This is the Cato Daily Podcast for Monday, January 10th, 2022.

I'm cable Brown.

As many state legislatures head back to work, making sure to balance the good years and bad to maximize stability is always a

challenge. Kurt Couchman is a senior fellow in fiscal policy at Americans for Prosperity.

We discuss the unique challenges faced by states and how he believes they should keep the fiscal ship level.

States overwhelmingly are supposed to have balanced budgets and

there are many gimmicks that states use to sort of avoid really having balanced budgets.

They often leave themselves in some really bad situations with regard to bonded debt that encumbers future

legislatures when it comes to appropriating funds.

They have to pay those debts.

They don't want their bond rating to go down and this legislature from a few

years ago has really tied our hands. So how do states get out of that? How do states, you know, write the fiscal ship in such a way that

legislatures aren't encumbered in the future when they want to spend X, Y, or Z, but also don't get into too much debt and have the resources they need during

downturns to handle whatever might befall them?

Well, Caleb, there are a whole bunch of different aspects to state budgeting.

There are 49 states with balance requirements. That means a different thing in basically every state.

Some of those are constitutional. Some of them are statutory.

Capital budgeting, the bonded debt that you referred to, that is typically treated

quite differently from the operating budget. So the proposal that we're talking

about today mostly is about the operating side of the budget,

which doesn't even include the federal funds that have really specific strings as to what it can be used for and maintenance of effort and that sort of thing.

In restructuring state spending, what do you generally propose?

...