Local revenue structure under economic hardship: reliance on alternative revenue sources in California counties

Sanghee Park uses data gathered from California counties over an 11-year period to investigate how local economic conditions affect a jurisdiction’s reliance on fines and fees. Park argues that local governments attempt to generate revenue through fines and fees more often when their budgets suffer due to a lack of property, sales, and income tax revenue. The article discusses intergovernmental transfers, fiscal conditions, and political and ideological preference as factors that can have an impact on local revenue structures. 

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Key findings
  • “Local governments under pressure may be more inclined to fulfill their responsibilities by seeking alternative revenue sources as a compensation for tax losses due to a decrease in income tax (from higher unemployment rates) and property tax (from depreciating housing prices).”
  • “Counties are likely to raise more revenue from nontax sources when their revenue is more dependent on intergovernmental transfers.”
  • “If a county has less than 30 percent of transfers to total revenue, county officials are less likely to develop alternative revenue sources to meet their budget needs.”
  • “Counties with a higher property tax ratio in their revenue structure, i.e., with less diversified revenue structure, are less likely to raise revenue from nontax sources.”
  • “Counties with slack resources are more likely to increase revenues from fines/forfeitures, while the same variable was not significant in the fees/charges models.”
Sanghee Park
Boise State University 
Local Government Studies