Funding Stabilization and the Performance of Public Agencies: Evidence From Ohio Libraries

Do the sources of funding available to public agencies—and shocks to these sources—affect the performance of these agencies? Using data on Ohio public libraries, we exploit the sudden state budget cuts implemented in 2009 following the 2008 recession, along with the bureaucratic delay in approving new local property tax levies to make up for the lost state funding, in order to compare the performance of libraries that had access to property taxes prior to 2008 to those that relied exclusively on state funding. We find that libraries with diversified funding, and so with access to relatively stable property taxes, demonstrated higher service across a wide range of performance indicators in the first year of funding stabilization following the budget cuts relative to libraries without local funding. These effects decrease by about one‐half to two‐thirds by the fifth year, but they remain statistically significant at the 1% level.