Balanced Budget Requirements:
State Experiences and Implications for the Federal Government
AFMD-93-58BR: Published: Mar 26, 1993. Publicly Released: Mar 26, 1993.
- Full Report:
Pursuant to a congressional request, GAO provided information on: (1) states' balanced budget requirements; (2) states' experience in meeting those requirements; and (3) implications for a federal balanced budget.
GAO found that: (1) 48 states have balanced budget requirements; (2) states focus primarily on balancing the general fund, which includes general tax receipts and discretionary appropriations; (3) states do not have provisions for automatic spending cuts or other formula-based processes to implement their requirements; (4) many states give governors the authority to enforce balanced budget requirements throughout the fiscal year by unilaterally reducing state spending; (5) state tax and fee increases and spending cuts outweighed budget-balancing measures to use cash reserves and defer current year payments until the following year; (6) although most balanced budget requirements are not explicit regarding year-end balances, 39 states had balanced budgets every year since 1990; (7) factors motivating balanced budget actions include the expectation of balanced budgets and the concern that state bond ratings may decrease if the state does not balance its budget; and (8) the federal budget's unique macroeconomic role could be compromised by a strict balanced budget mandate.