Budget Balance: County Rankings

April 5, 2016 |

In Brief: 

One indicator of a fiscally sustainable government is that it maintains a generally balanced or positive ratio of revenues to expenses or “budget balance”. This article explores the relative performance of the 50 most populous U.S. counties according to their budget balance ratio.

Introduction: Why We Measure

Across the United States, governments in severe fiscal distress have consumed our collective national attention. Citizens in Stockton, Detroit, and Puerto Rico are facing with the real consequences of fiscal short-sightedness: increased taxes, cuts to public services, or unfulfilled promises to public employees. But often, public officials, journalists, researchers, and citizens lack the data and practices to identify fiscal challenges in advance of severe distress.

To combat the challenges of access to, and understanding of, fiscal sustainability data, US Common Sense has created the nation’s largest comprehensive and free municipal finance platform on GovRank.org. The platform includes “top-line” financial figures, understandable measures of fiscal sustainability, and interactive rankings for over 13,000 municipalities nationwide.

In this article, we examine the performance of counties according to one aspect of fiscal sustainability: how well a government balances its budget. For a full explanation of our data collection, analysis, and methodology, please refer to the GovRank project’s Methodology article.

Overview: Fiscal Sustainability and Budget Balance

A government is fiscally sustainable if it can meet the service needs of its current population without jeopardizing its ability to meet the service needs of its future population. We selected a set of three measures to help citizens understand fiscal sustainability: a budget balance ratio, asset flexibility ratio, and pension funding for public employees ratio. A fiscally sustainable government would maintain a generally balanced or positive budget balance ratio, a positive and relatively high net asset ratio, and a low per capita unfunded liability associated with retired public employees’ pension benefits.

Budget balance is the ratio of a government’s total revenues to its total expenses in any given year. The budget balance ratio illustrates whether a government operated in surplus, balance, or deficit in a given fiscal year.

Budget Balance = Total Revenues/Total Expenses

  • Total revenues include all the income a government generated in a fiscal year, as reported in its comprehensive annual financial report (CAFR). The total amount includes tax collections, fees and charges for services, transfers from other governments, and other revenue sources.
  • Total expenses include all the costs a government paid in a year, as reported in its CAFR. These typically include costs for general operations, personnel, infrastructure spending, and services that may include corrections, education, healthcare, and others. Total expenses do not include the cost of public employee retirement benefits. These are reported elsewhere in a CAFR.

Interpretation:              

  •  When the budget balance is greater than 1 (total revenues > total expenses), the government has a surplus, with a larger value indicating a greater surplus.

  • When the budget balance is equal to 1, the government broke even (total revenues = total expenses).

 When the budget balance is less than 1, the government operated in deficit (total revenues < total expenses), with a smaller value indicating a greater deficit.

Budget Balance Ranking: To rank budget balance performance, we calculated the average of a government’s annual budget balance ratios from 2009-2014. The percentile rank for each government is based on the average budget balance ratio.

By their nature, percentile ranks are a relative measure of performance. A city government that ranks in the 98th percentile for budget balance performed better than 98% of the city governments in our sample. A higher percentile rank indicates better performance relative to the sample.

Example: If a city had $1,000,000 in total revenues and $900,000 in total expenses in a given year, then its budget balance was 1.11 ($1,000,000/$900,000). The result tells us that total revenues were 11% greater than total expenses, meaning the city had a budget surplus.

About the Data

This article assesses total revenue and total expense data among the 50 most populous counties, based on 2014 population figures. We included cities that reported three or more years of data in the sample. For this indicator, we were missing 2014 data for the following counties: Nassau, NY, Wayne, MI, DuPage, IL, St. Louis, MO, King, WA, and Alameda, CA.

The data are from Comprehensive Annual Financial Reports (CAFRs). While CAFRs are standardized documents that use consistent reporting standards, underlying differences in government systems remain. For example, a government’s total revenue depends upon its tax structure. If a government's relies on a volatile tax source, such as capital gains, its annual revenue may fluctuate more than other governments’. Expenses can also vary widely, depending on the services the government is responsible for providing and also on unusual one-time expenses. Our analysis does not control for the observed differences in circumstances and policy preferences.

Budget Balance Results

  • The counties’ mean budget balance ratio is 1.02, with a maximum (best performance) of 1.25 in Cuyahoga County, Ohio and a minimum (worst performance) of .82 in Cook County, Illinois. This means Cuyahoga maintained an average 25% surplus and Cook County maintained an average 18% deficit during the period.
  • Most counties are keeping revenues and expenses approximately equal. Forty-five out of the 50 most populous counties had a budget balance ratio between 0.90 and 1.10. Notwithstanding, Cuyahoga, Gwinnett County, Georgia and Pima County, AZ have average budget surpluses of more than 10%, and Cook County, Illinois and Suffolk County, NY have average deficits of more than 10%.
  • By comparison, states’ budgets were on average more frequently balanced between revenues and expenses. Thirty-seven states had average budget balance ratios between 0.95 and 1.05. The existence of state balanced budget requirements may explain the lower variance in their average budget balance ratios.
  • Among the worst-performing of the 50 counties, all were, on average, operating in deficit. The best-performing counties were usually less populous than the sample average. The best-performing states and cities were also typically less populous.

Table 1. Top Performing Counties by Budget Balance (2009-2014) 

State

Budget Balance Percentile Rank

Average Budget Balance Ratio

(2009-2014)

Average Surplus (Deficit) per Capita

(2009-2014, 2014 Population)

Overall Fiscal Sustainability Percentile Rank

Population

(2014)

Cuyahoga Co, OH

96

1.25

$53

NA

1,259,828

Gwinnett Co, GA

94

1.21

$211

76

877,922

Pima Co, AZ

77

1.11

$107

42

1,004,516

Mecklenburg Co, NC

72

1.09

$114

66

1,012,539

St. Louis Co, MO

71

1.09

$55

24

1,001,876

Orange Co, FL

67

1.08

$105

NA

1,253,001

Maricopa Co, AZ

66

1.08

$32

87

4087191

Shelby Co, TN

65

1.08

$86

14

938,803

KIng Co, WA

64

1.07

$85

21

2,079,967

Broward, FL

60

1.07

$76

NA

1869235

Table 2. Bottom Performing Counties by Budget Balance (2009-2014)

State

Budget Balance Percentile Rank

Average Budget Balance Ratio

(2009-2014)

Average Surplus (Deficit) per Capita

(2009-2014, 2014 Population)

Overall Fiscal Sustainability Percentile Rank

Population

(2014)

Cook Co, IL

1

0.82

-$122

5

5,246,456

Suffolk Co, NY

1

0.89

-$219

NA

1,502,968

Nassau Co, NY

2

0.91

-$246

NA

1,358,627

Fulton Co, GA

2

0.91

-$84

2

996,319

Los Angeles Co, CA

5

0.94

-$122

1

10,116,705

Westchester Co, NY

7

0.96

-$100

NA

972,634

Miami-Dade Co, FL

8

0.96

-$105

30

2,662,874

Wayne Co, MI

8

0.96

-$36

1

1,764,804

Wake Co, NC

9

0.96

-$47

23

998,691

Prince Georges Co, MD

9

0.97

-$85

1

904,430