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Simulating Massachusetts Municipalities' Recession Readiness: Early Warning of a Perfect Storm?
Author(s) -
SNOW DOUGLAS,
GIANAKIS GERASIMOS,
FORTESS ERIC
Publication year - 2008
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.1540-5850.2008.00894.x
Subject(s) - recession , property tax , revenue , economics , tax revenue , local government , state (computer science) , warning system , storm , government (linguistics) , finance , monetary economics , business , public economics , macroeconomics , geography , meteorology , computer science , linguistics , philosophy , archaeology , algorithm , aerospace engineering , engineering
We simulate effects of two recessions on Massachusetts municipalities in light of their relative dependence on state aid, capacity to increase property taxes under Proposition 2½ constraints, growth, and nondiscretionary costs. We also explore the efficacy of local government stabilization funds in light of current literature on stabilization funds, slack resources in general, and the state–local fiscal relationship. We found substantial variance in Massachusetts municipalities' recession readiness. Fifty‐five (16 percent) municipalities have insufficient resources to weather a severe recession scenario without significant sacrifice due to reliance on state grants‐in‐aid, low property tax revenue growth, erosion of property tax revenue increments by increases in nondiscretionary expenditures, and inadequate stabilization funds.