State budget stabilization fund adoption: Preparing for the next recession or circumventing fiscal constraints?

Wagner, Gary A.; Sobel, Russell S.
January 2006
Public Choice;Jan2006, Vol. 126 Issue 1/2, p177
Academic Journal
The high rate of budget stabilization fund adoption during the 1980s is often attributed to the 1980–1982 recession. In this view, states adopted funds to prevent a recurrence of the fiscal crises experienced during that recession. An alternative hypothesis is that some funds adopted during this period were intended to circumvent tax and expenditure limit laws. We find that states with TELs in place were significantly more likely to adopt statutory funds, but were significantly less likely to adopt funds with stringent deposit and withdrawal rules, suggesting that some funds were adopted to circumvent existing fiscal constraints.


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