The Impact of Public Officials’ Corruption on the Size and Allocation of U.S. State Spending

This article demonstrates the impact of public officials’ corruption on the size and allocation of U.S. state spending. Extending two theories of “excessive” government expansion, the authors argue that public officials’ corruption should cause state spending to be artificially elevated. Corruption increased state spending over the period 1997–2008. During that time, the 10 most corrupt states could have reduced their total annual expenditure by an average of $1,308 per capita—5.2 percent of the mean per capita state expenditure—if corruption had been at the average level of the states. Moreover, at the expense of social sectors, corruption is likely to distort states’ public resource allocations in favor of higher‐potential “bribe‐generating” spending and items directly beneficial to public officials, such as capital, construction, highways, borrowing, and total salaries and wages. The authors use an objective, concrete, and consistent measurement of corruption, the number of convictions.     

Budget Slack,Institutions, and Transparency

Economic theory suggests that it is optimal for governments to use precautionary saving as a countercyclical tool. However, the availability of surplus funds often triggers political pressure for tax cuts and spending increases. Mechanisms for alleviating that pressure include limiting the transparency of slack resources and limiting politicians’ discretion to use slack resources for purposes other than stabilization. This article investigates the extent to which these two mechanisms are substitutes. In particular, the authors examine whether the widespread adoption of budget stabilization funds (BSFs) in the U.S. states over the past several decades has been accompanied by a decline in conservative revenue forecast bias. Using panel data from 47 states over a 22‐year period, they find that the adoption of a BSF reduces revenue underestimation by approximately two‐thirds; however, the size of the effect depends in part on how much a state saves in the BSF and the rules governing BSF deposits and withdrawals. The results suggest that BSFs have the unintended effect of increasing fiscal transparency.     

Do Debt Levels Influence State Borrowing Costs?

This article reports on research into the possible interest cost penalties when state governments impose increasingly high debt levels on their citizens. The potential effect of debt levels on borrowing costs is a material one, given the large amounts of state debt outstanding. At the same time that government borrowing is heavy, the demand for government obligations also appears to be strong. The authors examine state debt levels and borrowing costs over a six‐year period (2001–2006) and find little evidence of such an effect, despite rapidly growing debt burdens. Those concerned about state debt levels, the authors say, must look to sources other than investors for pressure to reduce debt issuance.     

Substitution Is in the Variance: Resources and Foreign Policy Choice

This article argues that foreign policy substitution arises as a result of the costs of foreign policies relative to state resources. States with few resources are constrained in foreign policy choice compared to states with an abundance of resources. As a result, states with few resources will, on average, select, lower‐cost policies than will resource‐rich states. Resource‐rich states, by virtue of their abundant resources, have greater discretion over policy choice and thus behave less uniformly than do resource‐poor states. Our empirical results provide evidence of this and support the argument that substitution is in the variance.     

Does Financial Slack Reduce Municipal Short‐Term Borrowing?

Many municipal governments face the challenge of temporary cash deficits due to the mismatched schedules of cash flow‐ins and flow‐outs. To smooth the temporary deficits, they can use either internal financial resources such as financial slack or external financial resources such as short‐term borrowing. This paper applies the pecking order theory to examine municipal governments' financial preference when they experience cash flow problems. Results show that municipal governments prefer accumulated financial slack to short‐term borrowing when both options are available. This finding demonstrates financial slack's role as a convenient cash management tool in municipal financial management. It also suggests the applicability of the pecking order theory in future public financial management research.     

Fiscal institutions of Brazilian municipal borrowing

In an effort to understand subnational borrowing, this article explores how three Brazilian institutions—the 1988 Constitution which mandates revenue and expenditure assignments among the levels of the federation; the national Law of Fiscal Responsibility, which imposes expenditure and debt limitations on all levels and branches of government; and various borrowing arrangements—affect the municipal borrowing environment. These institutions are examined in light of de Mello's (2001) policy recommendations for strengthening efficiency and fiscal discipline in subnational borrowing. The institutions of Brazilian borrowing were found to have some of de Mello's recommendations, with the new Constitution and the Law of Fiscal Responsibility making progress towards increased fiscal responsibility, but the current borrowing arrangements serving to maintain a controlled system that is not conducive to responsible municipal borrowing. Several recommendations are made to improve the borrowing environment and foster fiscal discipline and efficiency Copyright © 2008 John Wiley & Sons, Ltd.     

Negative Externality of Fiscal Problems: Dissecting the Contagion Effect of Municipal Bankruptcy

The fiscal decision of one local government may spill over to other localities, and such externality could justify and inform policy making by a higher‐level government. Theories of municipal bond market contagion postulate that once a local government files for bankruptcy, localities sharing similar characteristics will be perceived negatively by creditors and charged a higher interest rate. In this article, empirical examination of the second‐largest municipal bankruptcy in American history shows no support for general contagion based on geographic proximity. That is, nearby localities did not pay a higher interest rate after the bankruptcy. However, case‐specific contagion formed around borrower‐ and bond‐specific characteristics contributing to the bankruptcy: general‐purpose borrowers and general‐obligation bonds experienced increased borrowing costs after the bankruptcy. These findings have implications for states considering granting authorizations for municipal bankruptcy or providing financial assistance to struggling localities, as well as for local governments planning to access the municipal bond market.     

