reducing expenditures for the vast majority of local governments. However, an overwhelming number (88%) of local government officials reported that the fiscal stress provided them with a good opportunity to improve the efficiency of their governments.
Impact on Services
There are at least three important consequences of budgetary cutbacks. Cutbacks are likely to reduce the services municipalities provide. Municipalities may reduce or eliminate some services and contract out others. Budget cutbacks are also likely to have disparate impacts on different groups of citizens in the community. Some groups are not impacted at all, while others may bear most of the burden. In addition, reducing or eliminating services often diminishes the in-house service capacity of the local governments.
The overwhelming number of local governments in our study, however, neither reduced services (86%) nor contracted out services (91%). Furthermore, 60% of the local government officials responded that there were very few or no long-term changes in the services and programs they offered. Only fewer than one in six indicated that there were significant long-term changes in their provision of services and programs. Large numbers of local government administrators (79%) expressed concern about the differential impacts of cutbacks and indicated that equity was an important consideration in their cutback strategies. On the other hand, there was not much concern about preserving in-house service capacity. Fewer than half (43%) paid some attention to preserving in-house capacity while almost a quarter paid very little attention to it. (See Table 1).
Our study found that the severity of cuts and the use of strategic planning and policy research do significantly affect the level of services and programs provided by the municipalities. They lead to long-term changes in those services of the municipalities. However, the severity of the cuts or the use of strategic planning were not related to decisions to contract out services. They were also not related to erosion of the in-house capacity of local governments to provide services. Thus concerns that the severity of budget problems and the use of strategic planning increase contracting out of services and lead to erosion of in-house capacity were not supported by our study. However, municipalities in our study using policy research in making cutback decisions were more likely to contract out services/programs.
Research suggests that communication with employees and employee participation in the cutback decisions help maintain employee morale and job performance (Chadwick, Hunter, and Walston, 2004; Kiefer et al., 2014). A large percentage of local administrators (65%) agreed, as they significantly increased efforts to communicate with their employees concerning cutback decisions. However, only 28% significantly increased efforts to communicate with employee unions. The most common strategy local officials used to build employee and union understanding, acceptance, and support for their cutback strategies was increased communication. Very few (13%) used employee participation in cutback decision making as a way to build support (See Table 1).
Increasing citizen participation in government decision making is widely considered desirable. In the time of fiscal stress it is important for citizens to play a role in budgetary decision making (Ebdon and Franklin, 2006). We would expect increased efforts by local officials to communicate with their citizens, and to broaden participation by those previously excluded from decision making. However, this was generally not the case. Only a third of local governments significantly increased their efforts to communicate with people in their community and only one in six (16%) made significant efforts to include those who had been previously excluded from decision making (see Table 1). Almost 60% did not include at all, or included to a very limited extent, those previously excluded. Only 16% included, to a large or great extent, those previously excluded. While communication was the most common strategy used with the public to cope with the fiscal stress, (69% of the responses), only 20% mentioned public participation in decision making. Fiscal stress and budgetary cutbacks do not appear to lead to increased citizen or employee participation in decision making.
While local officials did little to increase citizen or employee participation in cutback decision making, two thirds of respondents indicated that there was little or no effect on either public expectations for services provided by their municipality or on public support for the municipal government (see Table 1). Increased efforts at communication with employees and the public seem to have reduced the negative impacts of the cutbacks on citizen expectations of and support for government (Jimenez, 2014). Perhaps these reduced negative impacts are the result of "information asymmetries" between decision makers and the citizens (Bourdeau, this issue).
It is a common observation that cutback decisions should involve broad participation of and communication with the stakeholders (Caraley and Vaupel, 1982; Plant and White, 1982; Behn, 1996; Justice, 2009). In our study we found that the use of strategic planning and policy research and increased severity of cuts led to an overall broadening of participation, and in increased efforts to communicate with employees and unions, as well as with the public at large.
Budget cuts affect employee morale and job performance as well as public expectations of services and public support for government. We would expect that the more severe the cuts, the more negative the impacts. These expectations were borne out in our study. The more severe the cuts, and the more local government officials used strategic planning and policy research, the more likely they were to believe that cutbacks affect employee morale and job performance as well as public expectations of services from and support for the government.
