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

Erich Cromwell and Keith Ihlanfeldt

National Tax Journal, 2015, vol. 68, issue 2, 339-376

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.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:68:y:2015:i:2:p:339-376

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