ECONOMIC DEVELOPMENT AND ADMINISTRATIVE POWER THEORY: A COMPARATIVE ANALYSIS OF STATE DEVELOPMENT AGENCIES*

The ability of state leaders to influence economic growth and diversity within their states is a disputed issue within the literature on state economic development policy-making. This research contributes to this debate by developing comparative measures of state development agency power drawn from the emerging theory on organizational power. If state policy leaders have independent control over the economic performance of their states and if that influence is exercised through the administrative unit responsible for that activity, states which have supplied their agencies more resources and freedom in using those resources should outperform those states which have not.     

Looking a Gift Horse in the Mouth: Challenges in Managing Philanthropic Support for Public Services

Collaborations between nonprofit and public sector organizations have become an increasingly important phenomenon in state and local public service delivery since the publication of the Winter Commission report in 1993 . This article focuses on one of the less studied types of public–nonprofit collaborations, those in which philanthropic support from nonprofit organizations supplements the resources and activities of public agencies. Drawing on the case of “nonprofit‐as‐supplement collaborations” that support park services in New York City, this article documents the benefits and drawbacks associated with such collaborations. While they can provide increased resources and encourage management innovations, they also can lead to inequities in the availability and quality of services, the preponderance of particularistic goals over the broader public interest, and the politicization of previously bureaucratic decision making. The authors offer two strategies for public managers to realize more effectively the benefits yet mitigate the shortcomings of these collaborations.     

Executive Orders and Administrative Control

One of the key recommendations of the Winter Commission was the empowerment of governors over the executive branch. However, key institutions have not evolved in this direction; the long ballot still exists in most states, and the formal powers of governors have strengthened to their probable capacity. The authors suggest that a quasi‐formal power—the gubernatorial use of executive orders—may be a significant tool for empowering the governor in the state administrative realm. Analyzing all executive orders in 49 states for 2004 and 2005, they find variation in the aggregate use of and functions performed through these orders. Many executive orders do allow the government more direction and control of state bureaucracy. Finally, the authors suggest that the study of executive orders may be necessary to understand gubernatorial power in the executive arena and beyond.     

State Debt Management Policy: A National Survey

The amount of outstanding, long-term, tax-exempt state debt has grown precipitously over the last decade, from $87 billion in 1977 to $264 billion in 1987. But there have been few attempts to carry out broad studies of basic state debt management policies, using comparative state data. As a result, policy-makers lack guidance as they attempt to adjust policies and procedures to meet the rapidly evolving requirements associated with public borrowing. This paper reports on a national survey of state debt manage ment policies - policies devoted to the planning, preparation, sale, and repayment of debt for which states consider themselves responsible.     

The retention of state governors

In this paper, we have provided some support for several hypotheses about the determinants of which governors get reelected. The benefit from being a member of a particular party varies from state to state and from year to year. Personal characteristics such as age are also important. The logits give some support to the importance of coalition formation; reelection is easier in states with low voter turnout and in farm states. The paper is most concerned with the connection between the economic performance and the electoral success of incumbent candidates for governor, and we find support for a model of electoral acountability, in which governors are powerful in state governments and state governments have the ability to differentially tax fixed factors relative to neighboring states.This paper raises some important issues regarding the measurement of variables in political economy, which have wide applicability to other studies in the economics of politics. Peltzman (1988) finds that the difference between the growth rate in state personal income and the national growth rate over a one to four year period prior to the election does not affect gubernatorial electoral outcomes. Concurrently, we find that the current year's growth rate in state personal income and its difference from the national growth rate are not significantly related to electoral success but that the average deviation from predicted state personal income during the governor's tenure in office is significantly related to the odds of getting reelected. That is, the data reject simplistic views of voter behavior and support a sophisticated model of voter behavior. Similarly, Peltzman (1988) has greater success using more sophisticated, cumulative measures of national economic performance.     

When States Discriminate: The Non-uniform Tax Treatment of Municipal Bond Interest

There is a long history of states using tax systems to encourage residents to invest in bonds issued by jurisdictions within their state. This preferential or discriminatory tax treatment was ruled unconstitutional in 2006 by the Kentucky Court of Appeals. The Kentucky court decision, which sets the stage for this essay, was overturned by the U.S. Supreme Court in 2008. This essay addresses the possible implications of this and similar discriminatory tax policies. Such discriminatory policies are the foundation of the municipal bond market, and altering the practice would have significant implications for revenue collections and borrowing costs in most states and localities. While the Supreme Court's position has been rendered, the case has caused policy makers and administrators to scrutinize discriminatory tax policies and their impact on budgets and borrowing costs.     

