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State budget stabilization fund adoption: Preparing for the next recession or circumventing fiscal constraints?

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  • Gary Wagner

    ()

  • Russell Sobel

Abstract

The high rate of budget stabilization fund adoption during the 1980s is often attributed to the 1980–1982 recession. In this view, states adopted funds to prevent a recurrence of the fiscal crises experienced during that recession. An alternative hypothesis is that some funds adopted during this period were intended to circumvent tax and expenditure limit laws. We find that states with TELs in place were significantly more likely to adopt statutory funds, but were significantly less likely to adopt funds with stringent deposit and withdrawal rules, suggesting that some funds were adopted to circumvent existing fiscal constraints. Copyright Springer Science + Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s11127-006-7752-x
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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 126 (2006)
Issue (Month): 1 (January)
Pages: 177-199

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Handle: RePEc:kap:pubcho:v:126:y:2006:i:1:p:177-199

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Web page: http://www.springerlink.com/link.asp?id=100332

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  1. Gentry, William M., 1989. "Do State Revenue Forecasters Utilize Available Information," National Tax Journal, National Tax Association, vol. 42(4), pages 429-39, December.
  2. Daniel R. Feenberg & William Gentry & David Gilroy & Harvey S. Rosen, 1989. "Testing the Rationality of State Revenue Forecasts," NBER Working Papers 2628, National Bureau of Economic Research, Inc.
  3. Levinson, Arik, 1998. "Balanced Budgets and Business Cycles: Evidence from the States," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 715-32, December.
  4. Henning Bohn & Robert P. Inman, 1996. "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States," NBER Working Papers 5533, National Bureau of Economic Research, Inc.
  5. Sobel, Russell S. & Holcombe, Randall G., 1996. "Measuring the Growth and Variability of Tax Bases over the Business Cycle," National Tax Journal, National Tax Association, vol. 49(4), pages 535-52, December.
  6. Knight, Brian & Levinson, Arik, 1999. "Rainy Day Funds and State Government Savings," National Tax Journal, National Tax Association, vol. 52(n. 3), pages 459-72, September.
  7. Edward M. Gramlich, 1991. "The 1991 State and Local Fiscal Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 249-288.
  8. Sobel, Russell S, 1998. " The Political Costs of Tax Increases and Expenditure Reductions: Evidence from State Legislative Turnover," Public Choice, Springer, vol. 96(1-2), pages 61-79, July.
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Cited by:
  1. Craig, Steven G. & Hemissi, Wided & Mukherjee, Satadru & Sørensen, Bent E, 2013. "How Do Politicians Save? Buffer Stock Management of Unemployment Insurance Finance," CEPR Discussion Papers 9520, C.E.P.R. Discussion Papers.
  2. Fabrizio Balassone & Daniele Franco & Stefania Zotteri, 2007. "Rainy day funds: can they make a difference in Europe," Questioni di Economia e Finanza (Occasional Papers) 11, Bank of Italy, Economic Research and International Relations Area.
  3. George Crowley, 2012. "Spatial dependence in constitutional constraints: the case of US states," Constitutional Political Economy, Springer, vol. 23(2), pages 134-165, June.
  4. Gonzalez, Christian Y. & Paqueo, Vicente B., 2003. "Social sector expenditures and rainy-day funds," Policy Research Working Paper Series 3131, The World Bank.

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