HAL HOVEY: AN EXPERT VIEW.

• Position: Interview

It's not an exaggeration to say that Hal Hovey knows more about state finances than anyone else in the country. In his 40-year career, he has served as budget director in Illinois and Ohio, written extensively on state budget and tax matters, and served as a consultant dealing with fiscal and program design and evaluation for state and local governments. His clients have included every federal agency concerned with domestic programs, a dozen states, several local governments and many national associations of state and local officials. He's also worked at the Office of Management and Budget, the Urban Institute and the National Governors' Association.

This article is based on an interview with Hal Hovey conducted by Corina Eckl.

State legislatures magazine: The United States is approaching the longest economic expansion in its history. Last year the Wall Street Journal ran an op ed piece from an MIT professor who argued that the current economic expansion will run forever because the factors that cause economic downturns no longer exist. What is your response to that argument?

Hal Hovey: In every business cycle since the beginning of economic history, there has always been someone who says, during the good part of the economic cycle, that something has changed about the economy - a new economic era, a new prosperity - and that business cycles are no longer inevitable. I think this cycle will work out like the prior ones because the factors that produce cyclical behavior in the economy are, in fact, present. Just as the prognostications of those people who say there is a "new economy" have proved wrong in the past, they will be proved wrong again. We will see a recurrence of business cycles.

What are the most promising developments in state fiscal policy that you've seen in the last 10 years?

I would say the institutionalization of rainy day funds. They certainly are one of the most significant developments in many states. Second, I would categorize the continuing improvement in disclosures and accounting practices. Third, I suspect but couldn't prove, there is improved legislative oversight of some of the agencies of state governments that are not regular government departments subject to annual appropriations. Many, such as housing authorities, live out of revenue bonds.

What are the most discouraging developments?

Well in straight fiscal policy terms, I think it is our continuing inability to produce stability over the course of business...