If state governments began using a five-year rolling-average budgeting procedure as opposed to the current practice of no rolling average, which would the likely result be?
A)State financing would become more procyclical
B)Balanced-budget requirements in state constitutions would be much less procyclical
C)The need for automatic stabilizers at the federal level would increase
D)State governments would run a greater risk of running short of funds during recessions

Question

Quizplus · Accepted Answer

Using a five-year rolling-average budgeting procedure would likely make state financing less sensitive to short-term economic fluctuations, thereby making balanced-budget requirements less procyclical. This approach would smooth out the budgeting process over a longer period, reducing the immediate impact of economic downturns or upturns on state budgets.

If State Governments Began Using a Five-Year Rolling-Average Budgeting Procedure