Home      Login

Holding a Hot Potato?  The Credit Crisis and Its Impact on State Cash and Short-Term Investment Portfolios

Author:  Beth-Anne S. Leech.

Source: Volume 29, Number 04, Winter 2009 , pp.125-137(13)

Municipal Finance Journal

< previous article |return to table of contents


The management of cash and short-term investments ensures that state and local governments can provide consistent levels of service throughout the year. Government investment options are constrained by legislation and fiscal prudence, which are frequently viewed as sufficient to ensure that investments carry virtually no risk. However, unanticipated changes in the economy and capital markets may still result in financial losses for state and local governments. This paper provides an overview and analysis of the holdings of state short-term investment portfolios. It finds that state governments have generally been cautious in their cash management and do not have substantial exposure to riskier financial products. However, the current crisis will result in a decline in investment income, which has supplemented more traditional forms of revenue. This will result in additional stresses on resources as other sources of revenue decline and demands for expenditures increase.


Affiliations:  1: University of Georgia.

Subscribers click here to open full text in PDF.
Non-subscribers click here to purchase this article. $25

< previous article |return to table of contents