Managing Performance or Building Capacity? State Interventions in Local Financial Management  - Job market paper

[ Michael Curro Best Student Paper Award ] from the Association for Budgeting & Financial Management (ABFM) 

Abstract:  This paper asks whether organizations improve performance more effectively by incentivizing better performance or by building the underlying capacity that supports performance. Two types of state interventions in local financial management are examined: fiscal monitoring systems, which assess local governments' fiscal health and increase oversight, and training and certification mandates, which strengthen human capital and administrative procedures for financial management. Using a panel of general-purpose local governments subject to the federal Single Audit from 2009 to 2024 and a stacked difference-in-differences (DID) model, I estimate the effects of these interventions on local financial management capacity and performance. To measure both dimensions, I use disclosures in Single Audit reports to link internal control deficiencies to financial management capacity and noncompliance to financial management performance. Findings show that fiscal monitoring modestly reduces noncompliance, but does not lower, and may even raise, the probability of finding material weaknesses, the more severe category of internal control deficiencies. By contrast, training and certification mandates produce large and growing reductions in material weakness disclosures and a lagged reduction in noncompliance. Together, the findings indicate that incentive-based and capacity-building interventions operate on different organizational margins: the former primarily disciplines observable performance, whereas the latter appears better able to strengthen the systems that sustain performance. This suggests that while external pressure and oversight can reveal failures, they are insufficient to repair the systems that produce them, and genuine improvement in financial management may require some investment in the underlying capacity. 

Short-Term Rentals and Local Government Budgets: Evidence from Airbnb Expansion Following Solar Eclipse 

(with Lady Ikeya), Revise & Resubmit at Regional Studies 

Abstract: Digital platforms are reshaping regional housing markets, yet evidence on their implications for subnational public finance remains limited. This paper estimates the causal effect of the expansion of the short-term rental (STR) market on local government revenues and expenditures across all U.S. counties. To address endogeneity, we leverage quasi-experimental variation from the 2017 solar eclipse and estimate an instrumental-variables model with county- and year-fixed effects. We find that increased Airbnb penetration of the local housing market reduces property and sales tax revenues, as well as spending on public welfare and education. The findings of this paper imply that, as full-time residents are displaced by occasional visitors with increasing STR market penetration, local governments’ capacity to raise revenues may be sacrificed. With more Airbnb homeowners and fewer full-time residents – implying a shift in the voter composition – local governments may also reallocate resources, spending less on resident-focused public goods and services (e.g., public welfare and K-12 education) that may be less salient to home-sharing hosts.

Occupational Reputation and Public Sector Jobs: Evidence from Police Wages and Turnover 

(with Temirlan Moldogaziev), Revise & Resubmit at Public Management Review  

Abstract: This study examines whether the occupational reputation of public sector jobs, which involves both extrinsic non-monetary rewards and intrinsic rewards, affects wages and turnover rates. Using the Black Lives Matter protests as a quasi-random shock to police jobs and administrative data on state employees from 2016 to 2025, we empirically test wage and job separation differentials between police and non-police government jobs using a difference-in-differences model. Our findings indicate that a loss of occupational reputation drives increases in wages and turnover rates among police-state employees relative to non-police-state public employees, and that this can be costly for public-sector organizations. This study makes a significant contribution to research on the role of occupational reputation in the public sector, and the findings we present are critical to the practice of recruiting, training, and retaining employees in public sector occupations. 

Decoding Dysfunction: Machine-Aided Text Analysis of Federal Single Audits

Abstract: Local governments are routinely found to mismanage public funds, yet the field knows surprisingly little about why these failures occur in the first place. This paper looks inside thousands of federal audit reports to answer the question. Using machine-aided automation to download documents and analyze text, I examine the reasons behind each disclosed failure in financial reporting and management among U.S. local governments. Drawing on a novel corpus of roughly 20,000 Single Audit documents from general-purpose and special-purpose entities cited for at least one such audit finding between 2016 and 2024, the top five recurring explanations are identified through LDA topic modeling: staffing shortages, accounting reconciliation problems, weak procurement documentation, payroll processing errors, and constraints in preparing financial statements. Staffing shortages emerge as the most prevalent, suggesting that local government financial mismanagement is rooted less in one-off mistakes than in chronic resource constraints. This paper offers the first large-scale, systematic account of why local governments struggle with financial management, and provides public administration scholars with new empirical insight into a long-understudied dimension of local government performance. 

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