Do local authorities use NPM delivery forms to overcome problems of fiscal stress?

Abstract

Finding solutions to the unfavourable economic and financial situation that the local authorities are currently facing is of crucial importance. One such solution is to adopt mechanisms for restructuring local public services, through new management approaches to reduce costs and thereby reduce fiscal stress. The aim of this article is to determine the probability of a city council changing the way it manages services, selecting from different options, in response to situations of fiscal stress. To address this issue, we studied a sample of 1572 Spanish municipalities for the period 2002–2009, using a random-effects panel multinomial logit model. The results obtained show that outsourcing and inter-municipal cooperation are the management formulas that councils are most likely to choose in response to a financial crisis, especially the ones arising from insufficient transfers, negative cash flow, debt or budget deficit.

La búsqueda de soluciones a la situación económica y financiera desfavorable a la que se enfrentan actualmente las autoridades locales es de crucial importancia. Una de estas soluciones es la adopción de mecanismos para la reestructuración de los servicios públicos locales, a través de nuevos métodos de gestión que permitan reducir costes y por tanto, problemas de fiscal stress. El objetivo de este trabajo es determinar la probabilidad de que un ayuntamiento cambie la forma en la que gestiona sus servicios, en base a la selección entre diferentes opciones, en respuesta a situaciones de fiscal stress. Para ello, estudiamos una muestra de 1.572 municipios españoles para el periodo 2002–2009, utilizando un modelo logit mutltinomial de datos de panel de efectos aleatorios. Los resultados obtenidos muestran que la externalización y la cooperación intermunicipal son las fórmulas de gestión que los ayuntamientos son más propensos a elegir en respuesta a una crisis financiera, especialmente aquéllas que surgen de transferencias insuficientes, flujos de caja negativos, deuda o déficits presupuestarios.

Keywords:

• local governments
• fiscal crisis
• new public management

Palabras clave:

• Administraciones locales
• Crisis Financiera
• Nueva Gestión Pública

Funding

We are grateful for the financial support of [ECO2010-20522], received from the Spanish Ministry of Science and Education, [PRY102/12] from Centro de Estudios Andaluces, Junta de Andalucía (Spain), [P09-SEJ-5395] and [P11-SEJ-7700] from “Proyectos de Excelencia de la Consejería de Innovación, Ciencia y Empresa, Junta de Andalucía” (Spain) and “Cátedra Pasqual Maragall de Economía y Territorio”, Universitat de Barcelona, Barcelona (Spain).

Notes

^1. In Spain, a public company in which the majority of the share capital belongs to the municipality can be considered a type of agencification, in accordance with the NPM theoretical framework.

^2. The Stata command of GLLAMM (generalised linear latent and mixed models) is used to calibrate the PMLM (Rabe-Hesketh et al., 2004).

^3. Local authorities have the obligation to deliver a copy of the final statement of their budgets to the General State Administration before 31 March of the following fiscal year (article 193.5 TRLRHL). However, in 2002, 14.89% of the municipalities failed to comply with this obligation. In 2003, 24.2% failed to comply, in 2004, 17.26%; in 2005, 18.25%; in 2006, 18.04%; in 2007, 17.75%; in 2008, 14.78% and in 2009, 8.06%.

^4. Specifically, the percentage of councils that showed a combination of some of the four management formulas analysed in the same year amounted to 2% of the sample.

^5. The basic contents that seeks reform can be found at http://www.lamoncloa.gob.es/ConsejodeMinistros/Referencias/_2013/refc20130215.htm#AdmonLocal