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This research estimates a model of own-source revenue diversification and a model of changes in operational spending in municipal governments from 1997 to 2012 to determine how these governments have adapted to the two significant recessions that occurred during this time period. The first model examines factors that affect revenue diversification, focusing on the state–local fiscal context and how the level of urbanization of the area surrounding the municipalities impacts the effect of state–local context and other factors. The second model examines how municipal governments in the United States have adapted their spending to the two severe recessions of the 2000s, focusing on how state context, revenue diversification, and other factors affect changes in operational spending. Finally, this research also looks at the conditional effects of the size of government on the impact of state context, environmental pressures, and revenue structure on changes in operational spending.
