Municipal Governance and Financial Health: An Analysis of the Institutional Structures of California Cities
This dissertation analyzes the relationship between institutional structures of California municipalities and their financial health by examining how variations in framework, form of government, and operational model affect a city’s finances. This study seeks to answer why some cities are more fiscally healthy than others, particularly when facing similar economic challenges. In recent years, much attention has been focused on the financial distress and stability of California cities, especially after bankruptcy filings by cities such as San Bernardino, Stockton, and Vallejo. In response, the State of California established the California High-Risk Local Government Audit Program to allow the California State Auditor to monitor the financial health and stability of cities, with the goal of identifying and addressing fiscal challenges in cities facing insolvency. Annually, the California State Auditor’s Office provides a ranking of all California municipalities based upon an analysis of ten key financial indicators. The rankings are an essential tool for cities to be proactive in managing their local government finances and to promote transparency for local stakeholders in holding their public officials accountable to responsibly managing their public funds. The study’s hypothesis posits that charter cities, council-manager form of government, and cities that contract for public safety services will demonstrate stronger fiscal health compared to their general law, mayor-council, and full-service counterparts. To test these hypotheses, an ordinary least squares regression analysis is conducted to evaluate the relationship between the various institutional structures and a city’s financial performance, based upon data from the California State Auditor’s Office. The findings reveal that the operational structure of a city, especially those cities that contract out public safety services, is a significant determinant of a city’s fiscal health. Cities that contract out police and/or fire services do better financially than full-service cities, which often struggle with escalating costs for employee salaries, pension liabilities, and other post-employment benefits. Conversely, a city’s framework (charter or general law city) shows less significant impact on a city’s fiscal health, and its form of government (mayor-council or council-manager) proved not to be a statistically significant factor in this study. Suggesting that while framework and form of government as institutional structures matter, their impact on a city’s fiscal health is not as pronounced as their operational choices. A central aspect of this dissertation is the examination of four case studies-Fontana, San Bernardino, Antioch, and Vallejo-which illustrate how institutional structures influence fiscal performance and resiliency in real-world contexts. The addition of these case studies provides an essential understanding of the complex relationship between institutional structures and financial management of cities with diverse economic, demographic, and historical characteristics. The results in this study provide valuable insights for policymakers seeking to improve the fiscal health and stability of their community. While institutional structures do influence financial outcomes, a city’s operational model, particularly those cities that contract public safety services, emerges as the key factor of long-term fiscal stability.
city framework, form of government, instiutional structures, municipal finance, Political Science, Public Policy
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