State Constitutions and Fiscal Policy

This paper proposes a framework for studying the relationship between fiscal policy and state constitutions in terms of direct and indirect fiscal restraints and pressures. Fiscal restraints such as balanced budget rules limit the scope of government, while fiscal pressures such as education rights expand or place demands on government. After detailing the types of fiscal restraints and pressures in state constitutions, this paper discusses four limitations of state constitutions as they relate to achieving sustainable fiscal policies. It then discusses five principles for reform moving forward and calls for giving legislators more discretion about substantive policy matters while placing bounds on the overall scope of government. This paper provides guidance for policymakers and others who want to maintain a state’s excellent fiscal health or address budget problems.

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