Fiscal Stress Index (FSI) is a study to measure the fiscal stress of a government by its management's actions with traditional financial ratios. Government has a unique capacity to keep its traditional fiscal ratios in order, even if there is deterioration in overall soundness. Thus, FSI's analysis gets ahead of traditional ratios by quantifying management’s actions in addressing their stresses. (Example:
So, instead of being behind the information curve of government trouble, debt holders and other outsiders may actually get ahead of trouble, for the first time ever.
Other uses include: anticipating rating changes, arguing for higher ratings, refining pricing of insurance, and refining ratings—instead of 10 categories, FSI is 1 to 100. These are addressed in the study.
So get your free copy of the excerpt of the top 5% of governments in the FSI scoring, by emailing Greg Michels at munilysis@hotmail.com
Because MAS is the largest collector and analyst of government financial operations data, we routinely update the traditional analysis on each government and it’s management’s actions, each year.
During our research, we found that major taxing authority downgrades of New York City, Washington Power, Cleveland, East St. Louis, etc., among others, were precipitated by a pattern of financial conditions that occurred in similar stages, over several years. We studied about a dozen large government fiscal failures since the 1970’s that have been well analyzed, including discussing the patterns of developing stress with the officials involved.
Since most governments have wide latitude to correct the symptoms, most observers may not know the amount of fiscal stress. However, our studies of previous failures show that similar patterns of management actions will occur before stress appears in financial ratios.
This Fiscal Stress Index is a probabilistic determination of how closely each city or county is following the same path taken by past governments’
From our studies, we have found that most governments are working under an ‘equilibrium of stress’, that is, stresses routinely occur and governments routinely correct for them, from year to year.
Fiscal Stress Index of Cities & Counties is a sub-study from the 10,000 page, 40-volume, Governments of Your State that is published each year.