5. SIZE, TYPE AND FORM OF LOCAL GOVERNMENTS AND CUBACK MANAGEMENT
After a comprehensive survey of the literature on fiscal stress and cutback management Scorsone and Plerhoples found that "State and local governments rely on many different strategies to address fiscal stress and cutback management" and urged that "Future research needs to better integrate its examination of the use and implications of these alternative approaches across different types of governments" (2010, 185). Our study addresses this concern by examining the relationships between the size, types, and forms of governments and the use of different cutback strategies. (33)
Local government decision makers when dealing with fiscal stress should, cutback management literature suggests, use both expenditure reduction and revenue enhancement strategies. Local governments in our study, regardless of size or form of government did not do so. Only the type of government (Towns) was significantly related to the use of both expenditure reduction and revenue enhancement strategies. Earlier studies have found a relationship between the professional manager form of local government and responses to fiscal stress (Chapman and Gorina, 2014; Maher and Deller, 2007). However, our study found that there was no significant difference between the size, type, or form of the municipalities and their use of expenditure reduction as a strategy or in the importance of the cost reduction methods they employed (personnel costs, healthcare costs, service reductions, fund transfers, or capital projects deferral/cancellation). Similarly, there was no significant difference among the municipalities, regardless of size, form, or type of government, in the methods they used to increase revenue (i.e., increases in property taxes, gross receipt taxes, fees, charges, or new revenue sources). Professionally managed municipalities, however, were generally more likely to use property tax and fee increases as well as develop new sources of revenue.
Budget cuts rarely affect all citizens of a municipalities equally. Consideration of equity in making cuts is important, if a disproportionate burden is not to fall on a small segment, often the poorer residents of the municipality. The size of the municipality was significantly related to whether a local government considered equity in making cutback decisions. Large and medium size municipalities, regardless of form or type of government, were more likely than small local governments to consider equity when making budget cuts.
In times of fiscal stress and tight budgets, governments are likely to eliminate or contract out services. In our study, all municipalities, regardless of size, form, or type of government reduced levels of services to the same extent however, governments with professional managers (council-managers and mayor-councils with managers) were significantly more likely than mayor-council governments to eliminate services or contract out services. There was no significant difference among local governments in our study, regardless of their size, form, or type of government, in their use of strategic planning. Towns and cities, however, used policy analysis more than village governments.
Public administration writings on cutback management usually suggest that both internal and external stakeholders need to be engaged for successful cutback management (McTighe, 1979; Behn, 1980; Scorsone and Plerhoples, 2010). Our study found no significant differences among municipalities by size, type, or form, in the extent to which they increased employee participation or broadened the participation of those not previously included in budgetary decision making. However, towns were significantly more likely than cities or villages to increase their efforts to communicate with employees about their cutback strategies, while larger municipalities (towns and cities) were significantly more likely to increase their communication efforts with labor unions. There were no significant differences among the local governments in our study in the extent of their efforts to communicate with the public in general regarding their cutback strategies. There were also no significant differences, by size, type, or form of government in either public support for the local government or public expectations of public services.
6. DISCUSSION AND CONCLUSION
Pressure to constrain budgets is likely to be a permanent reality at all levels of governments in the U.S. in the foreseeable future. This is felt most acutely by local governments. Increasingly, cutback management is a way of life for most local governments.
There has been considerable public administration research over the last 35 years on the responses to fiscal stress by governments. There are many articles outlining causes and consequences of budgetary cutbacks and prescribing appropriate strategies for managing them. There are a number of case studies of strategies used by a specific city or local government. However, there are no empirical studies based on comprehensive primary data on responses to fiscal stress collected from all local governments in one entire state. Our study contributes to our understanding of local governments' cutback strategies and decision making in time of fiscal distress.
Politics matters in selecting cutback strategies. Almost half the local government administrators in New Mexico indicated that political pressure plays an important role in their management of budgetary cutbacks. Analysis and research, however, are largely ignored by local governments in making their cutback decisions. Almost three quarters of the local governments in our study do not use policy research or analysis in determining cutback strategies, despite the near universal consensus among public administration scholars about its importance. One would expect the severity of budget cuts to significantly affect cutback decision making. The more severe the cutbacks, the wider and deeper their impacts. Our study provides insights into the relationships between the severity of cutbacks and cutback management decisions. We found that greater severity does not lead to greater use of either strategic planning or of research and analysis. In addition, the more severe the cuts, the greater the focus on expenditure reduction and personnel cuts, but not on revenue enhancement. Interestingly, the more severe the budget cuts, the less likely local governments are to use analysis and planning in their decision making and the more likely they are to focus on cutting personnel and expenditures rather than on increasing revenues.
