52 analysis for most research on fiscal crisis is municipalities. Due to the fiscal options open
to cities, their size, and the services they typically provide, fiscal crisis is much more likely to occur at the local than at the state level Honadle 2003. As shown in Figure 3.1,
fiscal crisis is placed to the right of fiscal stress on the continuum of financial condition. This is to indicate that fiscal crisis signifies extremely poor financial condition.
3.1.4 Connotation of Fiscal Stress
For states, fiscal stress is a problem that requires a solution New York State Comptroller’s Office 2006; Municipal Fiscal Stress Task Force 2010. For this reason
within the academic literature, fiscal stress tends to have a negative connotation. While fiscal stress may have negative consequences for government constituents and
stakeholders, such as layoffs of public employees, cuts in school funding that may lead to lower test scores, or fewer benefits for the most vulnerable citizens that increases
demands on homeless shelters, food banks, and free clinics; fiscal stress may result in positive management or fiscal changes within a government Poister and McGowan
1984; Willoughby and Lauth 2003. Public managers may work to increase worker productivity or reduce program inefficiencies in anticipation of fiscal stress or in response
to it Poister and McGowan 1984. In response to the 1991 recession, Willoughby and Lauth 2003 found that some state program managers in Georgia used efficiency
measures to reduce costs. Other researchers argue that extensive and sustained fiscal stress can result in less productive state work forces Druker and Robinson 1993. Indeed
outside of the state government context, research points to fiscal stress putting strain on management systems, not fostering productive changes Rubin 1982; Schick 1988;
Caiden 1980. In a review of OECD countries’ responses to fiscal stress, Schick 1988 did not find a reliance on efficiency or effectiveness reviews or programs, rather
governments tended to look for the easiest places to reduce spending. Nonetheless, whether fiscal stress is positive or negative, depends on the actions that state governments
53 take. Lewis and Logalbo 1980 provide a checklist of actions local governments can take
to manage cutbacks and increase efficiency in government operations. If state managers are compelled to reassess their priorities, manage programs more effectively, and cut
unnecessary expenses; then fiscal stress may play a positive role in the production of government goods and services. However, and this is what receives the majority of
academic and journalistic attention, if fiscal stress results in severe cuts to services andor state employee layoffs, then fiscal stress has a negative connotation. In this research,
fiscal stress is not classified as either positive or negative, but rather as a condition that state governments, in this case, try to avoid or minimize.
3.2 Measures of Fiscal Stress
