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

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  • Abhisekh Ghosh Moulick
  • Lori L. Taylor

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.

Suggested Citation

  • Abhisekh Ghosh Moulick & Lori L. Taylor, 2017. "Fiscal slack, budget shocks, and performance in public organizations: evidence from public schools," Public Management Review, Taylor & Francis Journals, vol. 19(7), pages 990-1005, August.
    • Handle: RePEc:taf:rpxmxx:v:19:y:2017:i:7:p:990-1005
    DOI: 10.1080/14719037.2016.1243813
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    Cited by:

    1. Michelle L. Lofton, 2022. "The impact of excess taxing capacity on short‐term resources," Public Budgeting & Finance, Wiley Blackwell, vol. 42(1), pages 3-27, March.
    2. Michelle L. Lofton & Mikhail Ivonchyk, 2022. "Financial manager professionalism and use of interfund transfers: Evidence from Georgia counties," Public Budgeting & Finance, Wiley Blackwell, vol. 42(2), pages 171-195, June.

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