Abstract
Ohio is one of several states that has instituted a Budget Stabilization Fund to serve as a tool to fight the impacts of economic fluctuations on state finances. The optimal size and rate of contribution to the fund are explored in this study. A widely accepted target of 5 percent of general fund revenue for the budget stabilization fund is found inadequate to provide any degree of normalization of state general fund revenue when Ohio's recent fiscal experiences are examined. An optimal size of close to 13 percent emerges as a more likely target for Ohio along with an annual contribution rate approaching 4 percent of revenues in average non‐contractionary years.
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