Federal–State Budgetary Interactions

Abstract

The foregoing chapters on federal fiscal policy never stray far from the fundamental goal of balance. Some may focus on near-term balance; others may be more concerned with long-term actuarial balance in major social insurance programs' financing mechanisms; still others may address the intergenerational equity of the unified federal budget. A simple-minded attempt to translate these concerns to the state level would suggest that states have no significant structural budgetary problems: All but one state is required to balance its budget annually, and all regularly do so. Sometimes balance comes easily; sometimes it comes amidst pitched political battles with temporary government shutdowns. In the end, however, all states have budgets that, at least to a first approximation, are balanced. The question of balance, per se, therefore is not particularly central to debates about state fiscal policy.