Fiscal slack, budget shocks, and performance in public organizations: evidence from public schools

Abhisekh Ghosh Moulick and Lori Taylor

Public Management Review, 2017, vol. 19, issue 7, 990-1005

Abstract: Some scholars equate fiscal slack with organizational inefficiency, while others argue that it is a useful environmental buffer. This study takes the first step in reconciling these opposing views, by classifying fiscal slack as absorbed and unabsorbed slack in public organizations. In a sample of 1,000 Texas public school districts over 17 years, fund balance (unabsorbed fiscal slack) does not seem to affect student performance, unless there is a major downward budget shock. In the absence of a negative budget shock, non-instructional spending per pupil (absorbed fiscal slack) has a negative impact on performance change in an average school district, but no meaningful impact on student performance during a major budget shock.

Date: 2017
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DOI: 10.1080/14719037.2016.1243813

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