## Great Recession and Fiscal Squeeze at U.S. Subnational Government Level

_IMF Working Papers, July 1, 2012_

## Source details

**Canonical URL:** [Great Recession and Fiscal Squeeze at U.S. Subnational Government Level](https://www.imf.org/en/publications/wp/issues/2016/12/31/great-recession-and-fiscal-squeeze-at-u-s-26060)

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## Bibliographic details
- Authors: Jiri Jonas
- Published: July 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475505320.001

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### Summary
- The paper discusses the fiscal impact of the Great Recession of 2007-08 on state and local governments in the United States.
- It documents the sharp decline in tax revenue and examines how states responded to close budget gaps in order to obey balanced budget provisions.
- The paper highlights the procyclical nature of these policy responses.
- It provides a brief comparison with subnational policy stances in other advanced economies.
- It discusses options for making subnational fiscal policy less procyclical within the framework of current rules.

### Key findings and observations
- Sharp decline in tax revenue during the Great Recession of 2007-08 affected U.S. state and local governments.
- States implemented measures to close budget gaps to comply with balanced budget provisions.
- The policy responses at the subnational level were procyclical, amplifying fiscal contractions during the downturn.
- A brief cross-country comparison indicates different subnational policy stances in other advanced economies (details and country-by-country specifics are addressed in the paper).

### Options to reduce procyclicality (discussed)
- The paper discusses several options for making subnational fiscal policy less procyclical while operating within existing rules. (The paper outlines mechanisms and institutional options; consult the full paper for detailed proposals.)

### Subject areas and keywords
- Subject: Budget planning and preparation; Expenditure; Financial crises; Global financial crisis of 2008-2009; Public financial management (PFM); Revenue administration; Subnational tax; Tax collection; Taxes
- Keywords: bond yield; budget gap; Budget planning and preparation; country; Fiscal policy; Global financial crisis of 2008-2009; government; government supplier; job statistic; local government; local government employment; local government finance; net government lending; property tax; State budget; state government; State nominal; State tax collection; Subnational tax; Tax collection; tax policy; tax receipt; WP

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- **Wp12184**
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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/great-recession-and-fiscal-squeeze-at-u-s-26060_