U.S. States’ fiscal constraints and effects on budget policies

Open access


The article looks at fiscal constraints adopted by the U.S. States. It questions the ability of those rules to determine sound budgetary policies. To assess this point it analyses, in the general part, the major kind of constraints so far adopted. Of each major category the focus is upon institutional weaknesses that create the room for the adoption of circumventing practices. The following section focuses instead on three case studies, to show examples of the way in which the constraints influenced policy-making without mining the ability of government to adopt unbalanced budgetary policies. The weaknesses are combined with the adoption of a deferential approach by the Courts that generally legitimized the accounting devices adopted by the States. The outcome is a system in which budget policies are influenced by several factors that go beyond the institutional framework. On the other side, legal boundaries create distortions and unwanted effects in policies implemented by the States.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • • Alesina Alberto and Perotti Roberto 1996 Budget Deficits and Budget Institutions NBER Working Paper 5556 1996.

  • • Alt James E. and Lowry Robert C. 1994 “Divided Government Fiscal Institutions and Budget Deficits: Evidence from the States” American Political Science Review LXXXVIII(4): 811-828.

  • • Bohn Henning and Inman Robert P. 1996 Balanced-Budget Rules and Public Deficits: Evidence from the U.S. States Carnegie-Rochester Conference Series on Public Policy 45 1996.

  • • Briffault Richard 1996 Balancing Acts. The Reality Behind State Balanced Requirements Twentieth Century Fund Press New York.

  • • Briffault Richard 2003 “Foreword: The Disfavored Constitution: State Fiscal Limits and State Constitutional Law” Rutgers Law Journal XXXIV(4): 907-957.

  • • Briffault Richard 2009 “Courts Constitutions and Public Finance. Some Recent Experiences from the States” in Garrett Elizabeth Graddy Elizabeth A. and Jackson Howell E. (eds) Fiscal Challenges. An Interdisciplinary Approach to Budget Policy Cambridge University Press 418-445.

  • • Bunch Beverly S. 1991 “The Effect of Constitutional Debt Limits on State Governments' Use of Public Authorities” Public Choice LXVIII(1/3): 57-69.

  • • Clingermayer James C. and Wood B. Dan 1995 “Disentangling Patterns of State Debt Financing” American Political Science Review LXXXIX(1): 108-120.

  • • Council of State Governments 2008 The Book of the States 2008 vol. 40/2008.

  • • Croley Steven P. 1995 “The Majoritarian Difficulty: Elective Judiciaries and the Rule of Law” University of Chicago Law Review LXII(2): 689-794.

  • • English William B. 1996 “Understanding the Costs of Sovereign Default: American State Debts in the 1840s” American Economic Review LXXXVI(1): 259-275.

  • • Eucalitto Cory 2013 Unbalanced: Why State Balanced Budget Requirements Are Not Enough STATE BUDGET SOLUTIONS http://www.statebudgetsolutions.org/doclib/20130403_UnbalancedPDF.pdf.

  • • Galles Gary M. and Sexton Robert L. 1998 “A Tale of Two Tax Jurisdictions: The Surprising Effects of California's Proposition 13 and Massachusetts’ Proposition 2½” American Journal of Economics and Sociology LVII(2): 123-133.

  • • Gillette Clayton P. 2004 “Direct Democracy and Debt” XXX Journal of Contemporary Legal Issues New York University Public Law and Legal Theory Research Paper Series Research Paper No. 69.

  • • Greve Michael S. 2012 “Our Federalism Is Not Europe’s. It’s Becoming Argentina’s” Duke Journal of Constitutional Law & Public Policy VII(1): 17-42.

  • • Hellerstein Jerome R. and Hellerstein Walter 1997 State and Local Taxation: Cases & Materials 34 6th ed. West Group St. Paul MN.

  • • Henning C. Randall and Kessler Martin 2012 Fiscal Federalism: US history for Architects of Europe’s Fiscal Union in Peterson Institute for International Economics Working Paper Series January 2012.

