Abstract
This chapter summarizes the fiscal health and condition of local governments. The focus is primarily from the perspective of small to medium-sized local governments. However, states play a pivotal role in the financial well-being of their local governments. Among other things, states determine the powers, authority, and limitations that the local governments have for providing services and raising revenues, sharing financial resources with their local governments, and imposing mandates that may have financial implications for local units of government. The chapter performs a review of macroeconomic trends and examines the strategies that may be undertaken to strengthen a local government's fiscal health or condition.. One of the key lessons is that there are relatively few things that local government fiscal managers totally control. Local governments can influence some factors determining their fiscal health such as the amount of state aid they receive, local economic development, and sometimes local government boundaries through such procedures as annexation and consolidation. Sometimes a local government can adapt to changing demographics, national economic trends, the prevalence of natural disasters and climate-related costs, and other drivers of local government fiscal situations.
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