exploring explanations of state agency budgets

r 2008 Public Financial Publications, Inc.

Exploring Explanations of State Agency Budgets:Institutional Budget Actors or Exogenous

Environment?

JAY EUNGHA RYU, CYNTHIA J. BOWLING, CHUNG-LAE CHO, andDEIL S. WRIGHT

Budgetary incrementalism argues that three institutional actorsFagencies,executive budget offices, and legislative committeesFdominate budgetoutcomes. The complexity and interdependency of public programs expandsthis expectation to include the influence of exogenous budget factors. Findingsfrom a survey of state agency heads reveal that budget environments doinfluence state agency budget outcomes. However, the institutional budgetaryparticipants, especially governors and legislatures, envisioned in classicalincrementalism retain their principal and primary influence on state agencybudgets. A significant departure from classical incrementalism is that agenciesare not as influential as previously depicted.

INTRODUCTION

In the 1960s, Wildavsky1 and Fenno2 published seminal works describing national bud-

get processes, beginning explorations to understand how budgets are created. ‘‘Who’’ or

‘‘what’’ determines how much money can be allocated and who gets it? Despite the

Jay Eungha Ryu is Assistant Professor of Public Administration at Ohio University, Bentley Annex 237,

Athens, OH 45701. He can be reached at [email protected].

Cynthia J. Bowling is Associate Professor in the Department of Political Science at Auburn University,

8030 Haley Center, Auburn University, Auburn, AL 36849. She can be reached at [email protected].

Chung-Lae Cho is Assistant Professor of Public Administration at Ewha Womans University, 11-1

Daehyun-Dong, Seodaemun-Gu, Seoul, Korea, 120-750. He can be reached at [email protected].

Deil S. Wright is Alumni Distinguished Professor of Political Science and Public Administration at the

University of North Carolina at Chapel Hill. He can be reached at [email protected]. Besides

interests in federalism, intergovernmental relations, and intergovernmental management he has conducted

longstanding research in state government and administration.

1. A. Wildavsky, The Politics of the Budgetary Process (Boston, MA: Little, Brown, 1964).

2. R. Fenno, The Power of the Purse (Boston, MA: Little, Brown, 1966).

Ryu et al. / Exploring Explanations of State Agency Budgets 23

abundance of theories and empirical findings about the factors affecting public expen-

ditures, research generally has created greater complexity than clarity.3 This article ex-

plores competing claims about the factors influencing the funding levels that agencies

acquire. As Rubin4 suggests, an expanded budgetary theory, which builds on an accu-

mulation of good descriptive theories, is highly needed. In particular, researchers are

encouraged to ‘‘try to link changing environmental conditions, budget processes, and

budget outcomes.’’5 While there might be a variety of ways to test the competing forces

observed to affect budgetary outcomes, this paper attempts to clarify and improve the

extant budget theories by empirically testing one specific question. Do budget actors in

particular roles within fiscal institutions or broader exogenous (macro) budget environ-

ments contribute more to understanding how agency budgets change in a given year?

Wildavsky and his co-authors6 found that executive agencies, the Budget Bureau, and

legislative appropriations committees were the most dominant decision makers in the

national budgetary process. Rubin7 subsequently reframed budgetary incrementalism

and institutionalism theories. Her revision accords more attention to influences on bud-

gets from outside the fiscal institutionsFthe exogenous budget environment. Wildav-

sky’s version of incrementalism required stability among participants’ roles,

relationships, and reactions. According to Rubin, however, the high interdependency

among and complexity within public programs obstructs key budget participants from

obtaining necessary decision cues from other actors. This inhibits budget actors’ ability

to calculate their ‘‘fair shares’’ of the budget and determine an appropriate increment to

advocate for their agency. In addition to the difficulties budget actors have within the

budget process, Rubin suggests that budget environments exert additional and note-

worthy forces on budgetary decision-making. This might especially be true when one

considers the impact of past budgetary decisions as a setting or environment for the

current process.8

3. D. Lowery and W. D. Berry, ‘‘The Growth of Government in the United States: An Empirical

Assessment of Competing Explanations,’’ American Journal of Political Science 27, no. 4 (1983): 665–694;

T. Su, M. S. Kamlet, and D. C. Mowery, ‘‘Modeling U. S. Budgetary and Fiscal Policy Outcomes: A

Disaggregated Systemwide Perspective,’’ American Journal of Political Science 37, no. 1 (1993): 213–245.

