Title: State Balanced Budget Requirements
Headings: State Balanced Budget Requirements
State Balanced Budget Requirements
Executive Summary
State Balanced Budget Requirements

Content: State capital expenditure, mainly for land, highways, and buildings, is largely financed by debt. Court decisions and referendums on borrowing have led to the exclusion of expenditures funded by long-term debt from calculations whether a budget is balanced. In practice, the following kinds of state revenues and expenditures also have little impact on state balanced budgets: Almost all federal reimbursements or grants to a state are committed to specific purposes, and the governor and legislature have little discretion over the use of most federal funds. Transportation trust fund money raised from state motor fuel taxes is usually earmarked for highways and other transportation purposes. Some tax collections may be diverted to local governments or other specified purposes without appropriations. Some states allow agencies or programs to collect and spend fees, charges or tuition without annual or biennial appropriations. In each case, it is practically impossible for revenues and expenditures to get out of balance, since expenditures are controlled by available funds. Thus it is not surprising that the focus of "balancing the budget" tends to be on the general fund although general fund expenditures compose only 50 percent to 60 percent of total state spending. Enforcement of balanced budget requirements State requirements for balanced budgets do not impose legal penalties for failure to do so.