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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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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. 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.
  2. 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.
  3. Gentry, William M., 1989. "Do State Revenue Forecasters Utilize Available Information," National Tax Journal, National Tax Association, vol. 42(4), pages 429-39, December.
  4. 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.
  5. 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.
  6. Feenberg, Daniel R, et al, 1989. "Testing the Rationality of State Revenue Forecasts," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 300-308, May.
  7. 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.
  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. 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.
  2. Gonzalez, Christian Y. & Paqueo, Vicente B., 2003. "Social sector expenditures and rainy-day funds," Policy Research Working Paper Series 3131, The World Bank.
  3. 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.
  4. George Crowley, 2012. "Spatial dependence in constitutional constraints: the case of US states," Constitutional Political Economy, Springer, vol. 23(2), pages 134-165, June.

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