4. I. S. Rubin, ‘‘Budget Theory and Budget Practice: How Good the Fit?’’ Public Administration Review

50, no. 2 (1990): 179–189.

5. Ibid., 187.

6. O. A. Davis, M. A. Dempster, and A. Wildavsky, ‘‘A Theory of the Budgetary Process,’’ The

American Political Science Review 60, no. 3 (1966): 529–547.

7. I. S. Rubin, ‘‘Aaron Wildavsky and the Demise of Incrementalism,’’ Public Administration Review

49, no.1 (1989): 78–81; I. S. Rubin, The Politics of Public Budgeting: Getting and Spending, Borrowing and

Balancing, 3rd ed. (Chatham, NJ: Chatham House Publishers, 1997); I. S. Rubin, The Politics of Public

Budgeting: Getting and Spending, Borrowing and Balancing, 4th ed. (New York: Chatham House Publishers,

2000); I. S. Rubin, ‘‘The State of State Budget Research,’’ Public Budgeting and Finance Special Issue

(2005): 46–67; I. S. Rubin, The Politics of Public Budgeting: Getting and Spending, Borrowing and Balancing,

5th ed. (Washington, DC: CQ Press, 2006).

8. Rubin (2000).

Public Budgeting & Finance / Fall 200824

Wildavsky and co-authors, and other scholars subsequently paid more attention to

contextual variables.9 However, few studies have empirically tested whether agencies,

chief executives with their central budget offices, and legislative appropriations com-

mittees exert a stronger influence on budgetary outcomes than the decision-making en-

vironments. The question has gained greater attention in recent years. For instance,

supporters of the disproportionate information processing theory or the punctuated

equilibrium theory assert that the main budget actors pay more attention to informa-

tional cues from exogenous budget environments.10

Despite the current emphasis on the influence of exogenous budget environments, this

study found that the main institutional actors, especially governors and legislatures, still

play major roles in state budgetary processes that have recently been characterized by

complexity and unpredictability. While this study is cross-sectional (for 1998) rather than

temporal, it contributes to budget theory literature by examining and clarifying extant

theories of agency-level budget outcomes. The rarity of empirical studies testing explan-

atory theories can be attributed to the difficulty obtaining data that connect the pref-

erences and behaviors of budgetary participants with fiscal information at the agency

level. We use survey data from the 1998 American State Administrator Project (ASAP)

that elicited responses from state agency heads (over 1,000), as well as other state-level

data. The analysis uses the 50 American states as a natural cross-section within which

budgetary participants, their behaviors, and budget environments can differ while na-

tional political and economic factors remain similar or constant. The findings build on

prior results11 identifying factors affecting agency budget requests and contribute to a

further reduction in the disparity between descriptive and prescriptive theories of bud-

geting.

9. O. A. Davis, M. A. Dempster and Aaron Wildavsky, ‘‘Towards a Predictive Theory of Government

Expenditure: US Domestic Appropriations,’’ British Journal of Political Science 4, no. 3 (1974): 419–452;

L. T. LeLoup, ‘‘The Myth of Incrementalism: Analytical Choices in Budgetary Theory,’’ Polity 10, no. 4

(1978): 488–509; Su, Kamlet, and Mowery (1993); A. Wildavsky and N. Caiden, The New Politics of the

Budgetary Process, 3rd ed. (New York: Longman, 1997); A. Wildavsky and N. Caiden, The New Politics of

the Budgetary Process, 4th ed. (New York: Longman, 2001); A. Wildavsky and N. Caiden, The New Politics

of the Budgetary Process, 5th ed. (New York: Pearson-Longman, 2004); R. Keith and A. Schick, The

Federal Budget Process (New York, NY: Nova Science Publishers, 2003).

