This report's primary concern is how U.S. state governments should respond to the fiscal volatility created by their balanced budget constraints. Applying the principles of risk allocation theory to this recurring problem, we conclude that states should primarily adjust the rates of broad-based...

This report analyzes how states should cope with fiscal volatility at the level of institutional-design policy. We propose that states reconsider how they define terms like ‘‘tax cuts'' and ‘‘tax hikes.'' By adopting a new baseline for defining those terms, states can increase the...