The Hidden Consequences of Balanced Budget Requirements

2012 ◽  
Author(s):  
Anna M. Costello ◽  
Reining Petacchi ◽  
Joseph Peter Weber
Keyword(s):  
Balanced Budget ◽  
Balanced Budget Requirements

Balanced Budget Requirements Revisited

2021 ◽  
Vol 49 (5) ◽  
pp. 635-672
Author(s):  
Sharon N. Kioko ◽  
Michelle L. Lofton
Keyword(s):  
Empirical Analysis ◽  
Financial Statements ◽  
General Fund ◽  
Fund Balance ◽  
Fund Balances ◽  
Balanced Budget ◽  
Using Data ◽  
Balanced Budget Requirements

We test the effect of balanced budget requirements (BBRs) on budget outcomes using data published in audited financial statements. With a focus on the General Fund, we find states frequently reported deficits in their adopted budgets and relied on sizeable and favorable expenditure variances to close budget gaps before the end of the budget period. Empirical analysis shows that technical or strict BBRs procedures did not increase the likelihood that a state would report a balanced budget. We corroborate our findings using fund balance data. If technical or strict BBRs are effective, states would report higher fund balances, all else equal. Results show that states that adopted political BBRs reported lower fund balances. More importantly, the adoption of strict or technical BBRs did not lead to higher fund balances.

Balanced Budget Rules and Expenditure Limits: Lessons from the US and Australia and Implications for the EU

2012 ◽  
Vol 13 (6) ◽  
pp. 607-636
Author(s):  
Mark Humphery-Jenner
Keyword(s):  
United States ◽  
The United States ◽  
European Countries ◽  
Political Will ◽  
Constitutional Amendments ◽  
The Us ◽  
Balanced Budget ◽  
Tax And Expenditure Limits ◽  
Balanced Budget Requirements ◽  
The Eu

Governments periodically receive accusations of over-spending. These accusations are sometimes warranted. Some commentators propose that strict tax and expenditure limits (TELs) and/or balanced budget requirements (BBRs) may resolve excessive expenditure. Governments can implement TELs and BBRs through constitutional amendments, statutory schemes, or non-binding aspirational goals. They have been proposed as a remedy to allegations of over-spending in some European countries. However, it is not entirely clear if TELs or BBRs are effective or will resolve excess expenditure. I analyze TELs and BBRs as implemented in the United States and Australia. I argue that the Australian model of aspirational TELs and BBRs is beneficial if there is a political will to enforce them. However, if there is no such political will, then statutory (as opposed to constitutional) TELs and BBRs best strike a balance of flexibility and constraint.

Balanced Budget Requirements and Debt Brakes Feasibility and Enforcement

2014 ◽  
Vol 15 (1) ◽  
pp. 100-115 ◽  
Author(s):  
Werner Heun
Keyword(s):  
Side Effects ◽  
Public Debt ◽  
Balance Of Power ◽  
Fiscal Sustainability ◽  
Future Generations ◽  
Negative Side ◽  
Cyclical Fluctuations ◽  
Balanced Budget ◽  
Negative Side Effects ◽  
Balanced Budget Requirements

Abstract Balanced budget requirements should achieve fiscal sustainability, avoid a burden on future generations and allow for flexible reactions to cyclical fluctuations in the economy. There are many types of balanced budget requirements and debt limitations with different stringency. These budget restraints have a significant effect when they are applicable. The overall effect on public debt is small since there are many ways to circumvent or evade the restraints. Therefore budget restraints have substantial negative side effects. Public debt is transferred into less controllable budget areas, the structure of governments becomes fragmented and the balance of power is shifted away from the democratically accountable legislature.

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