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1 – 10 of over 13000Inflation and federal monetary efforts to control it with interest rate hikes have very real and overwhelmingly negative consequences on US local governments following the onset…
Abstract
Purpose
Inflation and federal monetary efforts to control it with interest rate hikes have very real and overwhelmingly negative consequences on US local governments following the onset of COVID-19. This study explores the post-pandemic inflationary environment of US local governments; examines the impacts of inflation and high interest rates on local government revenue, operating costs, capital costs, and debt service; reviews local government inflation management strategies, including the use of intergovernmental revenue; and assesses ongoing threats to local government financial health and financial resilience.
Design/methodology/approach
This study uses trend and literature analysis to comment on current issues local governments face.
Findings
The study finds that the growth of property values and resulting stability of property tax revenue has been important to local government revenues; that local governments bear very real burdens as operating and capital costs increase; and that the combination of high inflation and interest rates affects local government debt issuance by negatively affecting credit quality and interest costs, leading to municipal market contraction. Local governments have benefitted tremendously from intergovernmental revenue, but would be ill-advised to rely on it.
Practical implications
Vulnerabilities owing from revenue mismatch with the economy; inadequate affordable housing, inequality, and social issues; a changing workforce and tight labor market; climate change; and federal fiscal contraction—all of which are exacerbated by high inflation and interest rates—require local governments to act strategically, boldly and collaboratively to achieve fiscal health and financial resilience, and to realize positive returns of investments in people and capital.
Originality/value
This work is unique in addressing the post-pandemic impact of inflation and interest rates on local governments.
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Shengfeng Lu, Sixia Chen, Yongtao Cang and Ziyao San
This study examines whether and how government fiscal pressure influences corporate charitable giving (CCG).
Abstract
Purpose
This study examines whether and how government fiscal pressure influences corporate charitable giving (CCG).
Design/methodology/approach
The authors exploit sub-national tax revenue sharing changes as exogenous variations to government’s fiscal pressure at the city level and then construct a quasi difference-in-differences (DiD) model to conduct the analysis based on a sample that consists of 14,168 firm-year observations in China during the period of 2003 to 2012.
Findings
The authors found that firms increase charitable donations when local governments face higher fiscal pressure. Such effects are more pronounced for firms that have stronger demand for political connectedness in the sample period. Furthermore, this study’s findings suggest that the timing strategy of donating helps firms to lower the effective tax rate and to build stronger political connections. In addition, donating firms outperform non-donating firms in terms of bank loan access and market reputation.
Originality/value
The authors contribute to at least three lines of literature: first, extend the understanding of timing strategies of corporate charitable behaviors; second, contribute to the literature studying the “crowd out” effect between government-provided charitable funds and private donations; finally, contribute to the emerging literature exploring the financial interests associated with corporate donation strategy (Claessens et al., 2008; Cull et al., 2015).
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To boost the fiscal revenue, i.e., government revenue over GDP and central government revenue over government total revenue, China conducted the 1994 fiscal reforms. According to…
Abstract
To boost the fiscal revenue, i.e., government revenue over GDP and central government revenue over government total revenue, China conducted the 1994 fiscal reforms. According to some observers, the results of the initial reforms were mixed. This study reveals, contrary to most examinations of previous studies, the 1994 fiscal reforms have been an enormous success in achieving the original policy purposes, although remaining problems still present a daunting task for the Chinese government. This paper examines the factors triggering the 1994 fiscal reforms, reveals the contents and accomplishments of the reforms, explores unfinished tasks and ultimately proposes some policy implications.
Marc Holzer and Mengzhong Zhang
To adjust the fiscal relationship between the central government and the local government, especially to increase the two ratios of (1) central fiscal revenue over GDP and (2…
Abstract
To adjust the fiscal relationship between the central government and the local government, especially to increase the two ratios of (1) central fiscal revenue over GDP and (2) central fiscal revenue over government revenue, China conducted a 1994 fiscal reform effort, the result of which is, at best, mixed. One of the failures to boost the first ratio is the existence of largescale extra budget funds (EBFs) and extra-extra budgetary funds (EEBFs). This paper explores the history, the problems and the causal relations associated with the EBFs under the broad background of China’s fiscal reform and administrative reform. This paper then proposes a comprehensive package for the solution of problems related to the EBFs.
Hannarong Shamsub and Joseph B. Akoto
In the past two decades, much of the literature in the area of government financial management has been devoted to studying the causes of fiscal stress. Most studies emphasized…
Abstract
In the past two decades, much of the literature in the area of government financial management has been devoted to studying the causes of fiscal stress. Most studies emphasized the role of such factors as economic cycles, business relocation and factors beyond the control of policy makers as major causes of fiscal stress. This study extends the scope of the research in this area to investigate whether state and local fiscal structures contribute to fiscal stress. Using a pooled cross-sectional time-series approach with the state-local data ranging from 1982 to 1997, the result shows that: there is more significant difference in the composition of tax structures than that of total revenue; high aggregate spending is associated with high fiscal stress; state and local governments over-commit on the social welfare category; local revenue diversification is associated with low fiscal stress; and fiscal decentralization or high spending responsibility assumed by local governments is associated with low fiscal stress. The findings suggest that local revenue diversification and fiscal decentralization can be used as measures to reduce fiscal stress.
