Which indicator primarily reflects dependence on other government levels for funding?

• A. Reserve levels
• B. Intergovernmental reliance
• C. Debt burden
• D. Revenue sufficiency

Answer: (B)

Dependence on funding from other government levels is shown by intergovernmental reliance, because it directly measures how much of a local government's budget comes from transfers and grants from higher levels. This differs from reserve levels, which reflect cash on hand for liquidity and emergencies; debt burden, which indicates how much the government has borrowed; and revenue sufficiency, which looks at whether the government’s own revenues cover its expenses. When a jurisdiction relies heavily on intergovernmental funding, its financial stability can depend on decisions made at the federal or state level, making this indicator the best measure of external funding dependence.