How and when do structural deficits reveal themselves? The case of Indiana
Journal of Public Budgeting, Accounting & Financial Management
ISSN: 1096-3367
Article publication date: 1 March 2010
Abstract
Do state governments have the ability to predict the onset, duration, and depth of structural fiscal crisis? The State of Indiana had a particularly difficult time recovering from the recession that began in April 2001. Painful expenditure restraint and substantive revenue increases were necessary simply to "break even" from 2002 through 2006. Could early warning signs have permitted more timely actions to avert the subsequent pain? Using monthly cash receipts and balances, we test whether these data hold predictive value in forecasting the onset and severity of fiscal imbalance. The evidence strongly suggests that the structural character of the 2001-02 deficit and its subsequent depth was discernible in the cash receipts stream early enough to take ameliorating action. That the state did not do so reflects budgetary psychology more than the deficit’s predictability.
Citation
Kravchuk, R.S. and Stone, S.B. (2010), "How and when do structural deficits reveal themselves? The case of Indiana", Journal of Public Budgeting, Accounting & Financial Management, Vol. 22 No. 4, pp. 487-510. https://doi.org/10.1108/JPBAFM-22-04-2010-B002
Publisher
:Emerald Publishing Limited
Copyright © 2010 by PrAcademics Press