10. B. D. Jones, and F. R. Baumgartner, ‘‘A Model of Choice for Public Policy,’’ Journal of Public

Administration Research and Theory 15, no. 3 (2005): 325–335; B. D. Jones, F. R. Baumgartner, and J. L.

True, ‘‘Policy Punctuations. U.S. Budget Authority, 1947–1995,’’ The Journal of Politics 60, no. 1 (1998):

1–33; B. D. Jones, T. Sulkin, and H. A. Larsen, ‘‘Policy Punctuations in American Political Institutions,’’

American Political Science Review 97, no. 1 (2003): 151–169; M. M. Jordan, ‘‘Punctuations and Agendas: A

New Look at Local Government Budget Expenditures,’’ Journal of Policy Analysis and Management 22, no.

3 (2003): 345–360.

11. J. E. Ryu, et al. ‘‘The Effects of Administrator’s Aspirations, Political Principals’ Priorities, and

Interest Groups’ Influence on State Agency Budget Requests,’’ Public Budgeting and Finance 27, no. 2

(2007): 22–49.


BUDGETARY POLITICSFHEIGHTENED EXOGENOUS EFFECTS?

Under extraordinarily complex budgetary decision-making settings, shared understanding

of expected expenditure levels is a powerful means of securing budgetary stability and

predictability.12 Shared understanding enables the main budget actors (agencies, executives/

budget offices, and legislative committees) to participate in highly complex yet predictable

interactions with each other. Recent decades have witnessed drastic changes in the com-

position of governmental budgets, however. There have been rapid increases in entitlement

programs, largely beyond the discretion of budget actors.13 The changes raise questions

about the relevance of early incrementalist insights.14 Rubin asserts that norms of mod-

eration and fairness based on mutual consent throughout the budgetary process function

smoothly only if every budget actor can obtain decision cues from other actors.15 The sheer

size of governmental programs and their interdependency may make the norms of mod-

eration and fair share budgeting inapplicable to current budgetary settings. This could cause

the entire budgetary decision-making process to become more turbulent and uncertain.16

Rubin further emphasized how the budget process and the budget environment can

constrain decisions.17 Incremental theory described the environment of budgeting not as

part of the budget process but as an exogenous variable.18 If the environment is viewed as an

integral part of the budget process, however, greater influence on budget outcomes than

envisioned in early budget theory may be expected. Overall, Rubin suggested an expanded

model of the budgetary process that includes budget participants and environmental influ-

ences, a natural corollary of higher levels of predicted and perceived budgetary turbulence.19

In addition to discussions of the national budget process, significant work has ex-

plored incrementalism and budget growth in the American states.20 However, Lauth also

12. Davis, Dempster, and Wildavsky (1966, 1974); T. P. Lauth, ‘‘Exploring the Budgetary Base in

Georgia,’’ Public Budgeting and Finance 7, no. 4 (1987): 72–82; M. S. Kamlet and D. C. Mowery, ‘‘The

Budgetary Base in Federal Resource Allocation,’’ American Journal of Political Science 24, no. 4 (1980):

804–821; Wildavsky and Caiden (2004).

13. D. F. Kettl, ‘‘Expansion and Protection in the Budgetary Process,’’ Public Administration Review

49, no. 3 (1989): 231–239; A. Schick, ‘‘The Study of Microbudgeting,’’ in The Budget Puzzle: Understading

Federal Spending, eds. J. F. Cogan, T. J. Muris, and A. Schick (Stanford, CA: Stanford University Press,

1994a): 104–119.

