GASB Statement No. 34 required state and local governments to report information regarding general infrastructure in financial statements, to improve understanding of the organization's investments in capital assets. Some proponents suggested that this information would affect management practices and potentially resource allocation decisions, but initial survey data found limited evidence of effects. We use dynamic panel analysis covering 47 states from 1995 to 2009 to explore whether implementation of GASB 34 affected state highway capital and maintenance spending. We find evidence of increased capital spending, but no statistically significant change in maintenance expenditures. The choice of reporting method was not found to affect spending outcomes.
Purpose The purpose of this paper is to evaluate whether the additional infrastructure information in US state financial statements improves infrastructure quality. Design/methodology/approach Based on institutional theory, the authors developed six models and estimated them on a state panel data set. Findings The authors found that the implementation of the Government Accounting Standard Board (GASB) Statement No. 34 improved state highway infrastructure quality, and the states using the modified approach had a larger effect compared to the states using depreciation accounting. The authors further used a two-step path analysis and found that the implementation of GASB 34 indirectly improved highway quality through increasing state highway maintenance expenditures. From the empirical results, the authors conclude that the exercise of collecting and developing systems to track the additional data has provided the opportunity for officials to use the information to prioritize limited funding and improve their asset management practices. Practical implications Future research may extend this research by exploring the detailed micro-mechanisms of how decision makers use infrastructure information in their asset management practices, as well as by increasing the number of years in the panel data set to fully capture changes in behavior. Social implications In addition, governments currently using depreciation should be encouraged to move to the modified approach. Originality/value This is the first attempt to empirically examine the effects of GASB 34 on infrastructure condition.
This article examines how state tax and expenditure limitations (TELs) affect the size of fiscal reserves over election cycles. Using a panel data set of 47 U.S. states from 1986 to 2013, we find that the persistent pattern of electoral cycles in general fund balances (GFBs) disappears in states with stricter TELs. Regarding a budget stabilization fund balances (BSFs), the preelection and election downward effect diminishes and becomes statistically insignificant while the postelection upward effect increases and becomes significant in states with stricter TELs. Our findings reveal that the stringency of TELs not only eliminates electioneering's impact on GFBs but also coincides with increases in BSFs, particularly in postelection years. Consistent with the principal–agent theory, politicians tend to use a budget stabilization fund (BSF) as a secondary saving account to circumvent stronger TELs and save more BSFs after elections.
Routine maintenance spending for public infrastructure is critical for reducing life-cycle costs, and improving asset preservation and quality. Yet, states focus more on building new roads and expansion than maintaining existing assets’ conditions. Deferred maintenance costs are transferred to the future taxpayers, and they will eventually pay the expensive price. So far, there is little academic endeavor to examine the determinants of state and local routine maintenance spending. This study uses a panel data analysis covering 47 states from 1995 to 2009 to examine the effects of politics on state highway routine maintenance spending. The study finds that political incentive and conflict are key factors delaying state highway routine maintenance spending. The re-election-minded governors and legislatures tend to allocate less funding to maintenance to satisfy the current taxpayers. The study further finds that politically-divided states spend less on highway maintenance due to higher transaction costs in the policy-making process.
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