Abstract
Local government services are increasingly being provided in fragmented polycentric systems where the overlapping jurisdictions draw resources from the same fiscal base. Developing optimal policies for the efficient management of fiscal resources requires a consideration of the total underlying fiscal pool. In this study, we evaluate the impact that special purpose districts have on debt ratios at the county “common pool” level in the State of Georgia (U.S.) between 2005-2014. Empirical findings suggest that inclusion of all general government and special purpose debt for each county may at times result in a greater burden on fiscal common pool than existing rules permit. These results call into question the efficacy of fiscal policies in a polycentric governance system that neglect to account for debt levels for all actors within the confines of a single fiscal common pool unit. Results also show that total debt ratios are significantly affected by special districts that operate within boundaries of a single county. We find no evidence that independent special districts have a differential impact on fiscal common pools compared to their dependent counterparts.
Highlights
The number of special purpose local governments in the United States has grown over the last fifty years to become one of the most frequently used types of municipal government
We use uninformative priors recommended by the R-Integrated Nested Laplace Approximation (INLA) software package (Lindgren and Rue 2013) for the variety of components in our hierarchical model; this includes uniform, uninformative priors for linear covariates and “weakly informative” priors for model hyperparameters associated with hierarchical components such as the county random effects
This article utilizes the theoretical framework of polycentric governance and explains why special districts might be associated with increased public debt, whether intended or not, due to structural and institutional considerations
Summary
The number of special purpose local governments in the United States ( known as special districts or public authorities) has grown over the last fifty years to become one of the most frequently used types of municipal government. Faulk and Killian 2016), we argue that a critical theoretical and empirical follow-up question is how colocated special purpose entities intersect with – and potentially circumvent – policy mechanisms intended to regulate local fiscal common pools by increasing polycentric, rather than collective, decision making. Our measure of collective pressure that local general purpose governments and special districts exert on a fiscal common pool is the county’s observed total ratio of debt outstanding to assessed property values. Detailed financial statements obtained for all county, city, and special purpose governments in the state, help us to determine the effect of polycentric governance and the increased strain that a proliferation of special districts, and their types, may collectively exert on fiscal common pools
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