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date: 19 July 2019

Abstract and Keywords

This article first lays out the broad contours of state and local government capital spending and the precepts of the capital budgeting process. It then considers how capital spending levels and budgeting processes were affected by the Great Recession. State and local capital spending, which had grown rapidly before the downturn, was slowed considerably by the Great Recession's onset. Federal aid helped to cushion the blow, but capital spending began to decline as many jurisdictions exhausted their influx of federal funds. The Great Recession's effect on capital spending was found to be consistent with the impacts of past recessions, but its depressing effects will continue for several years. Thus, the Great Recession, when its aftershocks are played out, will likely result in unprecedented declines in state and local capital spending and an erosion of the public capital stock.

Keywords: capital budgeting, capital spending, local government spending, budget process, Great Recession, federal aid

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