By law are states required to have balanced budgets?
By Eric Smith
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YES
States lack the financial flexibility available to the federal government, which can issue its own debt and plan on deficit spending year after year. As of 2015, 46 states and the District of Columbia had some kind of formal balanced-budget requirement preventing them from planning on deficits. In the others, rules limited their ability to run a deficit.
When tax receipts fall because of an economic slowdown, states must move to raise taxes or cut spending, temporarily bridging the gap with reserves or borrowing from outside sources. States (and other local jurisdictions) can also issue bonds to fund planned investment-type projects like roads or bridges. They typically must seek voter approval to do so.
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