Honadle research is helpful to states

If there’s one thing the 50 states have in common when it comes to dealing with local government fiscal crises, it’s that they don’t have much in common.

Some states, believing in local control or lacking the human or financial resources to get involved, take a hands-off approach, according to Beth Walter Honadle, political science and director of the Center for Policy Analysis and Public Service. Other states, including Ohio, have clear criteria for what constitutes a fiscal crisis—inability to pay employees or vendors, or to make debt payments, for instance—and an elaborate system for intervention when one occurs.

Still others trod a middle ground.

Regardless of the role they play, however, states can learn from one another’s experiences—a process that has been simplified through research conducted last year by Honadle.

Her April-August telephone survey of members of the National Association of State Auditors, Comptrollers and Treasurers earned her an invitation to speak at the New England Intergovernmental Audit Forum in September. Her findings from the states will next be presented in a forthcoming article in the International Journal of Public Administration, which is devoting a special issue to local government fiscal crises.

Asking the state officials what they do to predict, avert, mitigate and prevent a recurrence of a crisis, Honadle found that states generally aren’t proactive, but they do commonly provide technical assistance and advice to local jurisdictions.

Recent local-government fiscal crises were reported by 36 states, Honadle found. In those states that acknowledge local crises, the reasons can be economic, political or managerial. State mandates, changing demographics and even weather are also among the factors that leave local governments vulnerable to fiscal instability, Honadle said.

While states don’t have the manpower to work directly with all the jurisdictions within their borders, they generally do feel obligated to help local governments—especially the small, rural ones—and make sure the locals follow the rules, she said. So they try to provide technical assistance, training and education, sometimes through statewide or other associations of important players, she added.

They tend to get more heavily involved to protect their bond rating, if necessary, or if “cleaning up” a situation after the fact is perceived to be more costly than preventing it. “The greater the financial stake the state has in it, the more likely they are to get involved,” Honadle noted.

In addition to directives, a state can respond to a crisis with legislative action, whether locality-specific special legislation or reform legislation to remedy a situation or conditions across the board.

Ohio has fiscal “watch” and “emergency” designations that are determined by a number of measures. Nine Ohio cities and villages are currently deemed by the state auditor’s office to be in the “emergency” category, which also entails appointment of a seven-member oversight commission for the locality. The commission must approve a plan prepared by the jurisdiction for getting out of the emergency, and the state provides fiscal supervision all along the way.

Ohio’s system is “one of the very best monitoring programs for local governments” not only in the U.S., but in the world, Honadle said.