Balanced Budget Requirements Revisited

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.

A Study on Fiscal Risk of China’s Employees Basic Pension System under Longevity Risk

It is generally accepted that China’s Employees Basic Pension System (CEBPS) cannot cover its expenses. The government needs to fill the gap in income and expenditure with fiscal revenue to ensure sustainability of the system, which may cause it to take fiscal risk caused by the volatility of the fund gap. In this article, through the establishment of a prediction model for the income and expenditure of CEBPS with dynamic mortality, we aimed to measure the fiscal risk caused by longevity risk and provide policy basis for the government. We found that longevity risk leads to serious fiscal risk. The income and expenditure gap of CEBPS fluctuates greatly, and the 2.5% and 97.5% quantiles of fund balance in 2067 are 1.52 and 0.44 times the expected value, respectively. The knock-on effect of fiscal risk, measured by value-at-risk (VaR), is 1.15 times gross domestic product and 4.75 times state fiscal expenditure in 2020. In this article, we not only calculate the expected value like the other literatures but also discuss the volatility of the CEBPS fund gap.

Charter Schools Have Rainy Days Too! But Are They Ready for When It Pours?

Nearly 30 years since their inception in the United States, charter schools are now a well-established educational option for parents and students. Although they are an important education provider schooling more than 3.1 million students nationwide, we know little about their ability to accumulate fiscal savings for weathering rainy days and sustaining smooth service. Unlike most other fiscal savings studies focusing on the unrestricted fund balance, we examine both restricted and unrestricted fund balances across Pennsylvania charter schools, this study’s unit of analysis. Using a Newey-West regression and data spanning the years 2011–2019, we show that charter schools consider all fund balance classifications when making savings decisions; albeit the unrestricted was their primary savings vehicle. Given their limited revenue portfolio, they are left with only a few options for accumulating fiscal savings. Surplus from tuition payments and additional revenues from private funding sources appear as main fund balance boosters. Surprisingly, special education enrollment significantly increases the unrestricted fund balance, a finding that requires further attention from legislators and policy makers. Concerns are also raised about participation in the state pension system as it absorbs a significant amount of slack that otherwise could be used for other purposes. Overall, most charter schools retain inadequate fiscal savings not capable of insulating their operation from revenue volatility and other contingencies. Statutory fund balance minimums and the adoption of formal fund balance policies articulating how savings are accumulated, used, and replenished should, therefore, be considered.

The SONS Money Tale: From Exxon Valdez to Deepwater Horizon to ??

Synopsis SONS (Spill of National Significance) have been extensively studied from multiple perspectives. In the realm of the Incident Command Structure (ICS) there have been numerous Operations, Planning, and Logistics examinations, reviews, and recommendations. The fourth ICS node – Finance – has seen little such scrutiny or review. This paper, written by two individuals at the heart of each respective response, will address that gap and identify the problems that arose, were solved, or remain problematic for the next SONS that occurs in the United States. Each spill posed different problems, driven by statute, prior experience, fiscal systems, and the expectations of outside stakeholders. The paper will examine the following dimensions. 1) The available fund balance at the start of the response, and how the fund could be replenished under existing statute.2) The financial role taken by the spillers/responsible parties.3) The mechanisms to provide response funding to the FOSC during the incident.4) Funding National Contingency Plan participants (Federal, State, Local) supporting the FOSC response.5) Funding Trustee led natural resource damage assessments and damage restoration plans during and after the response concluded.6) Payment of claims to injured third parties.7) Billing the spillers/responsible parties for the incident costs and the disposition of the resulting payments. The paper will conclude with an examination of the financial issues that remain and will probably arise for the next SONS. It will summarize possible solutions, reflecting when appropriate a number of legislative changes that have been proposed by various parties.

