Essays of Local Governments: Finances and Crime

I study local governments under fiscal stress and local elections of partisan politicians. In the first chapter, I explore municipal pensions. Most U.S. cities have defined-benefit pensions for their public workers, creating an obligation that exposes sponsoring cities to shortfall risk. Large funding gaps in recent years have required increased pension payments and generated fiscal stress for cities. To analyze the effect of “pension pressure”, I assembled a novel dataset which captures the universe of cities and their pensions in California from 2003 to 2016. I focus on the changes in city unfunded liability contributions, which are plausibly exogenous to cities’ year-to-year spending needs. Using a first-differenced empirical specification, I find that cities primarily target reductions in non-current expenses, specifically capital investment. I also show that cities cut payrolls and employment. Police employment declines have accompanying increases and decreases in crime and arrest rates, respectively. These estimates imply that pension pressure impairs local public service provision.

The second chapter, coauthored with Brett Fischer, considers elected district attorneys (DAs), who have wide discretion in criminal prosecution; yet, the extent to which DAs' politics shape their decision-making remains unclear. We evaluate the causal impact of DA partisan affiliation on prosecution rates, sentencing outcomes, and recidivism. Using quasi-random variation in DA partisanship stemming from close elections, we find that the marginal Democratic DA is 25 percent more likely to dismiss criminal cases than Republican counterparts, and 16 percent less likely to incarcerate defendants. Strikingly, defendants in jurisdictions with Democratic DAs are no more likely to reappear in a future criminal case, which is consistent with the notion that criminal prosecutions have limited deterrence or scarring effects. We find similar patterns using an alternative matching specification, suggesting our results capture the average effect of prosecutor partisanship. Our findings underscore the extent to which the punitiveness of the court system depends on the partisanship of local district attorneys.

In the third chapter, I examine the role of state oversight and interventions into local finances. I look at two cases, California and Ohio, which have different systems and contexts that allow for different empirical methodologies. Although some previous research suggests that there are economically large and statistically significant impacts on budgetary outcomes for local governments, my own analysis indicates that there is not enough evidence to reach definitive conclusions.