A forecasting model for state expenditures

In this study, the median voter model is applied to the problem of predicting state public expenditures in four major categories: human services, elementary and secondary education, higher education, and health services. Demand functions for public services are derived within a formal utility-maximizing model. The resulting model is estimated using time-series data for a representative state and the model is used to predict state spending for fiscal year 1985. The results of the estimation are consistent with the predictions of the median voter model and the forecasts correspond closely to those made by the State Bureau of the Budget. In contrast, a naive autoregressive model of state spending performs poorly.     

Interstate Spillovers,Fiscal Decentralization,and Public Spending on Medicaid Home‐ and Community‐Based Services

This article examines the interstate spillover effect of Medicaid expenditures for home‐ and community‐based services (HCBS) and tests the relationship between fiscal decentralization and public spending. Based on the theory of interstate strategic interaction, an empirical model is specified that explicitly accounts for interdependence in states’ spending decisions. The model is estimated by applying spatial econometric methods to panel data for the 50 U.S. states for 2000–2010. Findings show a positive interdependence in state HCBS expenditures that is contingent on similarity in citizen ideology between states. Fiscal decentralization, measured by transfer dependence and revenue autonomy, is positively related to Medicaid HCBS spending.     

Fiscal Decentralization and Provincial-Level Fiscal Disparities in China: A Sino-U.S. Comparative Perspective

Since China's 1994 fiscal reform, increasing concerns have been voiced about fiscal disparities across the country. Can local governments fairly and effectively fulfill basic public services such as primary education, public health, and social welfare? This essay traces the evolution of intergovernmental relations in China since 1978. The fluctuation of provincial level fiscal distribution over time and the underlying factors behind fiscal inequality, as compared to a decentralized American revenue system, are analyzed. The author, Zhirong Jerry Zhao of the University of Minnesota, argues for additional research on alternative measures of local fiscal capacity.     

Political Parties and Higher Education Spending: Who Favours Redistribution?

A nation's endowment with human capital is an important source of economic prosperity, yet education systems as well as the amount of public spending differ both between and within industrialised countries. Traditional approaches in comparative political economy explain education spending from a perspective in which leftist parties favour human capital formation. In contrast, recent approaches claim that – with regard to public financing of higher education in stratified education systems – the basic assumptions of partisan theory rather lead to the opposite hypothesis. In such systems, a pattern of reverse redistribution emerges, under which electoral incentives let right-wing parties favour increases in higher education budgets. This article tests both claims within the decentralised German education system. Its encompassing empirical strategy provides clear support for the latter hypothesis in the 16 German states between 1992 and 2003. The results imply that the partisan composition of government and preferences for redistribution continue to matter.     

THE NEXT DECADE: THE ECONOMIC, POLITICAL, AND SOCIAL CONTEXT OF EMPLOYMENT AND TRAINING POLICIES

The conservative challenge of the Reagan administration has not produced a full-scale reversal of the liberal policies and social programs developed by earlier administrations and seems unlikely to do so now. Nevertheless, the continuities in American social and political history, the changed economic and fiscal circumstances of the current era, and growing public appreciation of the limits of federal action and of institutional capabilities are likely to effect a reduction in the level of federal spending for social programs in the foreseeable future and force the states to assume larger fiscal and programmatic roles. Implications for future employment and training policies include continued decentralization, a shift in focus away from training new entrants to retraining mid-career workers, and greater emphasis on meeting cost-effectiveness tests as program goals seek to promote economic efficiency rather than social objectives.     

Democracy and Education Spending in Africa

While it is widely believed that electoral competition influences public spending decisions, there has been relatively little effort to examine how recent democratization in the developing world has resulted in changes in basic service provision. There have been even fewer attempts to investigate whether democracy matters for public spending in the poorest developing countries, where "weak institutions" may mean that the formal adoption of electoral competition has little effect on policy. In this article I confront these questions directly, asking whether the shift to multiparty competition in African countries has resulted in increased spending on primary education. I develop an argument, illustrated with a game-theoretic model, which suggests that the need to obtain an electoral majority may have prompted African governments to spend more on education and to prioritize primary schools over universities within the education budget. I test three propositions from the model using panel data on electoral competition and education spending in African countries. I find clear evidence that democratically elected African governments have spent more on primary education, while spending on universities appears unaffected by democratization .     

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.     

