The Persistence of Fiscal Shocks on State Expenditures: Effects of Budget Requirements, Rainy Day Funds, and Withdrawal Requirements
Recent literature has explored in the influence balanced budget requirements (BBR) may have on state budgets. However, while previous work has explored the influence fiscal shocks have on mid-year rescissions my analysis focuses on what, if any, persistent effect these shocks may have on the budget in the year following the shock. In this paper I analyze the influence shocks have on proposed and actual expenditures and revenues, subject to a state’s institutionary rules and stabilization funds (Rainy Day Funds). Exploring the influence a shock can have in the period following the shock it will allow states to better understand not only rescissions that are may be made following deficit shocks but what, if any, expansions are done following a surplus shock. Further, incorporating rainy day funds can provide an understanding of a state’s propensity to save, beyond their general fund. My results show that absent BBR’s surplus shocks are pro-cyclical and generate higher levels of proposed and actual expenditures following a shock; however deficit shocks do not have a significant persistence absent BBR’s or on strict rule states. Further, the results show weak rule states propose higher spending in the year following a deficit shock.
Politics, Partisanship and the Power to Veto: Does Gubernatorial Line Item Veto Power Affect State Budgets?
Coauthored with Yaniv Reingewertz, Division of Public Administration and Policy, School of Political Science, University of Haifa
How does line item veto power affect a state governor’s ability to structure the budget? Is line item veto power only relevant as a partisan tool? Further, is it still relevant when the state legislature can override the veto? The purpose of this paper is to examine these questions. We use a rich disaggregated dataset to test the effect of the gubernatorial line item veto on state budgets, depending on political factors. We control for political attributes such as the political affiliation of the governor and legislature, minority status of the governor and the ability of the legislature to override a line item veto. Our results suggest that line item veto power has a very weak influence, if any, on the governor’s ability to influence the budget.
Work in Progress
An Analysis of National Spending Growth Rates: Correlation Of Political Power in a Markov Switching Model
This paper will examine the existence of high and low growth rate regimes within U.S. Federal spending. The focus will be on total spending and the following three components: defense, health care, and education spending. In order to study the possible high and low growth rates, a Markov switching model will be employed to allow for endogenous regime changes of national spending and its components. By allowing endogenous shifts of the data, the existence of any potential regimes can be identified and the timing of the regime changes can then be compared to the political landscape of the House, Senate, and Presidency to see which political party may be in power or assumed power at the time of the switch. Expectations should show that defense spending increases under times of Republican control while health care spending should increase under Democratic control. Total spending and education spending should remain relatively constant and help to identify potential unobserved variables which may change the regimes. While any number of outside variables could alter spending growth, the focus will be to see if regime changes align to expectations of political party platforms and political power.