Explaining State Budget Punctuations: Policy Transparency,Political Institutions,and Electoral Incentives

What factors cause policies experiencing long periods of stability to be interrupted occationally by a short period of large changes? This study argues that electoral incentives might influence the search, supply, and processing of information on constituency issues, as well as the associated cognitive or institutional frictions, and thus determine the presence and variation of punctuated policies. This article develops and evaluates this claim within a systemic framework consisting of policy transparency, political institutions, and electoral incentives. For the purpose of identifying policy punctuations, this research uses the Generalized Pareto Distribution in the Extreme Value Theory. This study analyzes budget spending data collected from FY 1988 to FY 2008 for all 50 American states. This study finds that greater policy transparency is associated with larger spending stability. By contrast, greater gubernatorial competition is more likely to produce extreme spending changes. Electoral incentives shaped by public preference and political term limits have a profound impact on nonincremental policy changes. The impact of policy transparency is conditional on public preference, while that of electoral competition and legislative professionalism is moderated by political term limits. Particularly, a transparent policy consistent with public preference and legislative professionalism with term limits are more likely to give rise to punctuated policies, while gubernatorial (legislative) competition leads to less punctuated changes when governors (legislators) are subject to term limits.     

The Tortoise or the Hare? Incrementalism,Punctuations, and Their Consequences

In this article, we contrast the long‐term consequences of incrementalism and punctuated equilibrium. We test what the impact of each of these types of policy change is on long‐term budgetary outcomes for the American states. Policy scholars have applied both theoretical approaches to the study of budgetary spending as an extension of policymaking. Given the two contrasting paradigms of policy change, we develop the following line of inquiry: Does punctuated equilibrium create a different budget in the long term than incrementalism? We address this question through an analysis of American state budgets because the U.S. states provide a rich variation in both budgetary outcomes and political institutions. We use budget data from all American states across all government functions for the period between 1984 and 2009. We find that, first, state budgets and budget functions vary in their degree of punctuation and, second, the degree of punctuation in a state's budget function corresponds to smaller long‐term growth. Additionally, the kind of spending matters: allocational budget categories are more likely to exhibit punctuations.     

Budgetary Punctuations: A Fiscal Management Perspective

Although the development of punctuated equilibrium theory makes broad reference to the bureaucratic procedures that regulate budgetary decision making and makes reasonable assumptions about the influence of those procedures on the dynamic of resource allocation, little is known about how the specific mechanisms work. This has led to a call to understand the processes that cause friction in greater detail. This study examines how budgetary output patterns may be influenced by governments' strategic fiscal choices. Using an approach that highlights the roles of various fiscal policy-making processes, we found significant deviations of budgetary output patterns in capital projects, restricted funds, and entitlement spending, thus signifying the influence of fiscal practices on resource allocation decisions. We further examined how fiscal influences may be realized in the political process of democratization in Hong Kong. By examining legislative filibuster cases related to capital projects, we found evidence associating democratization with greater institutional friction and consequently with larger budgetary output punctuations.     

Geographical Leadership Mobility and Policy Isomorphism: Narrowing the Regional Inequality of Social Spending in China

The link between geographical leadership mobility and policy isomorphism is rarely discussed in the extant literature. We argue that the geographical leadership mobility encourages local executives to converge their development experiences in their original working jurisdictions and their current positions. The distinct Chinese political personnel system provides an ideal environment that allows researchers to examine the isomorphic effects of geographical leadership mobility. This research builds a dataset of local social spending between 1998 and 2011 as well as a database of the leadership mobility history of provincial executives in China. Results of the spatial panel analysis (SPA) demonstrate that the geographical leadership mobility (i.e., horizontal, top-down, and bottom-up) of governors stimulates the regional isomorphism of provincial education and health care spending. The empirical findings affirm the effectiveness of the effort of the Chinese central government in narrowing the regional inequality of social welfare provision through the geographical mobility of local leadership.     