These findings suggest important issues for future research. First, for example, when facing severe budget cuts, why are local government administrators less likely to use strategic planning and analysis, when scholarly advice would suggest making greater use of them? It is important for public administration scholars to investigate effective ways of increasing practitioners' knowledge and use of analytical tools. In-depth case studies of local governments that have used these tools to determine their cutback strategies may shed light on the conditions that influence their use. Secondly, our study found that greater use of policy research and analysis by local administrators is related to higher likelihood of reducing or eliminating services as well as to greater likelihood of contracting out government services and making long-term changes in the government's services and programs. Do these findings indicate an inherent bias in policy research and analysis studies toward reducing/eliminating services and contracting out services? Do the political pressures felt by municipalities similarly lead to budget cutting rather than revenue enhancing strategies? Thirdly, in a poor state, the size of a local government is often related to its economic status; are responses to fiscal distress limited or constrained by the poverty of some communities? This comprehensive look at cutback management in local governments across one state reveals interesting patterns while raising many important questions for future research.
This study is limited since it is based on the data from a single, poor and rural state. The pattern of local government responses to fiscal stress in New Mexico may not hold for local governments in more urban, populace and wealthier states.
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(1.) We study cutback management in New Mexico municipalities, since there are few empirical studies of cutback management in local governments in small states. New Mexico is among the 15 small states with populations of roughly 2 million people. Six more states have populations of just over three million. These 21 states are scattered widely across the country. Most are sparsely populated, rural states (with the clear exceptions of Rhode Island, Delaware, and Hawaii). While each state is, of course, unique, local governments in sparsely populated states are likely to be in similar situations, face similar constraints, and might employ similar cutback management strategies. Empirically little is known about how local governments in these states, which total over 40% of all states (21 out of 50), cope with fiscal stress and manage cutbacks.
(2.) While 46.7% is a modest response rate, it is by no means low or unusual in local government survey research. For example, response rates for surveys conducted by the ICMA typically have a 20%-30% response rate (http://icma.org/en/icma/priorities/surveying/survey research overview).
(3.) In order to better understand the relationships between the size, form, and type of local governments and their cutback strategies, impacts of cutbacks on their services, and stakeholder participation in their cutback decision making, we carried out an ordered logistic (maximum likelihood) regression analysis with size, type, and form of local government as independent variables. Local governments were divided by size: large, medium, or small, based on their average annual budget and number of employees for three years, 2009-2011. We also divided them by type of government: village, town, or city and by form of government: mayor-council, mayor-council with manager, and council-manager. In Table 2, we only report cutback strategies that have significant relationships with size, type or forms of governments.
Uday Desai (*)
University of New Mexico
(*) I would like to thank Dr. Adam Okulicz-Kozaryn, Rutgers University, for his help in data analysis, my research assistants Huong Nguyen and Jeremy Seaton, for their help with research, and Tatiana Estrada for her help with word processing and formatting.
