Balanced Budget Requirements Research Articles

BALANCED BUDGET RULES AND FISCAL POLICY: EVIDENCE FROM THE STATES

Analysis of state-level balanced budget requirements, and discussion of whether lessons learned in that context might be applied in the federal context. Points to links between state balanced budget mechanisms and fiscal institutions and policy.

The Impact of State Policies to Limit Debt Financing

The growing use of debt financing by all governments in the United States has attracted the attention of many observers.' Numerous observers have expressed alarm at that growth and have called for limitations on debt financing. The analysis that follows will assess the effectiveness of provisions designed to restrict the use of debt financing by state governments. Some analysts regard the growth in government debt as an inevitable outgrowth of public-sector budget processes. Agency officials seek to demonstrate their influence and to please program clienteles by pressing for expansion of agency budgets and preservation of established programs. Crises, citizen demands, and interest-group lobbying create pressure to provide more support for public programs, particularly when spending items are considered individually rather than in the context of overall totals. Elected officials try to placate program beneficiaries by approving increased appropriations, but taxpayers resist revenue increases. Deficit financing, therefore, offers direct, immediate benefits: more program benefits and lower taxes. The risk of resulting inflation is uncertain and remote; the cost of repaying the debt can be shifted partly to future generations.2 The combination of pressures to spend and reluctance to raise revenues produces an almost irresistible urge to finance programs by borrowing. Adherents of this perspective suggest that reforms of the budget process may be necessary in order to bring the situation under control. Balanced budget requirements, debt limits, and greater executive powers to restrain spending are among the reforms that have been proposed in order to reduce or eliminate reliance on borrowing.3

Resolving Double Moral Hazard Problems with Buyout Agreements

We consider a double moral hazard problem in which the efforts of two parties, e.g., a principal who initially owns an enterprise and a risk-averse agent in the enterprise, are not verifiable. The realized value of the enterprise's random profit stream is also unverifiable. There is also no third party to break a balanced budget requirement. Nevertheless, the double moral hazard problem can be resolved completely and costlessly when the principal, who can observe the agent's actions, has the option of requiring the agent to purchase the enterprise at a prenegotiated price.

State Support for Constitutional Balanced Budget Requirements

Analysis of state passage of legislative resolutions calling for a convention to propose a balanced budget amendment to the U.S. Constitution reveals no tendency for states passing the resolutions to have constitutional balanced budget requirements or debt limits of their own. States passing the resolutions tend to have more conservative electorates.

Uncertainty and National Nominating Coalitions

Previous articleNext article No AccessArticlesUncertainty and National Nominating CoalitionsEugene B. McGregor, Jr.Eugene B. McGregor, Jr. Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by The Journal of Politics Volume 40, Number 4Nov., 1978 Sponsored by the Southern Political Science Association Article DOIhttps://doi.org/10.2307/2129906 Views: 4Total views on this site Citations: 17Citations are reported from Crossref Copyright 1978 Southern Political Science AssociationPDF download Crossref reports the following articles citing this article:BRADLEY STEWART CHILTON, DAVID C. NICE Triggering Federal Court Intervention in State Prison Reform, The Prison Journal 73, no.11 (Nov 2016): 30–45.https://doi.org/10.1177/0032855593073001003David C. Nice The State Safety Participation Program, The American Review of Public Administration 23, no.11 (Jul 2016): 43–56.https://doi.org/10.1177/027507409302300104David C. Nice State Regulation of Employee Drug Testing Laboratories, Review of Public Personnel Administration 11, no.33 (Jul 1991): 66–78.https://doi.org/10.1177/0734371X9101100305Robert D. Plotnick, Richard F. Winters Party, Political Liberalism, and Redistribution, American Politics Quarterly 18, no.44 (Nov 2016): 430–458.https://doi.org/10.1177/1532673X9001800403Beth Moncure Winn, Marcia Lynn Whicker INDICATORS OF STATE LOTTERY ADOPTIONS, Policy Studies Journal 18, no.22 (Dec 1989): 293–304.https://doi.org/10.1111/j.1541-0072.1989.tb00834.xDavid C. Nice STATE PROGRAMS FOR CRIME VICTIMS, Policy Studies Journal 17, no.11 (Sep 1988): 25–41.https://doi.org/10.1111/j.1541-0072.1988.tb01013.x David C. Nice The Item Veto and Expenditure Restraint, The Journal of Politics 50, no.22 (Oct 2015): 487–499.https://doi.org/10.2307/2131805Doh C. Shinn, Jack R. Slik THE PLURALITY OF FACTORS INFLUENCING POLICYMAKINC: SCHOOL REFORM LEGISLATION IN THE AMERICAN STATES, 1982-84, Review of Policy Research 7, no.33 (Mar 1988): 537–562.https://doi.org/10.1111/j.1541-1338.1988.tb00852.xArnold Fleischmann, David C. Nice States and PACs: The legacy of established decision rules, Political Behavior 10, no.44 (Jan 1988): 349–363.https://doi.org/10.1007/BF00990808David C. Nice State regulation of railroads, Transportation Research Part A: General 21, no.66 (Nov 1987): 411–420.https://doi.org/10.1016/0191-2607(87)90030-6 David C. Nice Incremental & Nonincremental Policy Responses: The States & the Railroads, Polity 20, no.11 (Nov 2016): 145–156.https://doi.org/10.2307/3234941D. C. Nice State-Financed Property Tax Relief To Individuals: a Research Note, Political Research Quarterly 40, no.11 (Mar 1987): 179–185.https://doi.org/10.1177/106591298704000113T. Wayne Parent, Calvin C. Jillson, Ronald E. Weber Voting Outcomes in the 1984 Democratic Party Primaries and Caucuses, American Political Science Review 81, no.11 (Aug 2014): 67–84.https://doi.org/10.2307/1960779 David C. Nice State Support for Constitutional Balanced Budget Requirements, The Journal of Politics 48, no.11 (Oct 2015): 134–142.https://doi.org/10.2307/2130929David C. Nice STATE PARTY IDEOLOGY AND POLICY MAKING, Policy Studies Journal 13, no.44 (Jun 1985): 780–796.https://doi.org/10.1111/j.1541-0072.1985.tb01618.xJeffrey E. Cohen, David C. Nice Changing Party Loyalty of State Delegations to the U.S. House of Representatives, 1953-1976, Western Political Quarterly 36, no.22 (Sep 2016): 312–325.https://doi.org/10.1177/106591298303600209 David Nice Ideological Stability and Change at the Presidential Nominating Conventions, The Journal of Politics 42, no.33 (Oct 2015): 847–853.https://doi.org/10.2307/2130556

Note—Sufficient Conditions for Maintaining a Balanced University Budget

In a recent article, in Management Science, W. F. Massy [Massy, W. F. 1976. A dynamic equilibrium model for university budget planning. Management Sci. 23 (3, November) 248–256.] outlines an interesting difference equation model of the Stanford University budget system. He proceeds then to solve for first and second order (i.e., short-term) balanced budget conditions. However, Massy's assertion that the balanced budget requirement cannot be modeled “effectively” for an extended time horizon is inaccurate. This note shows that such long-range solutions are readily available from the eigenstructure of his model. We derive simple sufficient conditions for maintaining balanced university budgets. Related issues of balanced budget attainability, empirical correspondence, and policy feasibility are also discussed.