Punctuated Equilibrium and Bureaucratic Autonomy in American City Governments

Several recent applications of Punctuated Equilibrium Theory (PET) have yielded compelling findings linking institutional design and change distributions, yet, much more work needs to be done to understand institutional arrangements that make punctuated processes more or less likely. In responding to the recent call for more research on unraveling particular mechanisms through which bureaucracy moderates the odds of policy punctuations, this research explores the potential of bureaucratic expertise and professionalism in fostering rational decision making, and thus the stability in change dynamics. One important feature of urban government receives close attention: the position by professionalized, trained bureaucrats in municipalities (city manager and chief administrative officer) and the effects of their discretion on altering municipal budgetary change distributions. Analysis of a novel dataset of fiscal policy changes, charter and census information of city governments in the State of Michigan, 2005–11, suggests city governments, on average, produce change patterns that conform to the expectations of PET; more importantly, it reveals that heightened levels of managerial discretion can have a significant implication for helping cities experience less abrupt, punctuated budget changes. The paper concludes with a discussion of the implications of these results for PET, policy change dynamics, and the design of city-governing institutions.     

Complexity,Capacity, and Budget Punctuations

The budgeting literature has long focused on “institutional friction” as a cause of ubiquitous punctuated equilibrium (PE) findings. A recent wave of scholarship looks to identify specific institutional mechanisms that affect the number of punctuations in policy outputs. We contribute to this growing body of research by focusing on the complexity of the institutional environment surrounding a policy area as well as that of the government as a whole. These factors have opposite effects: the more complex a policy area, the greater the likelihood of extreme spending changes. But, higher institutional capacity in general leads to greater stability. To test these ideas, we develop a novel index of budgetary change that balances the conceptual importance of extreme changes while analyzing the entire distribution of budget changes, not only the tails. In addition, we also demonstrate that findings are robust to a number of important distinctions, such as between series associated with slowly moving demographic trends or quickly moving stochastic events. We, therefore, demonstrate the robustness of important findings from the established literature, add a new measure of the dependent variable, and push the literature forward with a new focus on issue complexity and institutional capacity.     

A SIMULTANEOUS EQUATIONS MODEL OF FISCAL POLICY INTERACTIONS*

ABSTRACT Existing studies of fiscal policy interactions are based on single equation (SE) models of either taxation or expenditures, without specifying the underlying social welfare function, without taking account of budget constraints and without allowing for cost differences between jurisdictions. Taking all this into account, we derive an extended version of the linear expenditure system with policy interaction effects. We use this system to simultaneously estimate interactions in both taxation and different spending categories among Dutch municipalities. Our interaction parameters tend to be higher than those estimated using conventional SE models.     

Political Attention and Public Spending in the United States

According to Jones and Baumgartner's disproportionate information processing model, it is crucial to study fluctuations in congressional attention over time and across policy issues to understand congressional policy decisions including decisions on the federal budget. Drawing on classical ideas about reelection-oriented behavior, on the one hand, and the blocking power of federal agencies, on the other, this paper extends and specifies the attention-spending predictions of the disproportionate information processing model. Specifically, spending effects of congressional attention shifts are argued to be crucially dependent on both the spending preferences expressed by the U.S. public and on pressure from spending advocates. An empirical evaluation of the association between changes in congressional attention measures and federal budget appropriations across 12 spending domains and 33 years (1970–2003) supports this conditional hypothesis derived from the extended disproportionate information processing model.     

Punctuated Equilibria and Budgets in the American States

In this article, we examine long-term state budget trends to find evidence of punctuated equilibrium. We use the American states as a broad set of institutional variation with which to examine the nature of policy change through the lens of incrementalism and punctuated equilibrium theories of policymaking. The strength of this article is its sensitivity of variations in policy outcomes across time (18 years), across space (50 state institutions), and across issue space (10 budget categories). This research advances the characterization of policy outcomes by employing a quantitative measure that is both less sensitive to outliers and one that characterizes budget distributions on a simple numeric scale. Our general findings are: (i) state budget categories are interdependent; (ii) state budgets are generally punctuated; but (iii) to varying degrees: Thus, considerable stability (indicated by tall peaks) and punctuations (represented by fat tails) are a central feature of policy outcomes in the American states. This result confirms the logic of punctuated equilibrium theory, but raises future questions about the impact specific variations in institutional costs have on policymaking across the 50 states.     

