UC San Diego

This work deals with local governments and fiscal stress. In the first chapter, I analyze the response of individual housing sales prices to negative information or “news” about local public debt levels and their underlying impact on the provision of public goods and services. In particular, I use the announcement that rising levels of unfunded pension liabilities for the San Diego City Employees’ Retirement System (SDCERS) were higher than previously perceived. In the second chapter, I analyze the effect of fiscal stress on local government fiscal structures. For this analysis, I focus on the sudden investment losses of nearly $1.7 billion in 1994 that led to Orange County’s default on debt obligations and bankruptcy. In the third chapter, I analyze how local governments underfund their public pensions over the business cycle—where unfunded pension liabilities serve as an effective way to borrow from the public workforce. I look at changing levels of unfunded pension liabilities and the local government characteristics over the 2001 and 2008 recessions.