Using Fiscal Ratios to Predict Local Fiscal Distress

42 Pages Posted: 26 Apr 2018

See all articles by Evgenia Gorina

Evgenia Gorina

University of Texas at Dallas - School of Economic, Political and Policy Sciences

Marc D. Joffe

Public Sector Credit Solutions

Craig Maher

University of Nebraska at Omaha - School of Public Administration

Multiple version iconThere are 2 versions of this paper

Date Written: April 24, 2018

Abstract

Municipal fiscal distress experienced by cities such as Detroit, Michigan; San Bernardino,California; and Harrisburg, Pennsylvania, has generated an impressive body of work by researchers seeking to understand underlying factors in an effort to prevent future distress. Recent research has been informative and appears to be coalescing around a handful of predictive factors such as reserves and debt; however, the generalizability of the findings is limited because the research has focused on case studies or within-state analyses. This study draws from a large national sample of local governments in the United States over a 10-year period and incorporates robust methodology for rare events analysis. Consistent with previous research on local fiscal distress, we find evidence that unreserved general fund balances, unrestricted net assets, long-term obligations, and local unemployment are statistically associated with municipal defaults and bankruptcies.

Keywords: local government finance, municipal finance, municipal bankruptcy, municipal bond default, rare events, relogit

JEL Classification: H74, C35, R51

Suggested Citation

Gorina, Evgenia and Joffe, Marc D. and Maher, Craig, Using Fiscal Ratios to Predict Local Fiscal Distress (April 24, 2018). Available at SSRN: https://ssrn.com/abstract=3169363 or http://dx.doi.org/10.2139/ssrn.3169363

Evgenia Gorina (Contact Author)

University of Texas at Dallas - School of Economic, Political and Policy Sciences ( email )

P.O. Box 830688, GR 31
Richardson, TX 75083
United States

Marc D. Joffe

Public Sector Credit Solutions ( email )

1655 N. California Blvd.
Suite 223
Walnut Creek, CA 94596
United States
14155780558 (Phone)

HOME PAGE: http://www.publicsectorcredit.org

Craig Maher

University of Nebraska at Omaha - School of Public Administration ( email )

Omaha, NE
United States

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