Interregional Fiscal Accounting

Fiscal devolution fiom federal to state jurisdictions gives states more authority but also more responsibility for redistributing and stabilizing income. Both the revenue and expenditure sides of a state's budget are affected. This paper describes a social accounting matrix approach to documenting multi‐regional, multi‐jurisdiction fiscal accounts, called a fiscal SAM. Two of the many potential uses of a fiscal SAM are demonstrated. First, a fiscal SAM of rural, urban, and metro areas of Iowa is used directly to describe and compare the benchmark net fiscal situations of interdependent regions. Second, it is used to analyze the impacts of an economic downturn under a block‐grant welfare system. Substate regions are relatively more specialized than state or national economies. Thus, for example, shocks to agriculture will directly affect agriculture‐dependent counties more than other types of counties. Substate regions are also more interdependent than states, as well as more open than the nation as a whole. This means that indirect and spatial spillover effects of fiscal and other exogenous changes can be surprisingly large between counties. Here, analysis of fhe multipliers highlights the relative intensities of within and across‐region effects of changes in the form of intergovernmental transfers. The multiplier simulation estimates the relative impacts and spillover effects of economic shocks under the new regime.