State Budgets and Crises: Notes for the Municipal Bond Investor
Times of economic crisis often create stress, such as budgetary challenges for US state governments and anxiety for investors. Press headlines seem inclined to increase rather than ameliorate stress, and political rhetoric seems inclined to distort rather than clarify the true situation. Yet states have successfully managed through multiple economic contractions in the postwar era, and we believe almost all will do so again. This paper will explain how states set budgets, how they react during contractions, and why we believe the current recession will prove to be no exception.