The main purpose of this study is to determine whether the proximity to elections impacts
on the financial health of local governments. This constitutes an original approach to
understand the importance of monitoring politicians’ actions, especially when elections
are coming. Using a sample of 153 Spanish local governments for the period 1988–2008,
we find the existence of an electoral cycle, since electoral proximity damages the
financial health of local governments. Concretely, the use of public resources with the
opportunistic aim of being re-elected damages the local solvency, the capacity to provide
public services, and the capacity of preserving social welfare, since municipalities
becoming more dependent on resources from other levels of government. Furthermore,
we find a partisan cycle too, since municipalities governed by left-wing parties are
usually under worse financial health than other municipalities because they lose capacity
to adapt to economic and financial changes.