Measuring the Fiscal Health of Municipalities

One of the difficulties faced in the effective and efficient management of public organizations is the understanding of when the organization is experiencing financial distress. Administrators and researchers alike have typically relied upon ratio analysis for this determination, but too heavy of a reliance on ratios can produce misleading results. Using 150 municipalities from the Fiscally Standardized Cities (FiSC) database for the period of 1977 to 2012, this study reconsiders the measurement of fiscal health through an exploration of several predominate approaches. The efficacy of the measurement approaches is tested with a series of event history analyzes that captures their utility in predicting municipal bankruptcy.