Creating Public Value with Tax and Spending Policies: The View from Public Economics

According to the framework rooted in public economics, governments can create public value by focusing tax and spending policies on remedying market failures and addressing concerns about fairness embodied in a social welfare function. By pursuing optimal tax and spending policies, governments navigate the omnipresent trade‐offs between equity and efficiency. Of course, in practice, the process by which policies are adopted does not resemble the planner's problem in social choice theory. In addition, real fiscal policies do not look much like the recommendations that arise from the optimal tax literature. Governments operate in public choice environments that are not conducive to focused remedying of market failure, and they suffer from their own tendencies to fail to achieve their objectives. Nevertheless, many of the tools are in place to help the federal and state governments focus tax and spending in ways that can maximize public value.     

The Changing Public-Private Infrastructure Mix: Economy-wide Implications

This article provides an economy-wide perspective on the changing role of the public sector in developing economic and social infrastructure in Australia. It analyses the scale and macroeconomic significance of the key economic and social infrastructure sectors — communication services, electricity, gas and water supply, transport, education, health and community services, government administration and defence. It then canvasses the major policy issues that have arisen in the progression from public to private infrastructure provision and considers why concerns about the trend fall in traditional public works spending may be misplaced in light of recent economic and institutional changes.     

Politics of childcare policy beyond the left–right scale: Post‐industrialisation,transformation of party systems and welfare state restructuring

Childcare policy has become an integral part of social and economic policy in post‐industrial democracies. This article explores how the transformation of party systems structures the politics of childcare policy. It reveals that political parties contend with each other over childcare and female employment policy on the social‐value dimension as well as the redistributive dimension. Assuming that different party policies have distinct impacts on public childcare policy, it is hypothesised in this article that a government's policy position – composed of the governing parties' policy positions – affects changes in public spending for childcare services. Through an analysis of the pooled time‐series and cross‐section data of 18 advanced industrialised countries from 1980 until 2005 using multivariate regression methods, it is revealed that a government's redistributive left–right policy position interacts with its social liberal–conservative policy position, and that a left–liberal government raises its budget for childcare services while a left–conservative government does not.     

Why people want something for nothing: The role of asymmetrical illusions

Abstract. This article examines if and why mechanisms exist at the individual citizen level that may contribute to public sector growth — and whether such mechanisms can be altered through provision of information about the costs of public services.We test and find empirical support for the theory of fiscal illusion according to which citizens underestimate the costs of public services and therefore demand more public spending than if they had been fully informed. We also develop and find empirical support for a theory of asymmetrical illusions. This theory claims that producers and users of public services are more spending–minded than ordinary taxpayers — and that limited rationality contributes to this difference. However, the provision of information about the unit costs of public services can weaken these mechanisms of fiscal illusion and asymmetrical illusions. The test is based on tabular, logit, and experimental analysis of survey data from Odense, a Danish city with 175,000 inhabitants.     

Municipal Expenditures Through Thick and Thin

This article examines changes in the revenue and expenditurepatterns of twelve major cities (six fiscally healthy; six fiscallydistressed) from fiscal years 1964 to 1979. The purpose of theexaminatin is to determine whether resource scarcity resultsin significantly different expenditure patterns, especiallyfor essential services (police, fire sanitation, and sewerage),social services (welfare, health, hospitals, and public housing),capital spending, and personal sevices (salaries). The resultsshow that changes inrevenue patterns are not significantly relatedto changes in expenditrue patterns, with the exception of capitalspending. The results support the theory that cutback budgetarystrategies are not significanely different from expansionarybudgetary strategies. Incrementalism (decrementalism) prevails.     

Bildung und die „neue“ Sozialdemokratie: eine Analyse aus der Sicht der vergleichenden Staatsausgabenforschung

The rhetoric of “reformed” social democracy has emphasized education and investment in human capital formation since the 1990s. Nevertheless, scholarly accounts of social democratic government policies have neglected the study of education politics. This article addresses the question of whether the move from traditional to reformist social democracy can be traced in the analysis of public social and education spending in the 1980s and 1990s. I show that government participation of social democrats went along with increases in social transfer spending in the 1980s, whereas in the 1990s, social democrats have instead increased spending on education, and higher education in particular, and curtailed spending on social transfers. The final section of the article discusses the implications of these findings for the future development of partisan theory.     

An analysis of asymmetric effect of federal transfers across Indian states

This study empirically examines the asymmetric effect of federal transfers in India using a panel dataset of 18 states from 2000–2001 to 2019–2020. In mapping the asymmetric effect of federal transfers on subnational spending across the Indian states, we test it in the extended ‘flypaper effect’ framework, examining whether subnational expenditures respond in the same way to changes in federal transfers. To quantify the extent of the asymmetric effect on the subnational expenditure, we employed the panel non-linear ARDL model. The results suggest that subnational spending has a greater asymmetric response to the increase in federal transfers than to a decrease. At the disaggregate level, ten out of 18 states have a fiscal replacement kind of asymmetric effect in any spending specifications. But only three validate it in the capital and development spending, and seven states validating in the non-development expenditure on the revenue accounts. Replacing the cut in federal transfers with other revenue sources that prioritise non-development spending over development spending is problematic.     

