Mayoral partisanship and municipal fiscal health

Abstract

Whether cities can provide critical public services and infrastructure depends on their fiscal health or the ability to pay for different service responsibilities and meet other financial obligations. In this study, we explore a long-simmering controversy in the study of local politics and public finance: does mayoral partisanship matter for city fiscal health? To answer this question, we use audited financial data from 2004 to 2016 for U.S. municipalities with a population of 50,000 or more to measure a critical dimension of fiscal health, which is budgetary solvency. Employing difference-in-differences regression with staggered treatment adoption, our findings reveal that cities switching from a Democratic to a Republican mayor experience improvements in budgetary solvency. However, the effect does not last and dissipates as the next election approaches, indicating the existence of a political fiscal health cycle. The effects of partisanship are more evident when elections are not competitive. We also find that Republican mayors in mayor-council cities exhibit better budget outcomes than Republican mayors in council-manager cities.