The Financial Condition of American’s Large Cities

This dissertation contributes to a better theoretical understanding of the complexities of financial condition process. Also, this dissertation uses data from government-wide financial statements to measure municipal financial condition, which can better evaluate the overall fiscal health of the governments as well as compare, analyze, and explain the financial condition in a more accurate and comprehensive manner. The results from the panel two-ways fixed-effects regression show that cities with more stringent state-imposed Tax and Expenditure Limitations (TELs) tend to have smaller government-wide cash reserves in the short-term but are more likely to excessively rely on debt, therefore facing difficulty in the payment of long-term liabilities. Second, an increased degree of state-local revenue decentralization is significantly associated with lower budget solvency and higher long-term solvency among cities; while an increased degree of state-local expenditure decentralization leads to higher levels of city cash solvency and lower levels of city long-term solvency. Finally, municipalities with more intergovernmental aid are likely to increase cash holdings but may experience unbalanced budgets and more financing responsibilities in the future.