State fiscal reserves: Supplementation and substitution over economic boom and bust years

Christian Buerger, Vincent Reitano and Ciana Sorrentino

Public Budgeting & Finance, 2022, vol. 42, issue 1, 98-118

Abstract: During the Great Recession and the start of the COVID‐19 pandemic, practitioners and scholars alike looked to fiscal reserves as a means to overcome fiscal pressure on state budgets. This study builds on the literature exploring the association between budget stabilization funds and unassigned and unreserved balances (UUBs) during economic booms and busts and under different institutional settings. We find that BSFs supplement UUBs during economic booms and substitute for them during economic busts. Institutional rules strongly influence the relationship between both saving instruments.

Date: 2022
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https://doi.org/10.1111/pbaf.12311

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