Tradeoffs between Local Taxes and Government Spending as Determinants of Business Location*

Abstract. This paper investigates the effects of local fiscal policy on the location decisions of 3,763 establishments that began operations in Maine between 1993 and 1995. Empirical results, estimated from Poisson and negative binomial regression models, indicate that businesses favor municipalities that spend high amounts on public goods and services, even when these expenditures are financed by an increase in local taxes. This suggests that a local fiscal policy of reduced government spending, to balance a tax cut, may attract fewer new businesses than a policy featuring additional spending and higher taxes.     

In pursuit of independence: the political economy of Catalonia's secessionist movement

This article examines the fiscal dimensions of recent support for Catalan secession. Since the region is a cultural community distinct from the rest of Spain, much research has spotlighted national identity features in the calculus of Catalan political aspirations. This study supplements this work by contextualising support for Catalan independence in terms of the state's fiscal arrangements with the use of public opinion survey data. Even after controlling for self‐reported cultural identity and other relevant factors, it argues that support for independence is a function of grievances rooted in the desire for Catalonia to assume responsibility for taxation and spending policy. Meanwhile, it validates some observations about Catalonia's separatist movement, while bringing others into question, and offers support for the theoretical framework linking political economy to secessionism. The results suggest that Spain might be able to stave off Catalonia's separatist bid through some form of political and taxation policy reconfiguration, with the caveats that cultural identity factors and the existence of other separatist movements across the country complicate this strategy.     

The Conditioning Effects of Policy Salience and Complexity on American Political Institutions

Years ago, Bill Gormley introduced public policy scholars to a new and innovative salience- complexity typology for regulatory policies. This typology not only helps scholars catalog numerous policies into distinct categories, but also helps explain variation in political processes. Specifically, different policies provide different incentives for political actors to be involved in policymaking. Salience encourages activity on the part of elected officials; complexity often requires policymaking outside of the public sphere. In this article, I extend Gormley's salience-complexity typology to more than just regulatory policies and confirm that levels of institutional activity vary across this range of public policies. I also expand on Gormley's contribution by differentiating the distinct impacts that policy type has on the policy activities of Congress and the presidency, and propose that institutional activity differs according to the dynamics of a policy's salience.     

Are All Policy Decisions Equal? Explaining the Variation in Media Coverage of the UK Budget

A country's budget is one of the most important public policy instruments, as it establishes the government's policy priorities and has the potential to determine winners and losers. The budget, however, is a mixture of different components and these get varying degrees of attention in the media. Drawing on sociology of news research, this paper seeks to explain this heterogeneous coverage of a budget's policy decisions. To do so, it uses a unique data set of over 5,000 articles of press coverage of six UK budgets (2008–2012). These articles are coded for the presence/absence of each of the budget's policy decision, via automated content analysis. On the basis of a multivariate negative binomial model, we find that the salience of a policy decision in the coverage is determined by its cost, whether it is negative (i.e., tax hikes and spending cuts) or positive, the income group that is the most affected by it, and the level of attention given to it by the government.     

The Public Assistance Policies of Cities and the Justice Concerns of Elected Officials: The Centrality of the Floors Principle in Addressing Urban Poverty

City councils are significant, though seldom central, actors in local policy networks providing public assistance to disadvantaged residents. Mayors and council members in 12 American cities more often support than oppose public assistance initiatives. They claim that their own normative judgments are more important to their preferences and voting behavior on such matters than are public opinion, group demands, or economic considerations. While such elected officials hold a variety of justice principles, the most important of these affecting their positions on public assistance issues is the “floors” principle. A broad ethical commitment to providing social minimums enhances support for living‐wage ordinances, for linking subsidies for economic development to assistance to less advantaged citizens, and for exempting spending on social services from budget cuts. We discuss the implications of these findings for major theories of urban politics and policies—collective‐action theory, regime theory, and pluralism—and for advocates on behalf of the urban poor.     

