New Thinking About Grassroots Public Management

Governments often use multiple policy instruments for pursuing policy goals with mutually reinforcing eff ects. Th ese eff ects include supplementation and substitution. Th is article examines both eff ects by studying two instruments of state budget stabilization policy: general fund balances and budget stabilization funds. States normally maintain budget surpluses in the general fund. In recent decades, many also created separate budget stabilization funds to guard against economic downturns. Empirical results show that substitution occurs between these instruments. In other words, the infl uence of the fi rst instrument is partially off set by the second. Th e second instrument also produces some independent impacts— called supplementation—that increase the overall infl uence of both instruments. Such selfreinforcement decreases over time, suggesting that multiple policy instruments are most eff ective in the initial stage of application.