Table 1. Frequency of Response (*) = scale of 1 to 5; (*) = scale of 1 to 6 CUTBACK ENVIRONMENT Total (n) Severity of Cut backs 35 Political Pressures 31 CUTBACK STRATEGIES Used Strategic Planning 32 Used Policy Research 33 Expenditure Reduction 35 Revenue Enhancement 34 Expenditure Reduction & Revenue Enhancement 34 Opportunity to Improve Efficiency 34 Importance of Equity in Making Expenditure 34 Cuts EXPENDITURE REDUCTION Total (n) STRATEGIES Reduction in Personal Costs 29 Reduction in Health Care Costs 25 Deferral/Cancellation of Capital Projects 30 Fund Transfers & Shifts 29 Reduction of Services 28 REVENUE ENHANCEMENT STRATEGIES Increase Property Tax 17 Increase Sale Tax 23 Increase Fees & Charges for Services 30 Develop New Revenue Sources 25 IMPACT ON SERVICES Total (n) Reducing or Eliminating Services & 35 Programs Ability to Preserve In-House Capacity 35 Creating Long Term Changes 35 Contracting Out-Services 34 STAKEHOLDER PARTICIPATION Participation Broadened 32 Effort to Communicate with Labor Unions 18 Employee Communication Efforts 34 Effects on Employee Morale 34 Effects on Employee Job Performance 34 Increase Efforts to Communicate with 33 Public Effects on Public Service Expectations 30 Effects on Public Support 33 CUTBACK ENVIRONMENT NOT MUCH (1-2) (*) MODERATE (3) (*) Severity of Cut backs 31% 37% Political Pressures 23% 29% CUTBACK STRATEGIES Used Strategic Planning 13% 28% Used Policy Research Yes No Expenditure Reduction 11% 23% Revenue Enhancement 38% 35% Expenditure Reduction & Revenue Enhancement 24% 53% Opportunity to Improve Efficiency 12% 35% Importance of Equity in Making Expenditure 21% 24% Cuts EXPENDITURE REDUCTION NOT MUCH (1-2) (*) MODERATE (3-4) (*) STRATEGIES Reduction in Personal Costs 48% 31% Reduction in Health Care Costs 16% 32% Deferral/Cancellation of Capital Projects 33% 47% Fund Transfers & Shifts 38% 38% Reduction of Services 7% 50% REVENUE ENHANCEMENT STRATEGIES Increase Property Tax 24% 6% Increase Sale Tax 35 26% Increase Fees & Charges for Services 47 30% Develop New Revenue Sources 44 16% IMPACT ON SERVICES NOT MUCH (1-2) (*) MODERATE (3) (*) Reducing or Eliminating Services & 86% 9% Programs Ability to Preserve In-House Capacity 23% 34% Creating Long Term Changes 60% 26% Contracting Out-Services Yes No STAKEHOLDER PARTICIPATION Participation Broadened 59% 25% Effort to Communicate with Labor Unions 61% 11% Employee Communication Efforts 35% 18% Effects on Employee Morale 50% 15% Effects on Employee Job Performance 68% 21% Increase Efforts to Communicate with 36% 30% Public Effects on Public Service Expectations 67% 20% Effects on Public Support 36% 30% CUTBACK ENVIRONMENT A LOT (4-5) (*) Severity of Cut backs 31% Political Pressures 48% CUTBACK STRATEGIES Used Strategic Planning 59% Used Policy Research 27% 73% Expenditure Reduction 66% Revenue Enhancement 26% Expenditure Reduction & Revenue Enhancement 24% Opportunity to Improve Efficiency 53% Importance of Equity in Making Expenditure 56% Cuts EXPENDITURE REDUCTION A LOT (5-6)(*) STRATEGIES Reduction in Personal Costs 21% Reduction in Health Care Costs 52% Deferral/Cancellation of Capital Projects 20% Fund Transfers & Shifts 24% Reduction of Services 43% REVENUE ENHANCEMENT STRATEGIES Increase Property Tax 71% Increase Sale Tax 39% Increase Fees & Charges for Services 23% Develop New Revenue Sources 40% IMPACT ON SERVICES A LOT(4-5) (*) Reducing or Eliminating Services & 6% Programs Ability to Preserve In-House Capacity 43% Creating Long Term Changes 14% Contracting Out-Services 9% 91% STAKEHOLDER PARTICIPATION Participation Broadened 16% Effort to Communicate with Labor Unions 28% Employee Communication Efforts 47% Effects on Employee Morale 35% Effects on