Fiscal health refers to the ability of governments to pay for different service responsibilities and meet other financial obligations.

One perspective suggests that government fiscal health is largely dependent on developments and trends in the external environment. Undoubtedly, government finances are shaped by both long-term structural economic and social developments, as well as short-term cyclical changes in the economy. Similar to a rudderless ship, it seems that governments can only sink or rise depending on the ebb and flow of the national economic tide.

Others contend that governments enjoy a degree of flexibility to alter their financial management practices and fiscal policies to prepare for and minimize the effects of developments in the larger environment. The features of the local governing body, the distribution of authority between politicians and professional managers, and budget and management decisions all matter for city fiscal condition.

Which side is correct?

Jimenez, Benedict S., Laiyang Ke and Minji Hong (2024) Mayors, competitive elections, and the fiscal health of cities.Public Choice Published online as doi.org/10.1007/s11127-024-01190-0

Ke, Laiyang and Benedict Jimenez (2024) The interesting case of special and extraordinary items: What are they and how do they influence municipal government finances?Public Budgeting and Finance. 44(2): 69-89

Jimenez, Benedict S. (2020) Municipal government form and budget outcomes: Political responsiveness, bureaucratic insulation, and the budgetary solvency of cities. Journal of Public Administration Research and Theory. 30(1): 161–177

Jimenez, Benedict S. (2019) Assessing the efficacy of rational budgeting approaches: Budget diagnosis, financial planning, and the fiscal performance of municipal governments. Public Management Review. 21(3): 400-22.

Jimenez, Benedict S. (2017) When ties bind: Public managers’ networking behavior and municipal fiscal health after the Great Recession. Journal of Public Administration Research and Theory. 27 (3): 450-467

Jimenez, Benedict S. (2013)  Strategic planning and the fiscal performance of city governments during the Great Recession. American Review of Public Administration 43(5): 581-601.