Growth and Fiscal Health in Wisconsin Cities

The intent of the applied research reported in this paper is to examine the relationship between growth and the fiscal health of a subset of local governments (incorporated cities) over the last decade. While any number of researchers has raised this question, the literature has tended to focus on larger urban areas during economic downturns. Ladd's (1994) most recent research looking at the fiscal effects of growth has become perhaps the most influential in this line of work. Ladd's research, however, is limited in that she focused on per capita spending, a variable of interest in itself and because it can be conceptually linked to service quality and tax burden. While the data used in her analysis do not reflect a period of economic downturn, the data are for large counties from across the U.S. The analysis presented in this paper is intended to explore of the impact of growth on the fiscal health of smaller local governments. Annual data for Wisconsin cities from 1991 to 1998 are analyzed in this study. Six measures are used to capture different aspects of fiscal health. Changes in these measures in relation to changes in population, property values, and income are evaluated through a series of tests of subsample equivalence and regression analysis.