Do Budget Maneuvers Reduce Future State Budget Resilience? Evidence from the Great Recession

53 Pages Posted: 18 Oct 2021 Last revised: 23 Aug 2022

See all articles by John Stavick

John Stavick

Indiana University - School of Public and Environmental Affairs

Date Written: August 19, 2022

Abstract

Conventional wisdom suggests budget maneuvers threaten long-term structural balance because they transfer resources from the future to the present by non-transparent means. However, the incidence of maneuver use remains poorly understood due in part to their difficulty to observe. In this research, the Volcker Alliance’s definitions of budget maneuvers are used as a taxonomy to create an original tally of maneuvers used by U.S. state governments during the Great Recession. Drawing on the regional economic resiliency literature, post-recession state budgets are binned into different types of responses to negative shocks. Multinomial logit regressions and a quantitative resilience measurement are used to estimate whether budget maneuvers used in the Great Recession raised the probability of experiencing a stagnant or negative post-recession budget era. The findings do not show a significant relationship between post-Great Recession budget outcomes and maneuver use. This supports NASBO’s contention that maneuvers are not a primary budget balancing instrument for most states. The results also indicate that states pursuing targeted or across-the-board cuts to balance their recession-era budgets were relatively more likely to realize post-recession budget growth than states whose post-recession budget growth stagnated. While this research does not support budget maneuvers as a unique threat to long-term budget resiliency, it does find that continuous or intensive use of certain maneuvers can create mounting budget risks in future years.

Keywords: State budgets, cutback budgeting, economic resiliency, budget maneuvers

JEL Classification: H12; H72; H74

Suggested Citation

Stavick, John, Do Budget Maneuvers Reduce Future State Budget Resilience? Evidence from the Great Recession (August 19, 2022). Available at SSRN: https://ssrn.com/abstract=3942519 or http://dx.doi.org/10.2139/ssrn.3942519

John Stavick (Contact Author)

Indiana University - School of Public and Environmental Affairs ( email )

1315 East 10th Street
Bloomington, IN 47405
United States

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