Thinking Outside the Box?
Studies in Fiscal Federalism and State–local Finance series
Edited by Sally Wallace
Comments on ‘Reaching and maintaining structural balance: leaders in the states’ and ‘Fiscal limitations on local choice: the imposition and effects of local government tax and expenditure limitations’ Kurt Thurmaier At first glance, there would not seem to be much conjunction of the contributions by Katherine Willoughby and Daniel Mullins in this volume. Willoughby discusses performance management issues at the state level, and Mullins analyzes the cumulative impact of decades of tax and expenditure limitations on local governments. Considered together, however, these contributions are complementary analyses that bring insight into the current and future flexibility of state and local governments to manage the current fiscal crisis and to evolve with emerging fiscal conditions and demands. Willoughby’s analysis of state finances and budgeting focuses attention on how states are reaching and maintaining structural balance. The Government Performance Project (GPP)1 has provided descriptive reporting of multiple measures of financial performance of states for several years. Willoughby draws our attention to structural balance in the states because there are many fiscal policy issues reflected in whether or not a state has a strong, moderate or weak structural balance performance. Structural balance is defined 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’. More specifically, the GPP measures structural balance as ‘year-end unreserved budget balance (general fund balance plus rainy-day fund balance) as a percentage of general fund expenditures’. There...
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