The Impact of Budget Stabilization Funds on State General Obligation Bond Ratings |
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| Authors: | CLEOPATRA GRIZZLE |
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| Institution: | Robert F. Wagner Graduate School of Public Service, New York University, 295 Lafayette Street, 2nd Floor, New York, NY 10012 |
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| Abstract: | 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. |
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