International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss


The Financial Indicators Associated with Reductions of Public Services by Pennsylvania Municipalities
Patricia A. Patrick, John M. Trussel

This paper investigates the financial indicators associated with reductions of public services in Pennsylvania municipalities. We use logistic regression analysis to investigate whether or not certain symptoms of fiscal distress lead to reductions in public services. We hypothesize that fiscal distress is positively correlated with revenue risk and debt usage, and negatively correlated with organizational slack and entity resources. We develop and test a parsimonious model to predict the likelihood of significant reductions in public services by Pennsylvania municipalities. We find that 31.7 percent of the municipalities have reduced public services during the period 1998-2008, with second-class townships having the highest incidence of reductions during this period. The results also show that the most important predictor of a reduction in public services is a high level of capital expenditures relative to total revenues and bond proceeds in the year preceding the reduction.

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