An Evaluation of the Connection between Economic Volatility and Governmental Savings Levels for Illinois,North Carolina,and Mississippi Counties

Abstract

Local governments are continually facing challenges that can drastically influence savings levels and service provisions. From deteriorating fiscal environments to escalating internal costs, maintaining adequate undesignated revenue streams becomes increasingly difficult. The authors evaluate the connection between economic volatility and governmental savings levels. They find that volatility influences counties’ level of saving, but there are differences in how volatility in specific revenue sources affects the size of savings. The findings indicate that counties in Illinois, North Carolina, and Mississippi are able to save in accordance with evolving fiscal conditions. Volatility among various revenue streams, unemployment, and even ideology of the electorate all have significant influence on county fund balance levels. The authors conclude that savings increase with volatility and counties use their savings to fill budget gaps in times of fiscal stress.