Do citizens care about government debt? Evidence from survey experiments on budgetary priorities

Ever since the Great Recession, public debt has become politicised. Some research suggests that citizens are fiscally conservative, while other research shows that they punish governments for implementing fiscal consolidation. This begs the question of whether and how much citizens care about debt. We argue that debt is not a priority for citizens because reducing it involves spending and tax trade-offs. Using a split-sample experiment and a conjoint experiment in four European countries, we show that fiscal consolidation at the cost of spending cuts or taxes hikes is less popular than commonly assumed. Revenue-based consolidation is especially unpopular, but expenditure-based consolidation is also contested. Moreover, the public has clear fiscal policy priorities: People do not favour lower debt and taxes, but they support higher progressive taxes to pay for more government spending. The article furthers our understanding of public opinion on fiscal policies and the likely political consequences of austerity.     

Recent Trends in State Spending: Patterns, Problems, Prospects

After more than three decades of institutional and fiscal capacity-building,the debate over the states' commitment to their citizens andlocal governments continues. Federal domestic disengagement,the national recession, taxpayer unrest, and anti-incumbentsentiments, among other factors, have raised concerns aboutthe states' performance. This article reviews recent trendsin state spending for public education, Medicaid, corrections,AFDC, and local aid to discern changes and assess their implicationsfor the states' role and record.     

Denying Citizens Their Rights? Indigenous People,Mining Payments and Service Provision

Indigenous Australians have a growing capacity to extract monetary payments from mineral development on their traditional lands. Considerable controversy surrounds the possible use of these payments to fund services such as health, housing and education for the Indigenous groups concerned. Critics of such an approach argue that government should provide basic public services to all citizens, and that use of 'mining payments' for service provision denies Indigenous people specific compensation for the negative impacts of mining and an important opportunity to enhance their economic status. There is also a danger that government may reduce its existing spending on services, leaving Indigenous people no better off as a result of allowing mining to occur. This article argues that while there are certainly risks involved in using mining payments to fund services, Indigenous groups can generate substantial net benefits by doing so. Mining payments can leverage additional government spending; fund services at a level or of a sort that government will not provide; give Indigenous people greater control over service provision; and help develop Indigenous organisational skills and governance capacity. A strategic approach is required to minimise risk and maximise the available benefits, and the article identifies policy principles that can be applied to secure such an outcome.     

State Fiscal Strategies for the 1990s: Balancing Budgets in a Recession

The fiscal crunch facing many states in FY 1991 has its rootsin the recession, federal mandates, election-year politics,and rapid growth in spending for Medicaid and corrections. Southernand midwestern states that made drastic cuts in response tothe 1981–1982 recession have fared relatively well, butstates in the Northeast have faced tax increases, layoffs, cutsin services, and prolonged conflict over state budgets. Althoughthe tax revolt has not led to appreciably lower taxes, it hasmade raising taxes more difficult, and has heralded a shiftto "boutique government," which may create further fiscal problemsin the long run. State tax increases and spending cutbacks mayalso delay recovery from the recession.     

In Maryland, Fiscal Discipline Is the Budget Limit

Maryland does not limit spending or revenues pursuant to a constitutional or statutory formula. It has developed a unique response to fiscal difficulties, which does not abdicate fiscal policy to formulas as happens under traditional limitation regimes The process used in Maryland is called Spending Affordability, and it serves to cause policymakers to prospectively focus on the relationship of public spending to the state's economy without altering the budget-making process. This article examines the Spending Affordability model in use in Maryland.     

Redistributive policies in decentralised systems: The effect of decentralisation on subnational social spending

This article uses cross‐national data to examine the effects of fiscal and political decentralisation on subnational governments’ social expenditures. It revisits the benefit competition hypothesis put forward by fiscal federalism research, which posits that subnational governments in decentralised countries match welfare benefit reductions by their peers to keep taxes low and avoid an in‐migration of welfare dependents. As a consequence, subnational social expenditures are assumed to plateau at similar and low levels. Using a new cross‐national dataset on social expenditures in 334 subnational units across 14 countries and 21 years, the author explores whether benefit competition causes subnational governments to converge on similar levels of social spending. The analysis reveals that as countries decentralise, subnational social spending levels begin to diverge rather than converge, with some subnational governments reducing their social expenditures and others increasing them. Furthermore, decentralisation is not likely to be associated with lowest common denominator social policies, but with more variability in social expenditure. The article also examines the effects of other macro‐level institutions and demonstrates that policy coordination influences the relationship between decentralisation and subnational social spending levels.