Understanding the Consequences of Municipal Discretion

Abstract

In this study of municipalities over 25,000 in population in 49 U.S. states, the author tests whether municipal discretion makes a difference in terms of municipal fiscal performance. The author finds that municipalities located in states that grant more municipal discretion levy less property tax per capita, receive less state aid per capita, and levy less total taxes per capita. However, there is not a statistical correlation between the scope of municipal discretion and total outstanding debt, expenditures per capita, and employees per 1,000 in population. The results demonstrate that public officials in empowered municipalities do not abuse their authority by imposing unwarranted property, sales, income, and business taxes, and calls into question the notion that municipal officials in empowered states are more likely to become spendthrifts than are municipal officials in less empowered states. The author posits that officials in empowered municipalities may experience the perfect storm unless they use their expanded powers to improve the financial health of the municipality; enhance the efficiency, effectiveness, and equity of municipal public services/programs; and partner with their cohorts across geo-political boundaries to ensure the well-being of all citizens.