Dan Luo and Ronghua Ju
The purpose of the paper is to examine China's county‐level fiscal difficulties. A large portion of China's counties (county‐level cities) have to run with the shortage of…
Abstract
Purpose
The purpose of the paper is to examine China's county‐level fiscal difficulties. A large portion of China's counties (county‐level cities) have to run with the shortage of financial resources and huge government debt. To make a suitable policy to solve this problem is a top priority.
Design/methodology/approach
Using the first‐hand survey data, the paper compares nine sample counties whose economic development level is different, sums up the difficulties county‐level governments are facing and explores countermeasures from qualitative and quantitative approaches.
Findings
By studying the survey data of nine sample counties (cities), it is found that county‐level finance is facing the following problems: low‐level fiscal revenue, high debt risk and large gap of fiscal revenue between different counties (cities). Based on these findings, the paper provides suggestions such as ensuring that the county‐level government has sufficient fiscal resources and improving the transfer payment system.
Originality/value
Data from three well‐developed counties (county‐level cities), three middle‐income counties (county‐level cities) and three backward counties made the paper's findings more comprehensive and realistic and suggestions more practical.
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John M. Trussel and Patricia A. Patrick
This paper uses survival analysis to investigate fiscal distress in special district governments. We hypothesize that fiscal distress is positively correlated with revenue…
Abstract
This paper uses survival analysis to investigate fiscal distress in special district governments. We hypothesize that fiscal distress is positively correlated with revenue concentration and debt usage, and negatively correlated with organizational slack and entity resources. Our model addresses differences in district functions, financing and legislation. Our regression model predicts the likelihood of fiscal distress and correctly classifies 93.4 percent of the districts as fiscally distressed or not. The results show that the most important indicator of fiscal distress is a low level of capital expenditures relative to total revenues and bond proceeds. The information needed to predict fiscal distress is publicly available, making our model useful in the prevention, detection, and mitigation of fiscal distress in U.S. districts.
Craig S. Maher and Steven C. Deller
The intent of this research is determine the extent to which selfreported measures of fiscal condition are consistent with commonly identified measures of fiscal condition using…
Abstract
The intent of this research is determine the extent to which selfreported measures of fiscal condition are consistent with commonly identified measures of fiscal condition using secondary financial data. While the field of government finance has amassed a lengthy list of research on fiscal condition and fiscal stress assessment, there remains a gap in the research on the extent to which practitioners' perceptions of fiscal stress are consistent with such measures. Our results suggest that there is limited evidence of a relationship between self-reported and objective measures of fiscal condition
The recent recession provides us a good window to reveal fiscal problems and inadequate preparations of state and local governments. To address the fiscal crisis, and more…
Abstract
The recent recession provides us a good window to reveal fiscal problems and inadequate preparations of state and local governments. To address the fiscal crisis, and more importantly, to prepare for the potential economic downturns, this paper designs a framework of necessary tools to combat fiscal crisis. With matching policies of revenue diversification and counter-cyclical fiscal policy (CCFP), debt financing can be used as an effective tool to help state and local governments pull through fiscal crises. A brief example of local governments in Georgia proves the possibility and effectiveness of the counter-cyclical debt policy. It will be much better to institutionalize these policies to avoid the moral hazards of governments and politicians, which, in a great sense, requires engaging and educating the public and, finally, obtaining support from them.
Precious Muhammed Emmanuel, Ogochukwu Theresa Ugwunna, Chibuzor C. Azodo and Oluseyi D. Adewumi
The purpose of this study is to empirically analyse the fiscal revenue implications for oil-dependent African countries in the face of low-carbon energy transition (LET).
Abstract
Purpose
The purpose of this study is to empirically analyse the fiscal revenue implications for oil-dependent African countries in the face of low-carbon energy transition (LET).
Design/methodology/approach
The study combined the novel fully modified ordinary least squares, dynamic ordinary least squares and canonical cointegrating regressions estimators to analyse secondary data between 1990 and 2020 for the three major oil-dependent African Countries (Algeria, Angola and Nigeria).
Findings
The result shows that LET reduces oil revenue and non-revenue for specific countries (Algeria, Angola and Nigeria) and the panel, suggesting that low-carbon energy transiting is lowering the fiscal revenue of oil-dependent African nations.
Research limitations/implications
The seeming weakness of this study is its inability to broaden the scope to include all oil-producing African economies. However, since the study selected Africa’s top three oil-producing states, the sample can serve as a model for others with lesser crude oil outputs.
Practical implications
Oil-dependent African countries must urgently engage in sincere economic diversification in sectors like industry and manufacturing, the service sector and human capital development to promote economic transformation that will enhance fiscal revenue.
Originality/value
With the pace of energy transition towards low-carbon energy, it is not business as usual for oil-rich African countries (Algeria, Angola and Nigeria) due to fluctuating demand and price. As a result, it becomes worthy to examine how the transition is affecting oil-dependent economies in Africa. Also, this study’s method is unique as it has not been used in a similar study for Africa.
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