What, truly, is a balanced budget?

We’ve had the good fortune, for some time now, of working with the Volcker Alliance on a series of projects and reports. The current effort involves a massive fifty-state analysis of practices of state budgets, and we thought Barrett and Greene, Inc. readers would benefit from hearing all about it. Bill Glasgall who spearheads the project was kind enough to write the following essay for us. Thanks, Bill.

Paul Volcker Photo Credit: Albert Cheung
Early June Project Meeting Photo Credit: Albert Cheung
William Glasgall photo credit: Albert Cheung

By William Glasgall

If you want to investigate the practices of all fifty US state budgets, what better way to do it than fan out across the country to do the research? That is the modus operandi of the Volcker Alliance’s Truth and Integrity in Government Finance Project, which is relying on a network of public finance professors and graduate students at eleven public administration and policy schools from New York to California to dig into a mountain of fiscal documents to help answer the question, “What, truly, is a balanced budget?”


That answer is critical because while forty-nine states require balanced budgets by law, and the lone holdout, Vermont, follows its peers’ example, how revenues and expenditures are mixed and matched can vary widely from state to state and year to year. In asking a common set of questions about the states’ budgeting practices, the researchers are highlighting which states use one-time revenue items to achieve balance; the state of pension funding and its relationship to annual or biennial budgets; whether and how states forecast long-term financial trends; and how transparent is each state’s budget process. The work follows the Alliance’s 2015 publication of Truth and Integrity in State Budgeting: Lessons from Three States, written by special project consultants Katherine Barrett and Richard Greene, as well as subsequent papers by the duo covering budget transparency and budget information sources for policymakers and civic groups, taxpayers, and the media.


In early June, Barrett and Greene joined Volcker Alliance Chairman Paul A. Volcker, President Tom Ross, Director Richard Ravitch Matt Fabian, project consultant with Municipal Market Analytics Inc., and the Alliance’s state and local team to meet in New York with academics from the eleven schools to discuss progress on the Truth and Integrity project. A full report on the research is planned for later in 2017, and preliminary findings recently appeared in the Bond Buyer newspaper. Among the findings in fiscal 2016:


• Half of the states failed to make contributions to public employee pension systems that the plans’ actuaries recommended.

• About 20 percent of states filled budget gaps with proceeds of asset sales, upfront payments on financings, or other financial transactions.

• Seven states borrowed funds to close budget deficits, while 17 shifted current-year costs to future years.

• Only a handful of states fully disclosed the cost of deferred infrastructure maintenance.

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