Public Finance and Land Use in the Shadow of Fiscal Distress

Abstract

Since the Great Depression of the 1930s, all recessions have been relatively short, causing no changes in the fundamental structures of public finance and state and local government economics—except the Great Recession of 2007. For states and local governments the Great Recession has not ended; in some sense it is ongoing. Real property values continue falling, testing real property taxes as the basic source of local government revenue. The number of persons employed by state and local governments continues to decline. State and federal mandates and pension and other postemployment benefit (OPEB) obligations continue to rise, stretching governments’ ability to maintain annually balanced budgets. These trends have continued unabated for the past four years and show no sign of ending. There is nothing resembling the dot-com boom of the 1990s or the real estate boom of the 2000s in the offing that would reverse these trends.

For the first time since the end of the Second World War, the fundamental structures of public finance and state and local government economics are changing to adjust to lower levels of government revenues. These changes can be observed in the areas of public finance, economic development, land use economic development, land use planning, and financial restructuring.