Employee Job Performance 12% Increase Efforts to Communicate with 33% Public Effects on Public Service Expectations 13% Effects on Public Support 33% Table 2. Size, type, and form of government and cutback management FISCAL ENV. SIZE OF GOVERNMENT (1) Medium std. coef err Severity of Cuts 3.84 (***) 1.33 CUTBACK STRATEGIES Use Policy Research -0.23 1.45 Increase Property 0.46 1.88 Tax Increase Fees & 2.84 (***) 0.83 Charges Cut Expenditure 1.07 0.80 & Raise Revenue Consider Equity in Making 1.86 (**) 0.91 Cuts IMPACTS ON SERVICES Eliminate Services -0.45 1.11 or Programs Contract-Out-Services 0.62 2.14 Long-Term 1.24 1.08 Changes STAKEHOLDER PAR- Employee Communication -0.60 2.10 Labor Union Communication 0.71 0.95 FISCAL ENV. SIZE OF GOVERNMENT (1) Large coef std. err Severity of Cuts 2.41 (*) 1.34 CUTBACK STRATEGIES Use Policy Research 1.01 1.62 Increase Property -17.3 (***) 1.84 Tax Increase Fees & 1.82 1.04 (*) Charges Cut Expenditure 0.69 1.30 & Raise Revenue Consider Equity in Making 1.79 (*) 1.02 Cuts IMPACTS ON SERVICES Eliminate Services -0.35 1.51 or Programs Contract-Out-Services 37.7 (***) 0.00 Long-Term 2.46 (*) 1.43 Changes STAKEHOLDER PAR- Employee Communication 0.78 1.10 Labor Union Communication 38.24 (***) 1.78 FISCAL ENV. TYPE OF GOVERNMENT (2) Town coef std. err Severity of Cuts -1.13 1.23 CUTBACK STRATEGIES Use Policy Research 17.3 (***) 1.1 Increase Property 1.96 1.99 Tax Increase Fees & -1.88 (**) 0.89 Charges Cut Expenditure 1.49 (*) 0.88 & Raise Revenue Consider Equity in Making -0.17 0.91 Cuts IMPACTS ON SERVICES Eliminate Services 0.07 1.53 or Programs Contract-Out-Services 16.3 (***) 2.79 Long-Term -0.16 0.92 Changes STAKEHOLDER PAR- Employee Communication 18.6 (***) 1.12 Labor Union Communication 3.15 0.85 FISCAL ENV. TYPE OF GOVERNMENT (2) City Manager coef std. err Severity of Cuts 3.88 (***) 1.33 CUTBACK STRATEGIES Use Policy Research 17.3 (***) 0.96 Increase Property 2.37 1.85 Tax Increase Fees & -0.35 0.76 Charges Cut Expenditure 0.23 0.82 & Raise Revenue Consider Equity in Making -1.14 1.12 Cuts IMPACTS ON SERVICES Eliminate Services -1.97 1.03 or Programs Contract-Out-Services 1.34 2.17 Long-Term -0.19 0.92 Changes STAKEHOLDER PAR- Employee Communication 0.35 1.31 Labor Union Communication omitted omitted FISCAL ENV. FORM OF GOVERNMENT (3) Mayor--Council with coef std. err Severity of Cuts 1.48 1.68 CUTBACK STRATEGIES Use Policy Research 0.23 1.56 Increase Property 16.7 (***) 1.41 Tax Increase Fees & -2.05 0.66 Charges Cut Expenditure 1.02 0.72 & Raise Revenue Consider Equity in Making -0.09 1.01 Cuts IMPACTS ON SERVICES Eliminate Services 2.13 (**) 0.88 or Programs Contract-Out-Services -18 94 (***) 0.76 Long-Term 0.56 1.20 Changes STAKEHOLDER PAR- Employee Communication 0.60 1.55 Labor Union Communication -18.13 1.51 FISCAL ENV. FORM OF GOVERNMENT (3) Commission Manager or Council-Manager coef std. err Severity of Cuts -0.05 1.86 CUTBACK STRATEGIES Use Policy Research -0.36 1.53 Increase Property 16.5 (***) 1.75 Tax Increase Fees & -1.32 1.52 Charges Cut Expenditure -1.42 2.02 & Raise Revenue Consider Equity in Making -1.66 1.43 Cuts IMPACTS ON SERVICES Eliminate Services 2.61 (*) 1.47 or Programs Contract-Out-Services -38.4 - Long-Term -2.09 1.6 Changes STAKEHOLDER PAR- Employee Communication -1.60 1.45 Labor Union Communication -19.64 (***) 1.39 (1.) "Small government" is used as reference (2.) "Village" is used as reference (3.) "Mayor-Council Form of Government" is used as reference (*) Significant at 0.1 (**) Significant at 0.05 (***) Significant at 0.01
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|Publication:||Public Finance and Management|
|Date:||Jan 1, 2018|
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