Using Common‐Pool Resource Principles to Design Local Government Fiscal Sustainability

• DOI: http://doi.org/10.1111/puar.12273
• Date: 01 November 2014
• Published date: 01 November 2014

Shui-Yan Tang is Frances R. and John J.

Duggan Professor in Public Administration

in the Sol Price School of Public Policy and

research director for the Judith and John

Bedrosian Center on Governance and the

Public Enterprise, University of Southern

California.

E-mail: stang@usc.edu

Richard F. Callahan chairs the

Department of Public and Nonprof‌i t

Administration in the University of San

Francisco’s School of Management.

E-mail: rfcallahan@usfca.edu

Mark Pisano is Professor of the Practice

of Public Administration in the Price School

of Public Policy, University of Southern

California, and co-chair of the Federal

System Panel of the National Academy of

Public Administration.

E-mail: mpisano@usc.edu

Using Common-Pool Resource Principles to Design Local Government Fiscal Sustainability 791

Public Administration Review,

Vol. 74, Iss. 6, pp. 791–803. © 2014 by

The American Society for Public Administration.

DOI: 10.1111/puar.12273.

Shui-Yan Tang

University of Southern California

Richard F. Callahan

University of San Francisco

Mark Pisano

University of Southern California

 is article analyzes local government f‌i scal sustainability

as a common-pool resource (CPR) problem. Comparing

the experiences of Los Angeles County, San Bernardino

City, and San Bernardino County, California, the

analysis applies a framework developed from three

decades of CPR research to show the importance of six

micro-situational variables—communications with the

full set of participants, known reputations of participants,

high marginal per capita return, entry or exit capabili-

ties, longer time horizon, and agreed-upon sanctioning

capabilities—in shaping collective action dynamics and

building the trust and reciprocity among stakeholders

needed to achieve f‌i scal sustainability.  e underlying

contextual conditions for these micro-situational variables

vary based on specif‌i c socioeconomic and political settings,

but the f‌i ndings suggest that institutions and processes can

be designed based on several well-tested principles in CPR

governance to encourage stakeholders to look beyond their

immediate self-interests and make decisions that account

for the community’s long-term f‌i scal sustainability.

Fiscal sustainability has become and will con-

tinue to be a major challenge for local govern-

ments in the United States. As forecast by the

U.S. Government Accountability Of‌f‌i ce (2013),

operating def‌i cits for state and local governments

will increase and continue for decades. Reduced tax

revenues resulting from demographic changes will

also create budgetary stresses for governments at all

levels, and these stresses will

continue for decades (Pisano

2013b). Confronting these

f‌i scal sustainability challenges

requires coordinated ef‌f orts

among multiple actors in the

local community, both inside

and outside government, to

refashion institutions, budgetary

processes, and core assumptions about ways for fund-

ing and delivering local public services. As evidenced

by a number of highly visible municipal bankruptcy

cases in the recent past, including the cities of Detroit,

Michigan, and San Bernardino, California, if this

trend continues, many more cities around the country

may face the prospect of chronic f‌i scal imbalance and,

perhaps, bankruptcy in the future. In the current

public f‌i nance and budgeting literature, many quan-

titative studies link various institutional, political,

and socioeconomic variables to local f‌i scal decisions,

mostly based on cross-sectional data at a given point

in time; yet few qualitative studies provide detailed

and over-time analyses of the processes and mecha-

nisms by which local stakeholders may gradually

overcome collective action problems to develop f‌i scal

sustainability.

In this article, we analyze local government f‌i scal

sustainability as a common-pool resource (CPR)

problem. Originally developed to examine natural

resource governance issues, the CPR perspective is

well suited to studying public sector f‌i scal sustain-

ability issues because they share similar collective

action problems (Feiock and Scholz 2010). A long

tradition of academic research on CPRs has adopted

a case study approach (Ostrom 1990). Similarly, we

draw on our three-year, in-depth case study research

and apply the framework from f‌i ndings in the CPR

literature to explain the results of in-depth case studies

of three local jurisdictions—Los Angeles County, San

Bernardino City, and San Bernardino County—con-

ducted between 2011 and 2013.

Many f‌i scal challenges currently

facing state and local jurisdic-

tions in the United States

resemble the classic tragedy of

the commons, a situation in

which most users understand

that the existing way of using

the CPR will eventually lead to

its ruin, but no one is willing to

reduce one’s use or contribute to its replenishment if

no credible means exists to overcome the inherent col-

lective action problems. CPRs have two basic charac-

teristics: dif‌f‌i culty of excluding potential benef‌i ciaries

and subtractability of use (Ostrom 2005). Because of

Using Common-Pool Resource Principles to Design Local

Government Fiscal Sustainability

Many f‌i scal challenges currently

facing state and local juris-

dictions in the United States

resemble the classic tragedy of

the commons.