Factors Affecting State Budgetary Imbalances Elizabeth Madjlessi*

In order to assess contemporaneous trends in U.S. state budget practices, we apply OLS regression methods to panel data from 1997-2003. We consider four dependent variables: the annual balance of general fund expenditures and revenues, the amount of expenditures financed through bonds and per capita measures of each. We use eight categories of independent variables: annual, demographic, political, legal, spending, revenue, capital, and funding in our regression as well. This paper reaffirms previous findings that there are strong intertemporal interactions occurring in this process as states are more likely to withstand annual fluctuations when traditional spending categories compose a major fixed proportion of the general fund. We also confirm findings that indicate state-level legal budget institutions have varying impacts on short-run debt creation. However, we leave open the possibility that the effects of certain laws may be realized over time