GUEST COLUMN.

Government performance and spending is in the spotlight. As federal money dries up and tax cuts go into place, there is a renewed effort to understand what governments at all levels are providing and how efficiently tax dollars are spent to deliver public goods and services.

At the local level, governments must exhibit strong financial management skills to keep the balanced budget it passed in the beginning of the year in balance when the year ends. When revenues do not meet forecasts, the price of goods or service delivery increases, or there is an unexpected crisis, governments are forced to shift their resources to keep the government out of a budgetary deficit.

There are several cutback strategies available to local governments looking for fast solutions. For one, governments can reduce or delay capital and infrastructure expenditures. Governments can also reduce the personnel expenditures through hiring freezes, furloughs, reductions in professional development or equipment funds, and more. Additionally, governments can look to cut materials and contractor costs.

Another strategy, which can help governments get through tough fiscal times without making cuts, is to find additional revenue sources, including raising taxes or fees.

Each of these strategies has pros and cons and can be used simultaneously to alleviate a budgetary shortfall.

It is not surprising that unanticipated cutbacks are generally met with public disapproval. Citizens depend on government goods and services. When budget cuts are made and resources are shifted, that can potentially affect their timely access to services and the quality of the services themselves, which may then lead to negative effects on how citizens perceive, view, and engage with government.

Therefore, during these difficult financial periods, it becomes critical for public officials and budget officers to communicate with residents about the challenges and possible solutions to achieve a balanced budget. The importance of citizen communication extends beyond the immediate financial concerns. A growing literature in public administration on citizen evaluation of government shows how in every interaction with government, citizens are determining if their government is effective, efficient, high achieving and trustworthy.

One poor interaction with a government agency or the people who represent it can potentially turn a person away from seeking government assistance or actively engaging and participating in government in the future.  Thus, when governments are contemplating cutback strategies, they must not only use their financial expertise but think of how those decisions shape citizen views and desire to engage with the public sector.

Our research bridges the studies of cutback management with citizen evaluation of government by exploring how citizens evaluate a local government on trust, fairness, performance, and satisfaction based on their cutback management strategies. We used a vignette experiment approach, where respondents were presented with a scenario about a hypothetical local government. Our set of scenarios alternated among four cutback strategies and four blame attributions for the deficit. For example, one respondent might see a local government has a deficit caused by financial mismanagement and addressed the shortcoming by personnel cuts. Another respondent may see that the deficit was caused by hurricane recovery and that the local government cut infrastructure spending. We conducted the survey with more than 1,600 respondents from the U.S. that were recruited via a survey platform, Prolific.

We found that among the four cutback strategies, residents are most favorably disposed to governments that cut materials and contractors, followed by reductions in capital and infrastructure expenditures. Respondents gave the lowest evaluation to local governments that balanced the budget through cuts to personnel or raising the tax rate. These findings suggest that governments that are set to engage in either of these strategies will need to expend more effort on communication to justify them.

We also learned that the perception of who is at fault for the shortfalls can also shape respondents’ evaluations of government. Generally, if a budgetary shortfall is blamed on the actions of the local government itself, evaluations are at their lowest. Citizens understandably have little tolerance for local government financial mismanagement.

If the shortfall is the result of an outside entity or external event, in this study, fewer monetary transfers from the state government or natural disasters, like hurricanes tornados or droughts, citizens are more understanding and supportive of local governments.

The findings of our research can help governments grasp how the public perceives and evaluates cutback strategies in different blame scenarios. In sum, our studies suggest that overall financial performance is not the only factor that impacts citizen perceptions, but a government’s financial management decisions also influence how citizens feel about government. This can further influence the public’s future interactions with government. Moreover, the blame attribution for poor financial performance can further impact citizen perceptions.

The key is transparency. When clear communications about the nature of the financial situation are shared with residents along with explanations for the budget shortfalls, there’s reason to believe that trust in the government and overall satisfaction with its performance will be enhanced.

The contents of this Guest Column are those of the authors, and not necessarily Barrett and Greene, Inc.

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