The Political Consequences of Local Financial Emergencies

• In Event: Does Financial Sharing Result in Mutual Caring? Fiscal Policy in City-Regions

Abstract

American local governments are for the most part financially healthy. The vast majority are able to provide services to residents with the resources available to them via taxation and grants. But, sometimes, local governments experience financial emergencies. The consequences of these emergencies for residents usually come in the form of service cuts or increased revenue extraction. Conventional wisdom suggests that local voters would dislike either response and would be inclined to vote against their elected officials as a result. But this conventional wisdom has not been tested. In this research, we examine the political consequences of local financial emergencies.

Our approach leverages differences in types of financial distress. Some emergencies are quite easy to identify: they are associated with state interventions or attempts to petition federal courts for bankruptcy protection. But others are subtler. Governments can have troubled finances without external intervention. We leverage this variation to examine whether and how local voters respond to the easily-visible financial emergencies as compared to the subtler ones. Specifically, we compare political outcomes of the California cities that filed for municipal bankruptcy in 2008 – 2014 to cities experiencing similar levels of fiscal distress. We examine incumbent vote share, retirement rate, and turnout using data from the California Elections Data Archive and an original dataset on California municipal financial health. We also conduct a pre-registered experiment to complement the observational portion of the paper.

Authors

• Carolyn Abott, Baruch College - CUNY

• Matthew Incantalupo, Yeshiva University

• Akheil Singla, Arizona State University