Budget Processes and the Great Recession

In this study, we explore how strict balanced budget requirements (BBRs) and tax or expenditure limits (TELs) influence states’ decisions to either cut spending or raise revenues in response to surprise deficits and whether this relationship changed following the onset of the Great Recession. We also examine whether Democratic or Republican control of a state legislature and governorship affected state responses. We find that budget processes and party control influenced both the size and the composition of state responses to deficits, with responses tempering in the period during and following the Great Recession.