State and Local Fiscal Policy

State and Local Fiscal Policy

Thinking Outside the Box?

Studies in Fiscal Federalism and State–local Finance series

Edited by Sally Wallace

In this broad and illuminating work, experts on public finance discuss innovations in state and local tax policy that have been implemented or considered over the course of the last three decades. The authors provide original work that analyzes whether state and local governments have ‘gone outside the box’ to deal with the strains of current public finances or have gotten along by adhering to the status quo. This book provides researchers, students and policy makers with evaluations and analyses by well-known scholars in the area of state and local public finance of actual practices and analysis of potential policy changes for the future.

Chapter 8: Reaching and Maintaining Structural Balance: Leaders in the States

Katherine Willoughby

Subjects: economics and finance, public finance, public sector economics, politics and public policy, public policy


Katherine Willoughby INTRODUCTION This chapter examines state governments in the USA indicating strong ‘structural balance’ as defined and examined by the Government Performance Project (GPP), a research effort supported by the Pew Charitable Trusts. The initial and primary goals of the GPP are to gather data that supports ‘governments’ understanding of their management functions, including where to make improvements and how their systems compare to the management systems of other governments. In addition, the public is made more aware of how their government is performing and so is better able to hold leadership accountable’ (Crawford, 2002, p. 15). Structural balance is defined here as the ability of government to support ongoing expenditures with ongoing revenues – this concept is measured by examining tax structures, the existence of countercyclical devices, financial management strategies and various fiscal ratios. This research uses information generated by the most recent iteration of the GPP survey of the 50 US state governments, conducted in 2007 with results published in 2008 (see Barrett and Greene, 2008). The chapter begins with an overview of the recent fiscal condition of state governments and relays the concerns of current governors regarding reaching and maintaining structural balance. Then, an accounting of the GPP grading methodology and criteria used to measure state budget and financial management is provided. The next section assesses the results of the 2008 GPP, concentrating on state management in those governments indicating positive structural balance. This exploratory effort seeks to characterize the budget and financial management strategies of state...

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