Paradigm Shift of Municipal Credit Analysis

Andy Shin, Daniel DiSalvo and Sarah F. Anzia

Municipal Finance Journal, 2020, vol. 40, issue 4, 73 - 107

Abstract: The conventional approach to analyzing municipal credit fails to uncover the true fiscal dynamics of struggling state and local governments. Traditional credit factors such as finance, budget, debt, pension, management, and governance reveal the symptoms and manifestation of underlying driving forces rather than the root causes of credit issues. In many cases, the root causes are political in nature and stem from policymakers’ strong political incentives to make fiscally imprudent decisions. Recognizing these incentives and their resulting policies can provide powerful insight into the credit trajectory of state and local governments. In this session, the panelists discuss political incentives and policies that have shaped the fiscal conditions of state and local governments across the United States and the ways in which those conditions continue to constrain fiscal reform efforts.

Date: 2020
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