The Impact of State Policies to Limit Debt Financing

State policies intended to limit debt financing, either by requiringa balanced budget or by establishing constitutional limitationson debt, have been adopted in many states. A nalysis revealsthat stricter constitutional debt limitations are associatedwith lower levels of full faith and credit debt but show littlerelationship to overall state debt.     

The Impact of Energy Asset Privatisation on State Government Debt Management and Service Provision in Victoria and New South Wales

The purpose of this article is to look at the impact of the privatisation of the electricity and gas industries in the state of Victoria on the level of state government debt and subsequent ability of the state to deliver public services in the areas of health, education and law and order. In order to undertake this, a comparison is made with the state of New South Wales (NSW), where the privatisation of the electricity industry was often debated during the 1990s and 2000s, but never undertaken.     

State Debt Management Policy: A National Survey

The amount of outstanding, long-term, tax-exempt state debt has grown precipitously over the last decade, from $87 billion in 1977 to $264 billion in 1987. But there have been few attempts to carry out broad studies of basic state debt management policies, using comparative state data. As a result, policy-makers lack guidance as they attempt to adjust policies and procedures to meet the rapidly evolving requirements associated with public borrowing. This paper reports on a national survey of state debt manage ment policies - policies devoted to the planning, preparation, sale, and repayment of debt for which states consider themselves responsible.     

The Impact of Parties and Elections on Municipal Debt Policy in Mexico

Opportunistic electoral fiscal policy cycle theory suggests that all subnational officials will raise fiscal spending during elections. Ideological partisan fiscal policy cycle theory suggests that only left‐leaning governments will raise election year fiscal spending, with right‐leaning parties choosing the reverse. This article assesses which of these competing logics applies to debt policy choices. Cross‐sectional time‐series analysis of yearly loan acquisition across Mexican municipalities—on statistically matched municipal subsamples to balance creditworthiness across left‐ and right‐leaning governments—shows that all parties engage in electoral policy cycles but not in the way originally thought. It also shows that different parties favored different types of loans, although not always according to partisan predictions. Both electoral and partisan logics thus shape debt policy decisions—in contrast to fiscal policy where these logics are mutually exclusive—because debt policy involves decisions on multiple dimensions, about the total and type of loans.     

The Impacts of State Capital Management Programs on State Economic Performance

Although the normative literature advocates systematic capital management practices, empirical studies investigating the tangible benefits of these practices are rare. Based on previous findings that public investment affects economic growth, this study extends the model of government spending and economic growth to investigate the effect of systematic capital management programs on state economic performance. Using panel data from 1997 to 2004 and the Government Performance Project's data on state capital management practices, the empirical results indicate that highly systematic capital management programs positively alter the relationship between the state's capital spending levels and the state's economic growth rate.     

Corruption and State and Local Government Debt Expansion

Theories describing rent seeking in the public sector posit a number of negative fiscal outcomes that the choices of corrupt officials may generate. The evidence presented in this article shows that states with greater intensities of public corruption have higher aggregate levels of state and local debt. If corruption in the 10 most corrupt states were only at an average level, their public debt would be 9 percent lower, or about $249.35 per capita, all else being equal. Notably, institutional control measures may not have succeeded in restraining the expansion of state and local public debt in the presence of greater levels of corruption. State and local governments would achieve more efficient levels of fiscal discipline by curbing public sector corruption.     

An Approach to Measuring the Affordability of State Debt

Affordability is one important and widely accepted element of state and local debt policy. However, there is no well-established measure of affordability and no clear standard for making normative judgments about what amount of debt is affordable for a specific jurisdiction. This article suggests a six-step method for measuring affordability of state debt that provides a useful guideline for determining when a state may be entering a "danger zone" by having debt that exceeds norms of affordability.     

The Expected Impact of State Immigration Legislation on Labor Market Outcomes

In response to the dramatic rise in the number of unauthorized immigrants to the United States, every state has passed some form of immigration legislation. These laws appear to be predicated on a belief that unauthorized immigrants impose greater costs than benefits to state and local communities, including the labor market. The purpose of this paper is to examine some evidence on what workers should expect if the immigration legislation is successful in eliminating undocumented workers from states' labor markets. © 2012 by the Association for Public Policy Analysis and Management.     

State Debt Limits: How Many Are Enough?

There is a growing concern among state policy makers that unrestrained debt may exceed politically acceptable or financially sustainable levels of debt. Many states have established limits to restrict debt, but many of these limits are circumvented through issuing more complex and specialized bonds. In this article, we focus on the use of debt limits as an instrument to manage a state's debt in context of two key questions: (1) under what circumstances should a state consider multiple debt limits and (2) if multiple limits are established, what factors should be considered in setting such multiple limits. In addressing these issues, we consider the theoretical and conceptual issues associated with setting debt limits, we highlight current state debt limit policies, and discuss factors that appear to be influencing decisions to establish and set multiple limits.     

The Impact of Budget Stabilization Funds on State General Obligation Bond Ratings

This study examines the impact of budget stabilization funds (BSFs) on state general obligation (GO) bond credit ratings. While a number of past empirical papers have examined the effect of various fiscal institutions on state GO bond ratings; to date, BSFs have been largely ignored in the literature. Model estimates show that neither the choice to have a statutory BSF versus a constitutional BSF or the size of a BSF has any apparent impact on credit ratings. However, weak deposit rules are associated with lower credit ratings while weak withdrawal rules are associated with higher credit ratings.     

