This book is about how municipal officials in the suburbs of a large metropolitan region improve, maintain, or fail to maintain the financial health of their governments. Elected and appointed officials at the local level pursue many objectives in their respective roles, but ultimately their governments need to maintain a reasonable level of financial health to achieve many of their goals. Some officials are even elected on platforms to improve government financial health to make the government more sustainable financially. Many more are elected to reduce or limit spending and taxes. Others see political advantages in expanding government’s scope and...

To understand how municipal officials in large metropolitan regions improve, maintain, or fail to maintain the financial health of their governments, one must first understand what it means for a municipal government to be financially healthy. Generally speaking, a financially healthy government is one that can meet its financial and service obligations. This description is not very satisfying, however, as it leaves many unanswered questions. What constitutes an obligation? Some obligations are formalized or explicit such as those established by contract, agreement, or statute; others are implied and therefore ambiguous. Do governments have greater obligations to residents than nonresidents? What...

The previous chapter talked about what it means for local governments to be financially healthy and identified environmental and structural features that establish the boundaries of fiscal capacity and spending obligations (current and future). The key attributes of financial condition according to chapter 2 are revenue wealth, or the capacity of the environment to generate revenues; the level of spending needs within the jurisdiction; state-imposed rules that limit access to revenues and establish local spending responsibilities; and the government’s fiscal structure. This chapter presents a framework for describing and explaining financial decisions about policies and practices that affect financial condition....

This chapter presents two additional frameworks for understanding the financial decisions that municipal governments make to adapt their fiscal structure to their fiscal and political environments. It also describes how the governments in the Chicago metropolitan region fit into these frameworks. Both frameworks are about governing structure and institutions and are intended to supplement the problem-solving/strategic management framework presented in chapter 3. The first framework examines governing structure and institutions at the micro level, and the second focuses on governing structure and institutionalized rules about local finance and financial management at the macro level.

The micro level in this case...

This chapter focuses on identifying the events that promote fiscal stress and munificence in municipal governments in the Chicago metropolitan region. Using the strategic management metaphor, it describes the exogenous threats and opportunities municipalities faced from the mid-1990s to the mid-2000s in detail, and in the current recession more generally. In response to the first research question identified in the introduction, this chapter documents how threats and opportunities promote fiscal stress and munificence, focusing on changes to financial condition in the short term or near term. This chapter also examines how threats and opportunities vary with government external fiscal capacity...

This chapter focuses on answering the second question in the introduction: What tools do municipal governments in the Chicago metropolitan region use to respond to threats and opportunities and maintain or improve financial condition in the near term? This chapter also examines some of the contextual factors from figure 4.1 that can affect the availability of policies and practices to these governments and their responses to threats and opportunities in the short run, which is the focus of question three from the introduction. More generally, this chapter examines how contextual factors affect the contents of governments’ fiscal toolboxes and their...

This chapter focuses on answering two questions. First, what do municipal governments do to maintain or improve financial condition and solve their financial problems in the long run? In other words, what are the broader strategies they use to achieve their financial goals rather than the tactics they use to manage fiscal stress in the near term? Such decisions can encompass a wide range of fiscal policies, such as not issuing debt and relying heavily on sales taxes. They can also include what many people consider to be financial management practices, such as whether governments implement a comprehensive budget or...

The introduction identifies the following four broad questions about fiscal stress and financial condition in Chicago suburban municipal governments: (1) What are the sources of fiscal threats and opportunities in these governments? (2) What tools (policies and practices) do they use to manage fiscal stress and maintain financial condition? (3) What effect do contextual factors such as fiscal capacity and governance have on the tools available to them and the tools they use to manage fiscal threats and opportunities and maintain financial condition? (4) What effect do particular tools have on their ability to manage fiscal threats and opportunities and...