Divided Government and Deficits in the States

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After a long period of relative prosperity, American state governments have recently been experiencing significant fiscal difficulties. Ten states began their 1992 fiscal year without a budget, including New York, which set a record by going over three months past its April 1 deadline before adopting a budget, and Maine and Connecticut, which temporarily shut down all but essential public services. Some observers blame this pattern on excessive spending by state governments in the 1980s, while others argue that the "new federalism" is to blame, by increasing state responsibilities while decreasing federal revenue contributions. The investigators believe there is also a political cause: of the ten states that lacked a budget at the beginning of their 1992 fiscal year, nine currently had divided government, meaning that the same party did not control the executive and both houses of the legislature. The investigators of this project contend there is also a constitutional cause: states whose laws allow easy carryover of deficits accumulate debt faster than others. The investigators will use political and economic models to explain how fiscal imbalance in the states results from such political and legal causes. They will test whether America's parties really differ systematically in fiscal policy at the state level, with Democrats taxing and spending more. If so, they will also test whether Democratic states with no-carryover constitutional provisions act like Republican states, while Democratic states without such provisions amass large cumulative deficits. Most of all, the researchers seek to explain how divided government exacerbates budget deficits in recessions. This research promises to enhance our understanding of the impact of divided government on political and economic factors.