Strategic Treasury Debt Management in Public Policy

The Treasury should supplement its bond offerings with adjustable-rate coupon bonds. The adjustable coupon would be linked to the six-month Treasury bill auction yield. Given the different magnitude of adjustable and fixed mortgage rates, the interest servicing costs would be dramatically lower for the floating-coupon bonds. This idea is already a proven winner in the corporate bond market where close to 30 percent of new Eurobond offerings in the last 10 years have been adjustable-rate bonds. In addition to reducing servicing costs, the strategy will relieve some of the burden on the long-maturity fixed-coupon bonds. Reducing the supply of the fixed-coupon bonds should increase prices and decrease long-term yields. Reduction in long-term interest rates enhances spending, construction and capital expenditures. Most importantly, these bonds help enforce a low inflation policy.     

Fiscal Policy Composition,Public Debt,and Economic Activity

This paper uses a dynamic general equilibrium model i) toinvestigate how changes to different spending and revenue items of the budgetaffect economic activity and public finance; and ii) to evaluate thewelfare costs of alternative fiscal policy maneuvers. The paper shows that,unlike an increase in government purchases of final goods, an increasein public employment and transfers can have a contractionary effect onthe economy in the same way as a rise in tax rates. It also suggests thatfiscal adjustments implemented by cutting spending items increasehouseholds' welfare and are more effective in reducing the primary deficitand public debt than are increases in tax rates.     

Equity and Accountability: The Impact of State Accountability Systems on School Finance

Using an 11‐year panel data set containing information on revenues, expenditures, and demographics for every school district in the United States, we examine the effects of state‐adopted school accountability systems on the adequacy and equity of school resources. We find little relationship between state implementation of accountability systems and changes in school finance equity, though we do find evidence that states in which courts overturned the school finance system during the decade exhibited significant equity improvements. Additionally, while implementation of accountability per se does not appear linked to changes in resource adequacy, states that implemented strong accountability systems did experience improvements.     

The State in Environmental Management: The Ecological Dimension

A focus on 'modern' industrialized societies obscures both the great antiquity of the state and the powerful selective pressures that have led to the dominance of interstate competition, especially warfare. In pursuit of power, elites encouraged population growth and intensified the exploitation of the natural resource base, with progressively more severe ecological impacts. Modern technology has vastly amplified the problem. Though it makes possible sophisticated environmental management, that has been neglected for the demands of the military—industrial system. These ill-effects are reinforced by ignorance of ecology and inadequacy of traditional political thought. A major adaptive challenge faces modern states: to use their knowledge and resources for more humane, environmentally sensitive management and perhaps achieve a novel kind of steady state, or to renew emphasis on short-term competitive considerations.     

The Impact of Federal Preemption of State Antipredatory Lending Laws on the Foreclosure Crisis

State antipredatory lending laws (APLs) are designed to protect borrowers against predatory lending that can increase the risk of default and deplete the home equity held by borrowers. Federal regulators instituted preemption that limited the scope and reach of state antipredatory lending regulations for certain lenders. Based on the variation in state laws and the variation in the regulatory environment among lenders, this paper identifies the effects of federal preemption of state APLs on the quality of mortgages originated by preempted lenders. The results provide evidence of a relatively higher increase in default risk among loans exempted from strong state antipredatory laws. These results are most robust among refinance mortgages with adjustable interest rates—a large and highly dynamic market in the period of analysis. The findings provide initial evidence that preemption of state mortgage lending regulations may result in an increase in mortgage default risk, thus limiting consumer protection in the residential mortgage market.     

The Progressive Ratcheting of Environmental Laws: Impact on Public Management

One of the problem-making tendencies in environmental policymaking has been an incremental approach to regulation and control. Either because the full dimensions of an environmental problem are not perceived or because political resistance compels step-by-step action, environmental controls tend to be applied progressively, beginning with nominal, largely ineffectual, retroactive declarations. Failing to meet objectives, laws are toughened and extended year by year until the severty of sanctions begins to defeat their intended effects. The fractionized state of environmental law, focusing on specific problems of pollution and subject to changes in interpretation, makes observance and enforcement difficult. The National Environmental Policy Act of 1969 could have facilitated the unification of environmental policy; unfortunately presidents and congresses have not chosen to use it for this purpose. Meanwhile, because environmental protection per se is relatively new to public law and policy and has few roots in the common law, private citizens aggrieved by political obstruction of their expectations have appealed to the courts for relief and compensation. Conservative courts have granted this relief under the "taking" clause of the Constitution. Extraordinary measures in constitutional law may be necessary to resolve an impasse in public policy resulting from conflict between public interests and private rights as interpreted by the judiciary.     

Contextual Effects on Retrospective Economic Evaluations The Impact of the State and Local Economy

The theoretical premise of this study is that individual retrospective evaluations of the national economy, which have a clear impact on voting behavior in national elections, are influenced not only by the national economy but also by the state and local economic context. This hypothesis is tested by analyzing the effect that the unemployment rate in the individual's state and community has on the individual's retrospective evaluation of the national unemployment situation in 1992, using data from the 1992 American National Election Study survey, supplemented with data on the unemployment rate during the third quarter of 1992 for the respondent's community and state. The findings show that the state unemployment rate has a clear effect on retrospective evaluations of national economic conditions. This effect occurs apart from any effect on fear of unemployment, which is unaffected by the state unemployment rate. The community unemployment rate has little or no effect on retrospective economic evaluations, except for a small impact on personal unemployment experience. The contextual effect that we observe therefore is primarily sociotropic, not personal pocketbook, in nature. We suggest that the contextual patterning of information, perhaps especially through media reporting of economic conditions, is responsible for producing this effect.