Explaining the growth of government expenditure: Australian government department appropriations since world war two

Political economists have concentrated on explaining the growth of total government expenditure rather than individual governmental institutions. This paper applies four models of governmental behaviour from the public administration and public choice areas to the growth of the major Australian government departments in the period 1947–1979, and provides forecasts of expenditure for the years 1980–1982. The three models are: budgetary incrementalism, based on the auto‐correlation of departmental appropriations; the degree of bureaucratic monopoly power vis‐a‐vis its financial sponsor; a macro model incorporating social, political and economic incentives for governmental expenditure (e.g. unemployment); and a model based on measurements of the demand of the median voter for government services. The results suggest that a simple budgetary incrementalism model, using a first order autoregression provides the best explanation for institutional growth over the past thirty years and the best forecasts.     

DO FEDERAL DEFICITS MOTIVATE REGIONAL FISCAL (IM)BALANCES? EVIDENCE FOR THE SPANISH CASE

This paper studies the vertical and horizontal interactions between federal and regional governments in terms of public deficits. Recent studies commonly restraint budget slippages to the incentives created by the institutional arrangements within a country. Alternatively, we estimate here a fiscal reaction function for the Spanish regions over the period 1995–2010, paying special attention to the impact of the federal fiscal stance on regional fiscal imbalances. Our results indicate that higher public deficits for the central government encourage larger fiscal imbalances at the regional level. This vertical interaction is interpreted in the context of yardstick competition models. We also find a significant impact from fiscal decisions taken by governments at the same decision‐making tier in a specific region.     

Patterns of Change in the Congressional Budget Process, 1865-1974

This paper examines five periods of congressional budget reform, from 1865 to 1974, and asks two sets of related questions: (1) What are the external and internal factors that seem to precipitate reform? and (2) Are there systematic differences in the ways Congress responds to internal and external pressures for change? If so, in the process of formulating successful (i.e. adopted) reforms, how are the responses to external stresses balanced against those designed to deal with internal questions? The research indicates that economic difficulties engendered by war and major changes in presidential-congressional relations with respect to fiscal policymaking are the crucial external variables. Internally, major shifts in the power relations of those involved in congressional spending decisions appear to facilitate budget reform. In responding to external pressures on its budget process, Congress tends to centralize its budget procedures. In response to internal pressures, Congress tends to decentralize those procedures.     

Accommodation and the politics of fiscal equalization in multinational states: The case of Canada

The politics of accommodation in multinational states sometimes features an important, yet often overlooked, fiscal dimension. In fact, the scholarly literature on the accommodation of nationalist movements emphasizes territorial autonomy, access to power and representation within central institutions, and the promotion of the state national identity, but it is virtually silent on how patterns of territorial fiscal redistribution, and more specifically programs of horizontal fiscal equalization, may contribute to accommodating sub‐state nationalism. This article looks at the Canadian case and analyses the multidimensional relationship between equalization policy and Québécois nationalism. It explains how a key motivation behind the creation of Canada's fiscal equalization program in 1957 was to “end” the institutional and political isolation of Québec and how equalization may have, thereafter, contributed to making Québec's secession less appealing to a good number of Quebeckers than it would have been in the absence of this program. Simultaneously, the article discusses how equalization may have contributed to a certain political backlash against Québec in the other provinces, thus providing mixed evidence in the assessment of the accommodation potential of equalization policy.     

The Effects of Mayoral Power on Urban Fiscal Policy

Can mayors of American cities overcome the enormous constraints of environmental forces to exert some control over municipal spending priorities? Despite case study evidence suggesting that mayors can and do influence public policy making, the expectation of this research was that mayoral power in a comparative research design likely would not have a pronounced effect on city spending. Using multiple regression techniques and various socioeconomic, demographic, and political variables, the analysis indeed showed that mayoral strength was not a significant predictor of municipal expenditures for 1987. The findings also revealed only slight differences in the way the mayoral power variable operated when cities were divided by city government form (mayor-council vs. council-manager). The research did demonstrate that mayoral power was most likely to be effective in controlling city spending among localities having partisan ballots.     

Ronald Reagan's Indian Policy in Retrospect

This article examines presidential politics during the Reagan era with regard to the formulation, implementation, and aftermath of Reagan's Indian policy. Indian affairs proved to be a formidable testing ground for the drastic administrative budget cuts that transpired in the 1980s. Although the ill-effects of this policy were felt immediately in Indian Country, economic crisis inspired some tribes to seize control of their own political and economic destinies, ultimately influencing federal policy in their favor.