Factors influencing state progress in the implementation of Public Law 99-457, Part H

Policy implementation has been an infrequently studied process although it has become increasingly evident that the implementation processes of policy development, policy approval, and policy application can shape and delay prospective implementation of legislation. The current study analyzes the implementation of P.L. 99–457 (Part H) the Education for the Handicapped Amendments of 1986. This law provides the states with planning money from the federal government to design a comprehensive interagency, multidisciplinary program of services for children with handicapping conditions and their families. Ratings were taken from key administrators and citizens knowledgeable about the law on state progress in implementing the fourteen requirements of the law and also on proposed influential conditions that might affect that implementation. Additional demographic information was obtained for the fifty states. The factor that seemed to be most influential in a subset of 35 states was the prior presence in the state of systems for interagency planning and development. Neither prior history of early childhood services, available resources, wealth of the state, or geographic region appeared to have a significant influence on policy development. There was some indication that different factors might become influential in the next phase of implementation, policy approval. It appears that progress in state policy development may be linked to the special requirements of the legislation itself and to prior availability of institutional structures that make mandated collaborative efforts more possible.     

Institutions, Policy Innovation, and E-Government in the American States

Examining the rankings of American states in one fast‐growing policy area, e‐government, states with the most sophisticated and comprehensive policies varied over a five‐year period. What factors account for change in digital government policy innovation over time? Using time‐series analysis and 50‐state data, the authors find that state institutional capacity is important for continued innovation. They also find an association between reinvention in state governments and the institutionalization of information technology, suggesting a more general orientation toward government reform and modernization. Although state wealth and education were not significant in previous studies, they emerge as predictors of later innovation. The theoretical contribution of this study is to better understand the dynamic character of innovation over time and the role of institutions. The link between reinvention and e‐government raises the possibility that the modernization of state institutions generally facilitates innovation.     

Status and Power: The Principal Inputs to Influence for Public Managers

The authors identify status and power as the principal bases of influence for public managers and describe how managers can use this conceptual distinction to increase their influence. Status is defined as the degree to which one is respected by one's colleagues, and power is defined as asymmetric control over valued resources. Different social and relational processes govern (1) how people determine who is, and who ought to be, high status versus powerful and (2) how status and power affect individual psychology and behavior. To illustrate key points, the authors provide examples of individuals from the public sector and public service organizations. The framework of interpersonal influence gives practitioners behavioral strategies for increasing their status and power as well as a way to assess and diagnose interpersonal dimensions of their own performance in their jobs and careers.     

Policy Inventing and Borrowing among State Legislatures

Although a long literature has analyzed how policies diffuse or spread across the American states, scant attention has been given to how states invent or create original policy instead of borrowing existing policy from one another. In this article, I use state legislative policymaking with respect to renewable portfolio standards to examine when legislatures invent original policy instead of borrowing existing policy. I use a novel data set that includes the state adoption of hundreds of policy provisions, including their combinations, and I employ logistic pooled event history analysis to identify the determinants of inventing and borrowing. I find that government ideology largely predicts inventing, whereas electoral vulnerability predicts borrowing. The results suggest that ideologues spearhead invention and further suggest that democratic accountability works chiefly through promoting borrowing rather than blunting inventing.     

Politics of E‐Government: E‐Government and the Political Control of Bureaucracy

This case study reports an innovative e‐government experiment by a local government in Seoul, South Korea—Gangnam‐gu. A new local political leadership in Gangnam made strategic use of e‐government applications to exert greater political control over the local civil service bureaucracy. The authors find that e‐government applications possess political properties that can be applied effectively by the political leadership as instruments to improve control over the government bureaucracy as well as to enhance essential government accountability and transparency. The political circumstances underlying e‐government development as well as its impact on local government are reported, along with key variables associated with this innovation and directions for future research.     

Does democracy produce quality of government?

This article analyses the effects of political regimes over state capacity or the quality of government (QoG): Do democratic states perform better than authoritarian ones? Previous studies point to a nonlinear relationship between democracy and government quality. It is argued here that QoG is a function of both forces of supply (leaders who have the power to make reforms) and demand (citizens' desire for mid‐ to long‐term investments over short‐term needs), the latter of which is a function of economic development. In democratic states, leaders have stronger incentives to improve QoG after a certain degree of wealth is reached, while in poorer countries they have little incentive for long‐term bureaucratic investments. Thus it is predicted that the relationship between democracy and QoG is conditional, based on economic development. With over 125 countries in the sample, this hypothesis is tested using time‐series panel data and spatial models, and strong empirical support is found.     

The Effect of Bureaucratic Responsiveness on Citizen Participation

What effect does bureaucratic responsiveness have on citizen participation? Since the 1940s, attitudinal measures of perceived efficacy have been used to explain participation. The authors develop a “calculus of participation” that incorporates objective efficacy—the extent to which an individual's participation actually has an impact—and test the model against behavioral data from the online application Fix My Street (n = 399,364). A successful first experience using Fix My Street is associated with a 57 percent increase in the probability of an individual submitting a second report, and the experience of bureaucratic responsiveness to the first report submitted has predictive power over all future report submissions. The findings highlight the importance of responsiveness for fostering an active citizenry while demonstrating the value of incidentally collected data to examine participatory behavior at the individual level.