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Hou article on the budget stabilization fund published in Public Budgeting & Finance

Aug 11, 2004

Yilin Hou headshot

Yilin Hou


This article examines what leads to high balances of the budget stabilization fund (BSF) to make it a countercyclical fiscal tool. Checking state BSF laws, this article classifies BSF structural features into purposes, funding sources, balance caps, and use approval procedures. Using panel data (1979–1999) and controlling for related variables, this article tests the features' effects on BSF levels over the sample period and different phases of the economy to identify specific effects of the features in boom and lean years. The article also forwards policy recommendations for state governments to consider in designing or revising their BSF legislation.