Local Finance Bulletin #56

This bulletin continues from where “Theory and Practice for Coping with Economic Downturns at the Local Level: Part I” left off by further exploring the impact of budget balancing strategies on capital investments. This bulletin examines both the literature on cutback management and the results of a survey administered to county commissioners during the Great Recession. Specifically, it focuses on the use of capital spending reductions in county government to cope with fiscal stress and the potential long-term impact of such reductions, as there is a limited amount of research on this form of local government. In light of the literature and survey results, it is recommended that local governments consider avoiding cuts to their capital budgets due to the long-term costs of delayed maintenance and the opportunity costs incurred by stifling economic development. Policy choices, including public–private partnerships, available to many local governments for reducing capital budget cuts and maintaining capital investments are also presented.