  • • Hou Yilin and Smith Daniel L. 2006 “A Framework for Understanding State Balanced Budget Requirement Systems: Reexamining Distinctive Features and an Operational Definition” Public Budgeting and Finance XXVI(3): 22-45.

  • • Hou Yilin and Smith Daniel L. 2009 “Do State Balanced Budget Requirements Matter? Testing Two Explanatory Frameworks” Public Choice CXLV(1): 57-79.

  • • Institute For Truth in Accounting 2009 The Truth About Balanced Budgets: A Fifty State Study State Data Lab 25.

  • • Knight Brian G. 2000 “Supermajority Voting Requirements for Tax Increases: Evidence from the States” Journal of Public Economics LXXVI(1): 41-67.

  • • Luppino-Esposito Joe 2014 The Worst State Budget Gimmicks of 2013 STATE BUDGET SOLUTIONS http://www.statebudgetsolutions.org/publications/detail/the-worst-state-budget-gimmicks-of-2013.

  • • Lusvardi Wayne 2011 Calif. Gov. Jerry Brown Debt Gimmicks 'Balance' Budget WATCHDOG.ORG (June 14 2011) http://watchdog.org/9892/calif-gov-jerry-brown-debt-gimmicks-%E2%80%98balance%E2%80%99-budget.

  • • Mahdavi Saeid and Westerlund Joakim 2011 “Fiscal Stringency and Fiscal Sustainability: Panel Evidence from the American State and Local Governments” Journal of Policy Modelling XXXIII(6): 953-969.

  • • Marino Richard J. and Waddell Colleen 2001 Revised Lease and Appropriation-Backed Debt STANDARD & PooR's RATING SERVICES June 13 2001.

  • • McCall H. Carl 1996 Fiscal Review of the Enacted 1995-1996 Budget News from the Office of the New York State Comptroller.

  • • McGrane Reginald C. 1935 Foreign Bondholders and American State Debts Macmillan New York

  • • Musso Juliet Ann Graddy Elizabeth A. and Bravo Grizard Jennifer 2009 “Budgetary Arrangements in the 50 States: In Search of Model Practices” in Garrett Elizabeth Graddy Elizabeth A. and Jackson Howell E. (eds) Fiscal Challenges. An Interdisciplinary Approach to Budget Policy Cambridge University Press 251-270.

  • • National Association of State Budget Officers 2008 Budget Processes in the States Washington D.C. NASBO and the following reports available at https://www.nasbo.org/budget-topics/state-budget-processes.

  • • National Conference of State Legislatures 1996 State Balanced Budget Requirements: Executive Summary available at http://www.ncsl.org/research/fiscal-policy/state-balanced-budget-requirements.aspx.

  • • National Conference of State Legislatures 2010 NCSL Fiscal Brief: State Balanced Budget Provisions October 2010.

  • • Nowlan James D. Gove Samuel K. and Winkel Richard J. 2010 Illinois Politics. A Citizen’s Guide University of Illinois Press Champaign IL.

  • • O’Connor Evan 2015 “Caught Off-Balance: How Implementing Structural Changes to State Balanced Budget Requirements Can Foster Fiscal Responsibility and Promote Long-Term Economic Health” British Columbia Law Review LXVI(1): 351-388.

  • • Pinsky David E. 1963 “State Constitutional Limitations on Public Industrial Financing: An Historic and Economic Approach” University of Pennsylvania Law Review CXI(3): 265-327.

  • • Poterba James M. 1997 “Do Budget Rules Work?” in Auerbach Alan J. (ed) Fiscal Policy: Lessons from Economic Research MIT Press Cambridge MA 53-86.

  • • Poterba James M. and Rueben Kim S. 1999 “State Fiscal Institutions and the U.S. Municipal Bond Market” in Poterba James M. (ed) Fiscal Institutions and Fiscal Performance University of Chicago Press Chicago IL 181-208.

  • • Ratchford B.U. 1941 American State Debts Duke University Press Durham NC.

  • • Ravitch Richard 2010 A Five-Year Plan to Address the New York State Budget Deficit March 20 http://www.rockinst.org/pdf/budgetary_balance_ny/2010-03-10-LG_FYFP.pdf.

