The State Capital Funding Structure: Its Effect on the Operating Budget and Capital Spending Growth

Jun Peng

Municipal Finance Journal, 2005, vol. 26, issue 2, 1 - 18

Abstract: This study examines the relation between the state capital funding structure and the operating budget and long-term capital spending growth. It examines the way in which differences in capital funding structure affect both the states’ abilities to use the capital funding structure as a countercyclical budgetary tool as well as states’ long-term capital spending growth. An analysis of 40 states’ capital spending and funding sources between 1988 and 2002 found that states relying primarily on the general fund for capital spending were able to change the capital funding structure as a way of managing the cyclicality of the operating budget and that states relying primarily on debt financing for capital spending saw a lower long-term spending growth rate than states relying more on current revenue appropriation.

Date: 2005
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