State and Local Finances and the Macroeconomy:
The High-Employment Budget and Fiscal Impetus

Glenn Follette, Andrea Kusko, and Byron Lutz

October 28, 2008

Figure 1. NIPA State and Local Net Saving
Percent of potential GDP

Year	Actual	High-employment
1965	0.94	0.76
1966	1.04	0.73
1967	0.86	0.66
1968	0.85	0.61
1969	0.83	0.63
1970	0.68	0.72
1971	0.57	0.61
1972	1.28	1.22
1973	1.18	0.9
1974	0.62	0.65
1975	0.14	0.51
1976	0.39	0.61
1977	0.64	0.74
1978	0.82	0.74
1979	0.51	0.47
1980	0.31	0.51
1981	0.24	0.43
1982	-0.06	0.56
1983	0.13	0.65
1984	0.6	0.76
1985	0.53	0.61
1986	0.47	0.55
1987	0.26	0.31
1988	0.35	0.29
1989	0.38	0.27
1990	0.12	0.11
1991	-0.07	0.22
1992	0.01	0.26
1993	0.01	0.23
1994	0.15	0.23
1995	0.16	0.25
1996	0.33	0.37
1997	0.48	0.39
1998	0.6	0.43
1999	0.56	0.3
2000	0.52	0.24
2001	0.05	0.04
2002	-0.32	-0.16
2003	-0.18	0.01
2004	0.01	0.1
2005	0.24	0.28
2006	0.35	0.37
2007	0.07	0.15

Source: BEA and author's calculations.

Return to Figure 1

Figure 2: Year-end Balances as a Percent of Expenditures

Year	States (right axis)	Cities (left axis)
1980	9	ND
1981	4.4	ND
1982	2.9	ND
1983	1.5	ND
1984	3.8	ND
1985	5.2	11.5
1986	3.5	12.3
1987	3.1	11.1
1988	4.2	13.4
1989	4.8	15
1990	3.4	12.7
1991	1.1	11.8
1992	1.8	10.5
1993	4.2	12
1994	5.1	13.2
1995	5.8	15.7
1996	6.8	16.2
1997	7.9	16.1
1998	9.2	18
1999	8.4	18.5
2000	10.4	18.3
2001	9.1	19.6
2002	3.7	19.1
2003	3.2	19.1
2004	5.1	21.6
2005	8.7	24
2006	11.5	23.7
2007	10.5	28
2008	8	ND
2009	7.5	ND

Source: NASBO and National League of Cities. State year-end balances for fiscal 2008 are estimates, and balances for fiscal 2009 are based on recommended budgets.

Return to Figure 2

Figure 3. Fiscal Impetus
(percent of real GDP)

Year	Fiscal impetus	Neutral policy
1965	0.9	0.43
1966	0.88	0.47
1967	0.7	0.48
1968	0.81	0.48
1969	0.45	0.45
1970	0.39	0.41
1971	0.47	0.38
1972	0.25	0.37
1973	0.42	0.4
1974	0.38	0.43
1975	0.59	0.44
1976	0.11	0.4
1977	0.04	0.39
1978	0.6	0.41
1979	0.4	0.4
1980	0.16	0.3
1981	-0.37	0.25
1982	-0.19	0.31
1983	0.1	0.34
1984	0.25	0.34
1985	0.71	0.38
1986	0.76	0.38
1987	0.16	0.36
1988	0.34	0.35
1989	0.39	0.34
1990	0.51	0.34
1991	0.2	0.31
1992	0.18	0.29
1993	0.23	0.29
1994	0.32	0.31
1995	0.4	0.33
1996	0.28	0.35
1997	0.36	0.36
1998	0.47	0.39
1999	0.62	0.41
2000	0.38	0.43
2001	0.5	0.41
2002	0.3	0.36
2003	-0.1	0.33
2004	-0.03	0.31
2005	-0.01	0.32
2006	0.11	0.32
2007	0.28	0.33

Return to Figure 3

Figure 4. Fiscal Impetus Around Business Cycle Peaks
(Percent of real GDP)

Year	Pre-peak	Post-peak	Neutral
1969	0.63	0.37	0.45
1973	0.33	0.36	0.4
1979	0.5	-0.13	0.4
1989	0.37	0.3	0.34
2000	0.5	0.23	0.43

Note: Each 'pre-peak' bar is the average calue of fiscal impetus for the year of the business cycle peak and the year preceding the peak. Each 'post-peak' bar is the average value of fiscal impetsus for the three years after the peak.

Return to Figure 4

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State and Local Finances and the Macroeconomy: The High-Employment Budget and Fiscal Impetus

State and Local Finances and the Macroeconomy:
The High-Employment Budget and Fiscal Impetus