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Does General Fund Balance Stabilize Municipal Expenditure? Evidence from Large American Cities

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  • Yonghong Wu
  • Yu Shi

Abstract

Municipal governments in the U.S. tend to build and maintain substantial general fund balances to ensure expenditure stability and long-term financial sustainability. It is important to understand how municipal fund balances help stabilize municipal spending. This article examines the annual municipal general fund expenditure gap between 1996 and 2011. Using data from 100 large cities, the empirical evidence does not support the stabilizing effect of the unreserved fund balance on general fund expenditure. Furthermore, the undesignated portion of the unreserved fund balance helps stabilize municipal general fund expenditure during upturn years, whereas the designated portion plays a procyclical role. This article also finds that more restrictive local tax and expenditure limits lessen municipal expenditure gap during bad fiscal years and that residents with conservative ideology tend to support countercyclical fiscal policies at the local level.

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  • Yonghong Wu & Yu Shi, 2021. "Does General Fund Balance Stabilize Municipal Expenditure? Evidence from Large American Cities," International Journal of Public Administration, Taylor & Francis Journals, vol. 44(5), pages 420-429, April.
    • Handle: RePEc:taf:lpadxx:v:44:y:2021:i:5:p:420-429
    DOI: 10.1080/01900692.2020.1728772
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    Cited by:

    1. Evgeny N. Timushev & Vita A. Yagovkina, 2023. "Reserve Funds in Russian Regions: Factors of Formation and Efficiency Assessment," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 61-78, October.

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