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The right to access (& ultimately spend) public sector savings is determined by the party which can control the political outcome. This implies that anticipated future changes in the state's controlling political party may systematically adversely affect current savings. Extending the Life Cycle/Permanent Income model, I show that a representative legislator will opt to forgo current saving in favor of spending when his prospects for future political control diminish. Estimating a panel data model of 39 states from 1973-1995, I find that an actual future change in the controlling party of a state's Lower House significantly reduces current saving. 2 Tables, 38 References. Adapted from the source document.

AbstractHigh‐speed internet access is a core tenet of economic development strategies post‐COVID. While expanding access is linked to many positive benefits, evidence associating broadband to job growth and business formation is more mixed. This study expands the literature along several dimensions, most notably exploring how business download speeds affect employment, business formation, and survival at a microscale. Using conventional and Least Absolute Shrinkage and Selection Operator instrumental variables strategies, with terrain features as instruments, we find consistent evidence that broadband speeds stimulate local development. However, our estimates are 60%–65% smaller than those from recent studies, suggesting that broadband may be less beneficial than previously assumed.

In this paper, we estimate the long-term causal effect of population losses on local government revenue, expenditure, and debt by exploiting a quasi-exogenous change that reduced the number of US military personnel by about 40 percent between the late 1980s and 2000. Aggregating across governmental units within commuting zones, we find that real per capita total revenues and expenditures remained unchanged for remaining citizens. At the same time, however, we note several important compositional effects. First, local governments appear to have offset reductions in state intergovernmental aid by increasing property tax revenues. Second, they significantly shifted the composition of expenditures by making disproportionately large cuts in capital spending, including cuts in K–12 education, to maintain levels for current operations. Third, localities increased their long-term nonguaranteed debt to finance investments not covered by general capital outlays. Taken together, these actions run the risk of hindering a region's relative competitiveness in the long term.

Pension underfunding in the public sector has received considerable attention recently and is often cited as the next looming crisis. The majority of recent research has focused on appropriately measuring the underfunding. In this paper, we employ a political economy framework to show that increases in partisan polarization and electoral uncertainty lead to greater underfunding. Using an unbalanced panel of individual pension plans, we find robust empirical evidence that higher legislative turnover rates, more electoral competition, and term limits all lead to more pension underfunding. The political environments of state and local governments play a pivotal role in pension underfunding.

The consequences of revenue shortfalls for cities are particularly dramatic due to the balanced‐budget requirement. Revenue diversification is one method of stabilizing revenue streams because diversified revenue structures can mitigate the revenue fluctuations often associated with single source revenue. Using audited financial reports, this study examines the impact of revenue diversification in Arkansas cities over 10 years. To address the issue of revenue adequacy, this study examines diversification's impact on current year budget changes in revenue and expenditures as well as its impact on tax effort.