Fiscal Limits and State Fiscal Structure: An Analysis of State Revenue Structure and Indebtedness

Myungsoon Hur

Municipal Finance Journal, 2007, vol. 28, issue 3, 19 - 35

Abstract: Most states in the United States employ various methods of fiscal constraint. This study examines whether tax and expenditure limitations (TELs) and borrowing limits, as well as the way in which they interact with one another, affect the structure of state revenue and indebtedness. The results of the study indicate that these limits influence the finances of the state government and that an interaction exists between state TELs and debt limits. More specifically, TELs have resulted in reducing the tax burden but also in increasing non-tax revenue and debt issues. However, debt limits have not slowed the growth of debt but have reduced tax revenue. It appears that states with fiscal limits find less constrained ways of financing in order to make up for a reduction in tax revenue.

Date: 2007
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