Walking a Tightrope: Are U.S. State and Local Governments on a Fiscally Sustainable Path?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper develops a new measure of state and local fiscal sustainability called the "trend gap," which is based on socioeconomic and other fundamental factors and removes the shortterm influence of the business cycle. The paper estimates the trend gap and finds that the nationwide per capita trend gap has been on a growing path over the past three decades, a different conclusion than found in previous studies. Social insurance and income maintenance programs have played a major role in the growth of the trend gap, while pension and other post-employment benefits (OPEB) plans have become increasingly important in driving it up. In addition, there are large and growing disparities in the trend gap across states. Terms of use: Documents in EconStor may

Identifying Roles for Public Administrators to Foster Anticipatory Altruism for Severe Weather Preparedness

“…The authors argue that this form of public budgeting does not consider the long-term implications for future generations. Zhao and Coyne (2013) develop a measure of fiscal sustainability called the trend gap, which "reflects the long-term imbalance between service demand and the revenue-raising ability of state and local governments" (2). The authors find that the nationwide trend gap has increased over the last thirty years, indicating a highly unsustainable path and the dire need for policy change and reform in both the revenue and expenditure sides of the government budgetary process.…”

The role of intergovernmental aid in defining fiscal sustainability at the sub-national level

“…There are two distinct tracks in the analysis of fiscal sustainability concepts. One track emphasises the fiscal health of the jurisdiction in terms of whether or not the public sector is providing the appropriate level of public services financed with the appropriate level of revenue (Chapman, 2008; Ward and Dadayan, 2009; Zhao and Coyne, 2013). These are often based on median voter theory, on revenue and expenditure simultaneity, or on the role of the conflict between mandated expenditures and revenue limits.…”

“…In a recent working paper from the Federal Reserve Bank of Boston (Zhao and Coyne, 2013), the definition of fiscal sustainability has been enriched by the introduction of a trend gap and an explicit inclusion of social insurance and income maintenance programmes (as well as the continued inclusion of other post-employment benefits and pension contributions). Since social welfare programmes often have an intergovernmental component this is the beginning of a discussion of intergovernmental effects.…”