An empirical assessment of local autonomy and special district finance in the US

Abstract

ABSTRACTIn this article, we interpret local autonomy as a dimensional concept that includes local government importance, local government discretion, and local government capacity. Using longitudinal data from 1962 to 2012 covering all 50 states in the US, we examine how different dimensions of local autonomy affect the expenditure levels and debt levels of special districts. We find that the levels of debt and spending in special districts are lower when local governments have greater revenue diversification. However, fiscal decentralisation in the dimension of local government importance promotes the growth of special district finance. Moreover, our findings on local government discretion suggest that imposing too many fiscal constraints can affect the fiscal independence and capacities of local general-purpose governments. These constraints may also lead to the more extensive use of the fiscal power of special districts that are not subject to fiscal limits.