The available academic literature suggests that these balanced-budget requirements do work, at least in part. Although states have a wide array of budgetary tricks they can and do employ to hit their deficit targets, research evidence suggests that the balanced-budget requirements do limit borrowing and that, as a result, states with more stringent requirements face somewhat lower borrowing costs.
Furthermore, there seems to be a deeply held consensus that state budgets should be balanced, and this consensus undoubtedly helps legislators make the difficult choices sometimes necessary to balance state budgets.3 Hence, it may seem attractive just to limit overall deficits, but such limits have had only mixed success. They have typically worked, at least to a small degree, for U.S. states.