The Sustainable Development and Expenditure: Revenues Nexus of the WII Fund in China

Work-related injury insurance (WII) has undergone a long period of rapid growth in China. Therefore, its sustainability, funding, and system of payments deserve serious attention. By analyzing the changes of the numbers of insured, the number of compensated, and the cumulative balance of WII Fund, this article systematically reviews and summarizes the various stages of the development of WII in China. The relationship between the WII Fund’s revenue and expenditure between 1997 and 2018 is analyzed using statistical methods, including the augmented Dickey–Fuller (ADF) unit root test, the cointegration test, the Granger causality test and an error correction model. Since 1996, China’s WII has been repeatedly adjusted and constantly growing. Our empirical evidence shows that there is a long-term equilibrium and cointegration relationship between the WII Fund’s revenue and expenditure. Revenue is the Granger cause of expenditure, but it does not conform to the fund-raising principle. WII Fund has a large accumulated balance over the years, which violates the principles of fund management and has caused considerable controversy. China’s WII has undergone several regulatory upgrades and management mode adjustments to better ensure its sustainable development. The fund has maintained a basic balance of revenue and expenditure. Nevertheless, at present, China’s WII Fund is facing the pressure of declining fund balance and, as such, medium- and long-term development risks deserve careful attention. As there is no sufficient literature on WII Fund management, this study is a valuable contribution to the existing body of knowledge.

Socio-Hydrological Modelling to Assess Reliability of an Urban Water System under Formal-Informal Supply Dynamics

Increasing water scarcity in developing world cities combined with poor performance of water supply systems has led to an increasing reliance on informal water supply systems. Although the availability of informal supply provides a coping mechanism that enables water consumers to be resilient to failures in water supply, the longer-term effects on formal water supply systems (FWSS) are uncertain, with a potential reduction of tariff recovery (RT), and in turn a service provider’s financial sustainability. This motivates an analysis of the coevolving dynamics and feedbacks involved in water systems where formal and informal components co-exist. Investigating Hyderabad, Pakistan as a case study, a dynamic socio-hydrologic system model is built, comprised of a formal system’s water and fund balance, consumer behaviour and infrastructure conditions. Simulations are executed on a monthly basis at a household level and for a 100-year period (2007–2107) using data available from years 2007–2017. Demand shift to informal is observed to be weakly associated with lower recovery rates, with household income as a major predictor. The FWSS’s financial balance, predominantly driven by infrastructure condition, appears to be less sensitive to recovery of a tariff to generate sufficient revenue.

The study of changes in the land fund balance to manage the sustainable spatial development of the developed and developing territories in Russia

The analysis of changes in the land fund balance reflects the implementation of the scientific paradigm – “minimum initial information - maximum valid generalizations”. Active indicators, namely the shares of different types of land in the composition of certain land categories from the total area of a certain land category should be a priority. In 2011-2017, the share of settlement lands in the total land fund in the Russian Federation increased from 1.15% to 1.19%, industrial and other special-purpose lands - from 0.99% to 1.02%, which corresponds to modern Russian ideas about the spatial, but extensive, development of territories. The rate of change in the shares of different lands from the area of lands of different categories, %/year, is proposed to use an integrating estimated indicator for the spatial development of territories. The share of agricultural lands in the Russian Federation was increasing in the composition of settlement and industrial lands at a rate of 0.03%/year, which indicates their degradation. The share of forest lands decreased in the composition of industrial lands (-0.09%/ year). These lands served as a “source” of new farming lands for agricultural lands. In the settlement and industrial lands, the share of building land was increasing (0.06%/year), while the share of land under roads was decreasing (from -0.03 to -0.05%/year) due to their unbalanced development. Disturbed lands also need their intensive reclamation.

Managing Fiscal Volatility: An Empirical Analysis of California County Governments’ Saving Behavior

The increase in the importance of countercyclical behavior has expanded the research on fiscal saving behavior to local governments. In particular, the Great Recession has shown that local governments are not immune to economic shocks, spurring interest in local savings behavior. County governments are particularly vulnerable to negative economic shocks, as they rely more on intergovernmental revenues. With a focus on the determinants of fiscal slack, we empirically examined the relationship between tax revenue volatility and unassigned fund balance in 57 California counties over the period of 2004 to 2014. Employing spatial regression models, our empirical analysis revealed that revenue volatility is positively associated with general unassigned fund balance in California counties, and revenue diversification has partially positive effects on the fund balance. We infer that tax revenue volatility threatens the stabilized delivery of local services, which suggests that local governments should look to the factors that potentially affect revenue stability to improve their capacity for financial management. The spillover effects from the findings suggest that spatial effects need to be taken into account in analyzing the determinants of local fiscal slack.