publication . Report . Preprint . Article . 1996

Balanced Budget Rules and Public Deficits: Evidence from the U.S. States

Henning Bohn; Robert P. Inman;
Open Access
  • Published: 01 Apr 1996
  • Publisher: National Bureau of Economic Research
Most states (Vermont is the exception) have a constitutional or statutory limitation restricting their ability to run deficits in the state's general fund. Balanced budget limitations may be either prospective or beginning-of-the-year requirements or retrospective or end-of-the-year requirements. Using budget data from a panel of 47 U.S. states for the period 1970-1991, the analysis finds that states with end-of-the-year (not prospective) balance requirements enforced as constitutional (not statutory) constraints by an independently elected (not politically appointed) state supreme court do have significant positive effects on a state's general fund surplus. The...
free text keywords: jel:H61, jel:H62, General Social Sciences, Statutory law, Public economics, Economics, State supreme court, Fund accounting, Law and economics, Balanced budget
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