ABSTRACT
This chapter identifies the criteria states use for defining a capital asset and the procedures they use in developing their capital budgets. It also identifies the methods states use to finance capital assets, and determines the extent to which states link borrowing maturities to the useful life of a capital asset. Capital assets are often defined as those intended for long-term use or possession. Usually, they are classified into general groups, such as land, buildings, and equipment. States finance capital assets primarily through the use of current revenues and long-term debt. In a 1986 GAO survey, 29 of the 37 states who responded that they used a capital budget indicated that one of their primary funding sources for financing capital assets was current revenues. Current revenues consist of state revenues and intergovernmental funds. States use a combination of short-term and long-term debt to finance capital expenditures. There are two major forms of long-term debt—full faith debt and nonguaranteed debt.
