Two professors, Paavo Monkkonen and Michael Lens, at the UCLA Luskin School of Public Affairs have received a $610,000 grant to investigate how local governments spend and save during boom and bust economic times. The study hopes to determine whether such spending affects long term recovery of a community following an economic downturn.
The study conducted by the urban housing professors is called “Irrational Exuberance at City Hall: Local Government Resilience during Housing Booms and Busts.” Monkkonen and Lens plan to examine how as the housing bubble grew, local governments may have been tempted by rising property tax revenues and the perception that growth would continue to make unsustainable spending and investment decisions. As these revenues disappear, the shock to overextended resources is resulting in drastic cuts, possibly deepening the recession’s impact and slowing long-term growth.
“The California State Controller recently released a series of audits on the City of Stockton, which confirm our suspicion that ambitious spending and borrowing without proper consideration of future revenue streams was a major cause of its current problems,” Monkkonen says. “These case by case efforts to differentiate causes suggest a more systematic evaluation of the phenomenon is needed.”
The grant is awarded by the John D. and Catherine T. MacArthur Foundation, and is one of a series of grants totalling $25 million given over five years to projects focusing on how housing affects families and communities.
