Advertisement

Effects of Boom-Year Savings Across Three Types of State Expenditures

  • Yilin Hou
Chapter
Part of the Studies in Public Choice book series (SIPC, volume 8)

Abstract

This chapter examines the distribution of the effects of countercyclical savings across three types of state expenditure over the economic cycle. As I have discussed in Chapter 3, boom-year savings refer to budget stabilization funds (BSF) and general fund surpluses (GFS). I use panel data of 49 states from 1979 to 1999 to test the effects of BSF and GFS on general, own-source, and general fund expenditures of the states during downturns and upturns. I find a “division of work” between the two saving devices: Though the use of BSF concentrates on own-source spending, BSF are used to boost general expenditure more than general fund expenditure in downturns but to increase general fund expenditure more than general expenditure in upturns. The effects of GFS are significant only on general fund expenditure in upturns. This finding suggests that states may have some unstated or implicit “strategy” on when (downturn or upturn) and where (which the three types of expenditures) to use the two kinds of savings.

Keywords

Balance Budget Ordinary Little Square Model Percentage Point Increase Economic Cycle State Expenditure 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

References

  1. Bretschneider SI, Gorr WL, Grizzle G, Klay E (1989) Political and organizational influences on the accuracy of forecasting state government revenues. Int J Forecast 5(3):307–319CrossRefGoogle Scholar
  2. Bruce D, Fox WF, Tuttle MH (2003) Tax base elasticities: a multi-state analysis of long-run and short-run dynamics. Mimeo, University of Tennessee, KnoxvilleGoogle Scholar
  3. Engle RF, Granger CWJ (1987) Co-integration and error correction: representation, estimation and testing. Econometrica 55(2):251–276CrossRefGoogle Scholar
  4. Finkler SA (2005) Financial management for public, health and not-for-profit organizations. Prentice Hall, Upper Saddle RiverGoogle Scholar
  5. Fuller WA (1976) Introduction to statistical time series. Wiley, New YorkGoogle Scholar
  6. Granger CWJ, Watson MW (1984) Time series and spectral methods in econometrics. In: Griliches Z, Intriligator MD (eds) Handbook of econometrics, vol 2. Elsevier Science Publishers BV, AmsterdamGoogle Scholar
  7. Hamilton J (1994) Time series analysis. Princeton University Press, PrincetonGoogle Scholar
  8. Heckman J (1979) Sample selection bias as a specification error. Econometrica 47(1):153–162CrossRefGoogle Scholar
  9. Hou Y (2003) What stabilizes state general fund spending during downturns? Public Budg Finance 23(3):64–91CrossRefGoogle Scholar
  10. Hou Y (2005) Fiscal reserves and state own-source expenditure in downturns. Public Finance Rev 33(1):117–144CrossRefGoogle Scholar
  11. Knight B, Levinson A (1999) Rainy day funds and state government savings. Natl Tax J 52(3):459–472Google Scholar
  12. National Association of State Budget Officers (NASBO 1977–2004) Fiscal survey of states series. NASBO, Washington, DCGoogle Scholar
  13. National Association of State Budget Officers (NASBO). State budget processes. 1985, 1988, 1992, 1995, 1998 and 2002 editions. Washington, DCGoogle Scholar
  14. National Governors’ Association. The book of the states series. Various years. LexingtonGoogle Scholar
  15. Pollock R, Suyderhoud J (1986) The role of rainy day funds in achieving fiscal stability. Natl Tax J 43(4):485–497Google Scholar
  16. Prais SJ, Winsten CB (1954) Trend estimators and serial correlation. Cowles Commission discussion paper no. 383, ChicagoGoogle Scholar
  17. Rivlin A (1987) Economics and the political process. Am Econ Rev 77(1):1–10Google Scholar
  18. Ruppel W (2004) GAAP for governments. Wiley, New YorkGoogle Scholar
  19. Sobel RS, Holcombe RG (1996a) The impact of state rainy day funds in easing state fiscal crises during the 1990–1991 recession. Public Budg Finance 16(3):28–48CrossRefGoogle Scholar
  20. Sobel RS, Holcombe RG (1996b) Measuring the growth and variability of tax bases over the business cycle. Natl Tax J 49(4):535–552Google Scholar
  21. Wagner GA (1999) Essays on the political economy of state government saving and the role of budget stabilization funds. Ph.D. dissertation, University of West VirginiaGoogle Scholar
  22. Wildavsky A (1988) If you can’t budget, how can you govern? In: Anderson A, Bark DL (eds) Thinking about America: the United States in the 1990s. Hoover Institute Press, Stanford, pp 265–275Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2013

Authors and Affiliations

  • Yilin Hou
    • 1
  1. 1.University of GeorgiaAthensUSA

Personalised recommendations