Does partisan control of American state government have systematic effects on state spending and taxing levels? Does divided control affect the government's ability to make hard decisions? Do institutional rules like legal deficit carryover restrictions matter? Using a formal model of fiscal policy to guide empirical analysis of data covering the American states from 1968 to 1987, we conclude that (1) aggregate state budget totals are driven by different factors under Democrats and Republicans, the net result being that Democrats target spending (and taxes) to higher shares of state-level personal income; (2) divided government is less able to react to revenue shocks that lead to budget deficits, particularly where different parties control each chamber of the legislature; and (3) unified party governments with restricted ability to carry deficits into the next fiscal year (outside the South) have sharper reactions to negative revenue shocks than those without restrictions.

We examine whether and when voters in American states hold elected officials accountable for the results of fiscal policy decisions. Clear fiscal policy effects appear in both gubernatorial and legislative elections between 1968 and 1992, independent of the effects of incumbency, coattails, term limits, and macroeconomic conditions. The results show that voters expect Democrats to provide higher levels of taxes and spending relative to state economies. Net of these expectations, Republican gubernatorial candidates lose votes if their party is responsible for unanticipated increases in the size of the state budget, but Democrats do not, and indeed may be rewarded for small increases.Independent of this, the incumbent party is punished for failing to maintain fiscal balance, and accountability is generally stronger following a period of unified party control than under divided government. Taken together, these results show how electoral accountability for fiscal policy outcomes is strong but highly contingent on a complex configuration of party labels, partisan control, expectations, and institutions.

This paper describes a model of partisan fiscal adjustment where policy is made in a bicameral legislature subject to a veto by an independent executive. We show how changes in fiscal policy depend not just on the configuration of parties, but also on veto institutions and on which party or parties was responsible for the previous budget. In our model, the legislative party is unable to shift fiscal policy all the way to its preferred point in one step, but can take advantage of repeated shocks to shift fiscal policy toward its preferred target slowly, probably over several budget cycles. We describe how legislatures can use shocks to shift expenditures and revenues and how this means that over time one can observe persistence of past partisan targets or slower and faster shifts toward new targets. We show also how the amount of change in policy should vary according to how control is configured and how patterns of control interact with institutions.Empirical sections of this paper lay out a specification for estimating a model which is capable of incorporating these features, and report estimates based on taxes and spending in 35 nonsouthern states from . While the results are neither strong nor robust, estimated speeds of adjustment to targets line up as expected, with unified governments showing faster adjustment than divided, and the party targets go in the right direction, with Democrats apparently targeting a larger share of state incomes for the public budget than Republicans. Interestingly, Republicans react much more strongly to budget surpluses by reducing revenues than do Democrats. 5RNKV DTCPEJThe 1995 budget crisis in Congress produced a situation in which no formal budget passed and the government operated under a series of continuing resolutions which carried over the provisions of the previous year's budget. The result, long periods of uncertainty and conflict, focused attention on the political problem of fiscal adjustment in a bicameral system when parties are polarized in terms of having different partisan targets for the scale of taxes and public spending.In this paper we describe a model of partisan fiscal adjustment where policy is made in a bicameral legislature subject to a veto by an independent executive. We focus particularly on "split branch" government, where the legislature and the executive are controlled by different parties. We show how changes in fiscal policy depend not just on the configuration of parties, but also on veto institutions and on which party or parties was responsible for the previous budget. In our model, the legislative party is unable to shift fiscal policy all the way to its preferred point in one step. However, it is able to take advantage of repeated shocks to shift fiscal policy toward its preferences slowly, probably over several budget cycles.Our basic model and a few extensions show that budgets made under divided government can depend on a lot of features that we often think of as procedural details, like the identity of the "veto player," the l...

Scholars have devoted much attention in recent years to the possible effects of institutions on policy implementation, but empirical tests are limited to relatively simple contexts. I estimate the effects of multiple instruments for exercising political control over public university prices and, hence, spending. I find that public universities in states with statewide coordinating boards or few governing boards, and universities governed by trustees selected by elected state officials or the general public charge significantly lower prices than universities in states with decentralized structures, or governed by trustees chosen by academic stakeholders. The difference in revenues is reflected in spending on activities that directly benefit administrators and faculty, but that may also benefit students. Different hypothetical combinations of institutions yield similar results, which suggests that the particular system adopted by each state depends on the politics of institutional change as well as the intended outcomes.

Recent empirical work demonstrates that ®scal institutions in American states have real eects on state government bond rates, but the causal mechanisms have not been identi®ed. We show how laws that restrict state governments' ability to carry forward a de®cit improve the ability of investors to extract information from noisy signals. This aects the response of bond markets to repeated de®cits in states that have these laws. We argue that partisan preferences for higher spending also increase risk for investors, leading to higher interest rates. We provide empirical support for our hypotheses using data from 1973±1995.