State Fiscal Reserves and the Great Recession

Buerger, Christian; Reitano, Vincent

doi:10.1080/01900692.2022.2049814

Cited by 1 publication

(2 citation statements)

References 75 publications

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“…Shi (2016) explained that Texas had the largest rainy-day fund balance in the country during the Great Recession but did not use any of it because the legislature could not overcome its 2/3 vote rule needed to withdraw money. Buerger and Reitano (2023) found that many states did not use all of their rainy-day funds during the Great Recession even while they were cutting their budgets. NASBO (2013) indicates that there are disincentives to using reserves when they are needed.…”

Section: Canadian Provincesmentioning

confidence: 99%

“…One potential benefit of escape clauses is that they might encourage states to use the savings they have accumulated to the fullest extent. As discussed earlier, state politicians are often reluctant to spend their savings during economic downturns (Lauth, 2003; NASBO, 2013; Buerger and Reitano, 2023). If they know they have the fiscal slack afforded by deficit spendings then they may be less reluctant to drain their savings for fear that they may run out of resources if a recession is long.…”

Section: Lessons For Us Statesmentioning

confidence: 99%

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Do balanced budget practices of U.S. states make sense? Alternatives from the Eurozone

Douglas,

Raudla

2024

JPBAFM

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Purpose The purpose of this article is to challenge the balanced budget practices of U.S. state governments and offer alternatives that may lead to better fiscal, economic and policy outcomes. We contend that the norm of balance may be leading U.S. states to make fiscal decisions that result in less-than-ideal outcomes, especially during economic downturns.Design/methodology/approach This is a normative article. We examine the scholarly evidence regarding balanced budget practices to assess the appropriateness of balanced budget norms. We also examine the fiscal rules followed by Eurozone countries to draw potential lessons for U.S. states.Findings We conclude that state governments should move away from strict norms of budget balance and seek more flexible approaches. We suggest that instead of following strict rules and norms of balance, U.S. states should consider implementing escape clauses, debt and deficit ceilings, and fiscal councils. We also suggest that the Federal Reserve be open to lending directly to states during fiscal crises to ensure that states have access to affordable credit.Originality/value The balanced budget norm has become ingrained in U.S. state budgeting practices, so much so that public officials and scholars alike rarely question it. The novel contribution of our article is to question this practice in a systematic way and propose alternative approaches.

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Section: Canadian Provincesmentioning

confidence: 99%

Section: Lessons For Us Statesmentioning

confidence: 99%