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What Stabilizes State General Fund Expenditures in Downturn Years—Budget Stabilization Fund or General Fund Unreserved Undesignated Balance?
Author(s) -
Hou Yilin
Publication year - 2003
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/1540-5850.2303004
Subject(s) - economics , fund accounting , balance (ability) , monetary economics , finance , accounting , accounting information system , financial accounting , medicine , physical medicine and rehabilitation
This article strictly defines the budget stabilization fund (BSF) as a counter‐cyclical reserve, and with a panel data set examines the effects of BSF and general fund unreserved undesignated balances (UUB) on stabilizing state general fund expenditure during downturns. The article finds that BSFs bolster spending in lean years: each percentage point increase of BSF balance as a percent of general fund expenditure can minimize negative expenditure gap by a quarter percentage point. But the article does not find evidence that UUB is a counter‐cyclical fiscal tool, indicating that wide adoption of BSF may have changed the nature and use of UUB.