  • • Rodriguez Tejedo Isabel and Wallis John Joseph 2012 “Fiscal Institutions and Fiscal Crises” in Conti Brown Peter and Skeel David A. Jr. When States Go Broke: The Origin Context and Solutions for the American States in Fiscal Crisis Cambridge University Press Cambridge UK 9-39.

  • • Rubin Dale F. 1993 “Constitutional Aid Limitation Provisions and the Public Purpose Doctrine” Saint Louis University Public Law Review XII(1): 143-167.

  • • Schragger Richard C. 2012 “Democracy and Debt” The Yale Law Journal CXXI(4):860-886.

  • • Sexton Terri A. et al. 1999 “Proposition 13: Unintended Effects and Feasible Reforms” National Tax Journal LII(1): 99-112.

  • • Shadbegian Ronald J. 1996 “Do Tax and Expenditure Limitations Affect the Size and Growth of State Government?” Contemporary Economic Policy XIV(1): 22-35.

  • • Skeel David A. Jr. 2012 “State Bankruptcy from the Ground Up” in Conti Brown Peter and Skeel David A. Jr. When States Go Broke: The Origin Context and Solutions for the American States in Fiscal Crisis Cambridge University Press Cambridge UK 191-213.

  • • Skidmore Mark 1999 “Tax and Expenditure Limitations and the Fiscal Relationships Between State and Local Governments” Public Choice XCIX(1/2): 77-102.

  • • Sterk Stewart E. and Goldman Elizabeth S. 1991 “Controlling Legislative Shortsightedness: The Effectiveness of Constitutional Debt Limitations” Wisconsin Law Review issue 6: 1301-1368.

  • • Tobin Donald B. 1996 “The Balanced Budget Amendment: Will Judges Become Accountants? A Look at State Experiences” Journal of Law & Politics XII(2): 153-193.

  • • Topinka Judy Baar 2001 “Comptroller of Illinois Revenue Grows Bill Backlog Remains” The Illinois State Comptroller’s Quarterly 6 2012 at http://www.ioc.state.il.us/index.cfm/linkservid/A1F6980B-1CC1-DE6E-2F488540A8DB45B3/showMeta/0/.

  • • U.S. General Accounting Office (1995) Balanced Budget Requirements: State Experiences and Implications for the Federal Government (GAO/AFMD-93-58BR Washington D.C.: GAO 1995) available at http://archive.gao.gov/d44t15/148877.pdf.

  • • Valente William D. et al. Cases and Materials on State and Local Government Law 5th ed. West Group St. Paul MN.

  • • Wallin Bruce A. 1995 “Massachusetts: Downsizing Government” in Gold Steven D. (ed) The fiscal crisis of the states: Lessons for the future Georgetown University Press Washington DC 252-295.

  • • Wallis John Joseph 2002 Constitutions Corporations and Internal Improvements: American States 1842-1852 Unpublished Manuscript University of Maryland Department of Economics.

  • • Wetterich Chris 2011 “Supreme Court OK’s fund ‘sweeps’ to balance state budget” The State Journal-Register October 31 2011.

  • • White James H. III 2002 “Constitutional Authority to Issue Debt” Cumberland. Law Review XXXIII(2): 561-574.

  • • Williams Bob 2013 Reality-Based Budgeting: How to Permanently Resolve State Budget Gaps STATE BUDGET SOLUTIONS http://www.statebudgetsolutions.org/publications/detail/reality-based-budgeting-how-to-permanently-resolve-state-budget-gaps.

  • • Wolman Harold L. and Peterson George 1981 “State and Local Government Strategies for Responding to Fiscal Pressure” Tulane Law Review LV(3): 773-819.

Journal information
Impact Factor

CiteScore 2018: 0.04

SCImago Journal Rank (SJR) 2018: 0.105
Source Normalized Impact per Paper (SNIP) 2018: 0.03

Target audience: researchers, academics, practitioners interested in the field of political, economic and legal issues in federal states, regional organizations, and international organizations at global level
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 247 109 6
PDF Downloads 146 73 4