In recent years, scholars have developed new analytical tools and financial instruments that could help governments cope more effectively with financial volatility. In this essay we show how states can achieve fiscal sustainability using financial instruments based upon mean-variance analysis:...

Accurately predicting revenue growth is nearly impossible. Predicting the peaks and valleys of the business cycle is even more hopeless. This matters because tax revenues are largely driven by economic growth. Volatile, unpredictable revenue growth causes all sorts of unpleasant responses on the...

Oregon has one of the biggest cyclical budget problems in the country, if not the biggest. Without a rainy day fund, Oregon's state government would have a budget shortfall ten years out of twenty; two of which would be equal to or greater than twenty percent of annual spending. Oregon could...

The authors write that Oregon couldn't afford to establish a rainy day fund; borrowing in times of state fiscal crisis is cheaper. The only workable alternative to countercyclical saving or borrowing is a substantial overhaul of Oregon's revenue code, and that's a high price to pay for fiscal...