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Abstract: 

This paper assesses the determinants of county financial condition and whether nonprofit activity promotes a favorable financial condition. Using two ratio measures of financial condition as it pertains to resource flow—self-sufficiency and resource obligation—it analyzes panel data for all counties with populations greater than 500,000 during the 1991–2003 period. It hypothesizes that financial condition is influenced by financial, environmental, and organizational factors. In addition, because greater nonprofit activity should help alleviate financial burdens placed on county governments to provide social services, such activity should lead to improved financial condition. The regression results suggest that financial factors are the most important determinants of both self-sufficiency and resource obligation and that nonprofit activity exerts almost no influence on financial condition. Overall, this study lends credence to the side of the literature debate that promotes almost exclusive consideration of financial factors as determinants of government financial condition.

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Affiliations:  1: University of Georgia School of Public and International Affairs; 3: Housing Authority Insurance Group.