State and local finance

"Property Tax Assessment Appeal Patterns During Housing Booms and Busts."

Property tax appeals have emerged as one of the contributors to inequities in property taxation. However, recommendations on how to keep appeals at bay are still lacking. I aim to better understand the nature of appeals by investigating the relationship between appeal rates and house price fluctuations. I assembled a new panel dataset of appeal rates for many US counties. I find that appeal rates increase when prices fall and decrease when prices rise. I also show that the most likely mechanism for this result is that assessments do not keep pace with the market. In addition, appeal rates are less responsive to changes in house prices in states with assessment limits, where taxpayers may find comparing their assessment with the market price more confusing, as well as annual reassessment. Hence, improving property assessment accuracy should lessen the need for appeals.

State and local other postemployment benefit (OPEB) liabilities are particularly high in New York, making it a near worst-case scenario for assessing the fiscal sustainability of funding OPEB on a pay-as-you-go basis. We examine spending on retiree health care as a percentage of revenues for a sample of New York State school districts. The fiscal burden of these benefits grew from 3.4 to 4.3 percent between 2010 and 2021. Assuming Congressional Budget Office forecasts regarding growth in health care costs and continuation of recent trends in revenue growth, we project that the burden of retiree health care benefits will exceed 10 percent of revenue by 2050. Projected burdens are greatest in big city and high need rural districts raising educational equity concerns. We examine pre-funding as one possible policy response and conclude that full pre-funding is unlikely to provide a feasible solution.

Online Shopping Can Redistribute Local Tax Revenue from Urban to Rural America” (with David Agrawal). Journal of Public Economics, 2023, 219, 104818.

What is the effect of e-commerce on the geographic distribution of local sales tax revenues? Using COVID-19 as a shock to online shopping and hand-collected high-frequency data on local sales tax revenue, we document an important shift in the state and local public finance landscape. As e-commerce increases, a destination basis for remote sales taxes results in higher growth in local sales tax collections in smaller, generally more rural jurisdictions. This increase comes at the expense of larger urban retail centers, which previously enjoyed an origin basis for sales tax collections. As households replace in-person commerce with online shopping, sales taxes no longer accrue to urban centers with large concentrations of retail establishments and instead expand the tax base of smaller jurisdictions. State-level reforms that enforce sales compliance generally mitigate the revenue falls in larger jurisdictions and amplify the increases in smaller jurisdictions.

“Fiscal Impacts of the Opioid Crisis on State and Local Governments: How Big?” (with Robert Bifulco). The Annals of the American Academy of Political and Social Science, forthcoming.

Adverse effects of the opioid crisis on individuals influence the need for state and local government expenditures and erode their tax bases. Systematic estimates of the magnitude of such fiscal impacts are lacking. We estimate the magnitude of the effect of the opioid crisis on state and local expenditures and discuss approaches that might be taken to evaluate the impact of the crisis on revenues. We find that the fiscal impacts of the opioid crisis on state and local governments are modest for the U.S. as a whole but are likely to be greater in states with particularly high rates of opioid-use disorders. Our analysis aims to encourage and guide more in-depth studies in the future. Such studies can inform intergovernmental aid policies designed to offset the fiscal impacts of opioid misuse and can also contribute to assessing damages in opioid lawsuits.

Place-Based Small Business Support and Its Implications for Neighborhood Revitalization.Economic Development Quarterly, 2022, 36(4), 355-370.

Policy makers utilize various place-based interventions to reduce spatial inequality. In particular, there has been increasing attention to supporting small businesses in distressed places, but the lack of evidence makes it difficult to justify these public investments. The author investigates the Neighborhood Opportunity Fund (NOF), which has been providing grants for physical improvements to businesses in a low-income part of Chicago since 2017. Event studies are used to quantify the program's impacts on new business licenses, jobs, building permits, the commercial real estate market, and crime. The NOF increased construction and remodeling activity and decreased narcotics crimes around establishments receiving grants. Under some circumstances, it led to new business formation and increased demand for real estate. However, no evidence was found of a relationship between the NOF and jobs or total crimes in the larger area. This study is the first step to understanding how place-based small-business support programs affect neighborhoods.

"The Role of Organized Groups in Administrative Burdens of Property Taxation." Journal of Behavioral Public Administration, 2021, 4(1).

