Abstract
State governments have dramatically expanded their use of budget stabilization funds (BSFs) in recent decades. While stabilization funds have the potential to assist states in smoothing fluctuations in the budget, the extent to which balances in stabilization funds are substitutable with general fund balances is not yet resolved. Using new panel unit root tests, this paper finds evidence of unit roots in data series used by previous researchers. After accounting for the non-stationarity, I find strong evidence that monies retained in stabilization funds are, to a large degree, substitutable with monies held in the general fund.
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