Justin Marlowe

Much Ado about Nothing? The Size and Credit Quality Implications of Municipal Other Postemployment Benefit Liabilities

This paper presents estimates of the size and scope of other postemployment benefit (OPEB) liabilities among municipal governments. The findings indicate these liabilities vary substantially, ranging from less than a dollar per capita to more than

Citizen Engagement in Local Budgeting: Does Diversity Pay Dividends?

2,000 per capita. Those liabilities were then incorporated into separate models of credit ratings and borrowing costs. Results suggest OPEB liabilities do not directly affect credit quality, but the interaction between an issuers fiscal capacity to address its liability does have a notable effect.

Assessing Survey-Based Measurement of Personnel Red Tape With Anchoring Vignettes

The literature on citizen engagement in budgeting suggests local governments can improve how they collect, interpret, and incorporate citizen input about resource allocation issues. However, at the moment, it is unclear whether that input, particularly from a more diverse citizenry, is more or less useful to managers. We address this question by examining how a variety of demographic and institutional factors affect manager perceptions of citizen engagement among a sample of 221 local governments in Michigan and Minnesota. The results suggest that the input managers perceive as useful tends to focus on community concerns rather than parochial concerns. We also find that community diversity associates with a clear trade-off, as managers in more diverse communities are more likely to perceive citizen input as focused on community-wide rather than parochial interests but less likely to view that input as useful in making budget decisions.

IS THERE A 'GAAP GAP'? A POLITICO-ECONOMIC MODEL OF MUNICIPAL ACCOUNTING POLICY

Despite an upsurge of red tape research, a central issue remains unresolved. The most widely used red tape measures draw on key informant reports about red tape. The starkest objection to such measures is that key informant reports are mere perceptions—perceptions that are subject to distortion. We assess the validity of key informant perception-based measures of personnel red tape by using “anchoring vignettes.” Findings suggest that anchoring vignettes can be used to improve the accuracy of survey measures of red tape. Implications of findings for red tape scholarship and survey measurement in public management are discussed.

Recent Iterations in the Public Financial Management Curriculum: Is What Practitioners Need Being Taught?

Positive accounting theory suggests jurisdictions will meet their stakeholders’ financial information needs at the lowest possible cost, and current accounting policy will change if it does not accomplish that objective. This paper examines the breadth of stakeholders who are associated with accounting policy. We use multivariate methods to determine which among a group of potential users including taxpayers, interest groups, local government managers, the municipal credit market, and other governmental entities are correlated with accounting policy among municipal governments in Illinois. The results suggest one particular stakeholder - the municipal credit market - is an important determinant of the use of Generally Accepted Accounting Principles (GAAP). The analysis shows that professionalism, history, and administrative capacity are also associated with a municipality’s accounting policy.

Internal Control Deficiencies and Municipal Borrowing Costs

Abstract Most public organizations operate in an environment of constant fiscal stress. These and other changes have permanently altered public resource allocation and control processes, but we know little about whether the public financial management curriculum has changed in response. This study is an update on what is being taught in schools of public service regarding public budgeting and finance.

Fiscal Implications of City-City Consolidations

“Internal controls” refer to organizational rules and procedures used to safeguard assets and to detect fraud, waste, and abuse. This study examines the relationship between internal control deficiencies and municipal bond borrowing costs. The most severe form of internal control deficiencies (i.e., material weaknesses) is associated with higher borrowing costs for municipal bonds, between 10 and 18 basis points. Credit ratings mediate some of the effect of material weaknesses in internal controls but the indirect effect is relatively small. The effect of internal control deficiencies on borrowing costs was consistent in the time period before and after the financial crisis.

Municipal Bond Liquidity Before and After the Financial Crisis

There is a rich literature on the fiscal implications of municipal consolidations. Almost all of it is focused on city–county consolidations. City–city consolidations, although rare, are an even better setting to test the claim that municipal consolidation reduces local government taxing and spending. We examine this claim with data from six city–city consolidations since 1985. We find that, in fact, most city–city consolidations result in higher taxing and higher spending on core operations and salaries. Consolidation produced lower overall spending in three of the six jurisdictions, but mostly because it was accompanied by lower intergovernmental revenues and changes in debt management. All this suggests the economic theory of consolidation would be more salient if it considered a broader array of benefits and costs that are not directly reflected in tax and spending rates.

IMPLEMENTING HIGHWAY PREVENTIVE MAINTENANCE: COMPARING CHALLENGES, PROCESSES, AND SOLUTIONS IN THREE STATES

I examine how liquidity risk affects municipal bond pricing. Liquidity has become a central concern to municipal bond investors, issuers, and regulators since the recent collapse of the monoline municipal bond insurers. The results show that liquidity risk had a minimal effect on yield spreads in the period prior to the insurance collapse, but since that collapse 10-20% of a typical municipal yield spread is due to liquidity risk. These findings have implications for our understanding of the determinants of municipal yield spreads, and for contemporary public policy debates about how to improve the efficiency of the public capital markets.

Socially Responsible Investing and Public Pension Fund Performance

One of the central challenges facing todays state transportation policymakers is how to incorporate preventive maintenance concepts and strategies into existing asset-management systems. Seven unique challenges to implementing preventive maintenance are identified in the literature and elsewhere, and a discussion covers the ways states have addressed those challenges through various implementation strategies. Then, case studies provide examples of how that incorporation has occurred in the departments of transportation in Michigan, Kansas, and Nebraska. The three case studies are presented in an effort to demonstrate the advantages and disadvantages of these three unique approaches, herein labeled the top-down approach, for Michigan; the bottom-up approach, for Kansas; and the inclusive approach, for Nebraska. In particular, an examination is presented of how preventive maintenance concepts were integrated into the planning, budgeting, and technical needs-assessment for state highways.