There is a substantial body of literature regarding the effects of administrative burdens on the take-up of safety-net programs and the role of organized groups in this process. I investigate similar issues in the context of property tax assessment appeals. Disadvantaged groups spend well over the recommended 30% of their income on housing costs that include property tax, and, on top of that, assessors often overestimate lower-value properties. Appeals may provide some relief, but the process can be burdensome. Certain localities give condominium associations the right to file one joint appeal on behalf of all unit owners. I hypothesize that this rule reduces burdens for condominium units and causes them to appeal more frequently than houses, resulting in a distributive effect that depends on the local context. I present supporting evidence from two case studies in two locations: New York City, which allows joint appeals, and Allegheny County, Pennsylvania (Pittsburgh and surroundings), which does not. Thus, while administrative burdens can span diverse contexts, engaging a third party to assist potential beneficiaries consistently increases the take-up.

Public participation in government

“Exploring the Benefits and Challenges of Implementing a School Participatory Budgeting Process” (with Tina Nabatchi).

Participatory budgeting (PB) engages the community in deciding how to spend a portion of public money. While declining in general-purpose governments, PB is on the rise in public school districts and schools. Yet, no study has systematically evaluated the potential and pitfalls of PB in this new setting. We conduct a detailed inquiry into one PB process in a New York school district rooted in quantitative and qualitative data. Based on this case, we formulate and start tackling some implementation issues and research questions about school PB that need to be addressed before it can be widely advocated.

"The Effects of the BLM Protests on Public Demand for Police Spending" (with Ikhwan Kweon).

While public support for government spending may not directly drive budgetary decision-making, it limits acceptable choices. Hence, it is valuable to understand how the public forms opinions. Using a difference-in-differences design, we study how demand for police spending changed in response to the BLM protests in Chicago, on average and by physical proximity to the location of extreme protests. We find a 66.2 percent decrease in demand for police spending before and after the protests. Contrary to what some might have expected, we do not find any evidence that residents living near the location of extreme protests whose personal safety might have been compromised responded any differently than the control group. Hence, at least in our sample, individuals believe that police spending is low value-added, and that stance is more important to them than safety concerns. Findings from this study may have implications for other types of public spending, such as homelessness services and substance abuse services.

"The Impact of Pork‐Barrel Capital Funding in Schools: Evidence from Participatory Budgeting in NYC" (with Michah Rothbart and David Schwegman). Public Budgeting & Finance, 2022, 42(2), 148-170.

Pork-barrel spending is a form of public spending controlled by individual legislators and primarily serving a local interest. In this paper, we investigate the impact of a type of pork, council member capital discretionary education spending voted upon in a participatory budgeting (PB) process, on school budgets and performance in New York City. Exploiting plausibly exogenous variation in discretionary spending induced by the PB elections, we find winning a PB election increases school pork appropriations. However, we find no evidence these transfers from council members improve fiscal and performance outcomes. Further, pork may interfere with school budgeting.

Normative research on public participation in government related to desirable amounts and modes of participation has been flourishing. However, positive research explaining variations in real-world participation processes, while gaining momentum, is still thin and fragmented. This article aims to further the positive perspective by examining differences in participatory budgeting (PB) and the reasons for these differences in six New York City council districts based on fieldwork and secondary sources. The evidence suggests that district offices were invested in PB to gain strategic advantages, such as answering calls for political renewal, recovering from a mismanagement scandal, and signaling progressive values. Similarly, civil society organizations steered their resources toward PB only if they were interested in agenda items and in doing work with as opposed to against public officials. In the end, this study discusses implications for positive research and possible external interventions to achieve more even participation standards.

"Does Participatory Budgeting Change the Share of Public Funding to Low Income Neighborhoods?" (with Robert Bifulco). Public Budgeting & Finance, 2019, 39(1), 45-66.

Using a newly compiled dataset, we measure the effects of participatory budgeting on the allocation of capital funding among areas of different income levels within New York City council districts. A difference-in-differences design compares changes in the allocation of funding in adopting districts before and after the adoption of participatory budgeting to changes over the same period among a control group consisting of later adopters. On average, adopting districts increase funding in the next to the lowest income census tracts more than the control group, but participatory budgeting does not redirect funds to the lowest income census tracts.