Balanced Budget Requirements and State Spending: A Long–Panel Study

18 Pages Posted: 7 Jun 2013  

Daniel L. Smith

New York University

Yilin Hou

University of Georgia - Department of Public Administration and Policy

Date Written: Summer 2013

Abstract

This study tests the effects of balanced budget requirements on three measures of state expenditure using data on 48 states for the years 1950–2004. We find that the following rules are effective in constraining expenditures: (1) requiring that the governor submits a balanced budget; (2) placing controls on supplemental appropriations; and (3) prohibiting the carry‐over of a deficit from one fiscal year or biennium into the next. The latter two rules exert larger individual effects than the first. All else equal, states can best improve their prospects of reigning in spending by instituting technical rules that govern budgetary outcomes, as opposed to political rules that dictate how the budget is assembled and approved.

Suggested Citation

Smith, Daniel L. and Hou, Yilin, Balanced Budget Requirements and State Spending: A Long–Panel Study (Summer 2013). Public Budgeting & Finance, Vol. 33, Issue 2, pp. 1-18, 2013. Available at SSRN: https://ssrn.com/abstract=2275816 or http://dx.doi.org/10.1111/j.1540-5850.2013.12007.x

Daniel L. Smith (Contact Author)

New York University ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States
212-998-7400 (Phone)

HOME PAGE: http://wagner.nyu.edu/danielsmith

Yilin Hou

University of Georgia - Department of Public Administration and Policy ( email )

Athens, GA 30602
United States

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