Municipal Government Form and Budget Outcomes: Political Responsiveness, Bureaucratic Insulation, and the Budgetary Solvency of Cities

One of the fundamental questions in democratic governance is whether policies are best decided by elected officials or by appointed bureaucrat-experts. The study examines this issue in the context of how municipal government form influences government-wide budgetary solvency. Government form creates distinct incentives for executive action that shape budget outcomes. In mayor-council governments, the elected executive's desire to be reelected increases responsiveness to voters' preferences. Vote maximization incentivizes the adoption of policies that are popular among voters but can lead to budgetary imbalance. In contrast, the appointed executive in the council-manager form is interested in career advancement, which she achieves by building a reputation for leading a fiscally sound government. Insulated from the demands of voters, the manager can rely on expert knowledge and professional norms to choose policies that result in balanced budgets. Using data from audited financial reports for 655 mid-sized and large city governments in the United States from fiscal years 2006 to 2013, the econometric analysis shows that council-manager cities have stronger budgetary solvency compared with mayor-council cities.