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Literature Review

All over the United States, local governments are faced with federal and state cuts to their budget which have caused tension in their delivery of services and programs. Municipalities are trying many different solutions to help reduce the pressure on their budgets while still meeting the needs of their citizens.
The word fiscal stress is very common among federal, state, and local governments. What does fiscal stress mean to state and local governments? "In terms of a structural definition fiscal stress can be described as constraints put on the local government by its economy (its economic base), its population's structure (determining the extent of service need), and the cost of providing a unit of service." (Diaz and Green, Winter 2001).
State and local governments in America are currently facing a historic fiscal crisis. The National Governors Association says that states face the "most dire fiscal situation (fiscal stress) since World War II" (Cauchon, 2003). The continual diminish of the federal government's role in state and local affairs is reducing the amount of federal grant-in-aid to state and local governments, this is to be tied with additional cuts from the Bush administration. According to the most recent surveys of state fiscal conditions, the sum of reported state budget deficits for the 50 states exceeds $100 billion, an amount equal to about 14 percent of current spending levels. Many elected officials state that because of the fiscal problems that are currently being faced by state and local governments there will be layoffs of thousands of employees and cuts made to key programs such as education, health care, road construction, and other essential government services. In addition, states have been operating at an "anti-tax" environment, in which proposals to increase taxes to balance the budget have been met with public and political opposition. (Cauchon, 2003)
The issues of the budget crisis and fiscal stress has hit very close...