14. Rubin (1989).

15. Ibid.; Rubin (1997, 2000).

16. Rubin (2000).

17. Ibid.; Rubin (1989, 2006).

18. Rubin (1989).

19. Rubin (2000); see also W. A. Niskanen, ‘‘A Reflection on Bureaucracy and Representative Gov-

ernment,’’ in The Budget-Maximizing Bureaucrat: Appraisal and Evidence, eds. A. Blais and S. Dion

(Pittsburgh, PA: University of Pittsburgh Press, 1991): 13–31; and L. T. LeLoup (1978).

20. T. Anton, The Politics of State Expenditures in Illinois. (Urbana, IL: University of Illinois Press,

1966); I. Sharkansky, ‘‘Agency Requests, Gubernatorial Support and Budget Success in State Legisla-

tures,’’ The American Political Science Review 62, no. 4 (1968): 1220–1231; J. A. Thompson, ‘‘Agency

Requests, Gubernatorial Support, and Budget Success in State Legislatures Revisited,’’ The Journal of


indicated that earlier budget studies ‘‘provided limited insights into the institutions,

processes, or patterns of behavior that occur during the preparation and approval of the

state budget.’’ 21,22

In addition to the states providing a natural comparative database for analyzing

differences in impacts of budget actors and environments, the importance of state gov-

ernment in the American federal system has seldom been more prominent. Van Horn23

notes that ‘‘at the beginning of the twenty-first century, state governments are at the

cutting edge of political and public policy reform . . . now that states have strengthened

their political and economic houses, they occupy a much more important role in Amer-

ican politics. . . .’’ This emphasizes the need to understand what affects state budgeting

and, more importantly, how well current budgeting literature describes the realities of

state processes. The present study joins others in focusing on state budget features and

outcomes. What factors, institutional budget actors or exogenous budget environments,

influence the budget outcomes of state agencies?

STATE AGENCY BUDGET PROCESSES

Agency appropriations are the dependent variable for this study. This variable, Legis-

lative Appropriations, is the agency head’s reported measure of the relative increase (or

decrease) in legislative appropriations for his or her state agency. It is constructed from

the responses of state agency heads to the 1998 ASAP survey. The survey encompassed

95 different types of state agencies. The questionnaire was mailed to 3,541 state agency

heads. The initial mailing in September 1998 was followed by three subsequent mailing to

nonrespondents through January 1999 and produced usable replies from 1,175 agency

heads for a response rate of 33 percent.24,25 The final regression model dropped 215 cases

(footnote Continued)

Politics 49, no. 3 (1987): 756–779; J. C. Garand, ‘‘Explaining Government Growth in the U. S. States,’’ The

American Political Science Review 82, no. 3 (1988): 837–849.

21. T. P. Lauth, ‘‘State Budgeting: Current Conditions and Future Trends,’’ International Journal of

Public Administration 15, no. 5 (1992): 1069.

22. Of course, there are many earlier critiques of incrementalism as a general theory of budgetary

decision making. The present paper does not cover those issues. Rather, as Berry (W. Berry, ‘‘The Con-

fusing Case of Budgetary Incrementalism: Too Many Meanings for a Single Concept,’’ Journal of Politics

52, no. 1 (1990): 167–196) suggested, we focus on one of many conflicting dimensions of incrementalist

approaches, consideration of budget environments, and contribute to the budgeting literature by clarifying

what factors affect agency budgets.

23. C. E. Van Horn, ‘‘Power, Politics, and Public Policy,’’ in The State of the States, 4th ed., ed. Carl

Van Horn (Washington, DC: CQ Press, 2006): 1–2.

24. A follow-up telephone survey of the nonrespondents verified the representativeness of the respon-

dents. They were not statistically significantly different from those who chose not to respond.

25. D. S. Wright and C. Cho, ‘‘American State Administrators Project (ASAP) Overview: Major Fea-

tures of the ASAP Surveys (1964–1998)’’ (Chapel Hill, NC: The Odum Institute at the University of North


due to list-wise deletion leaving 960 observations for statistical analyses. The actual

survey item presented a scale with 13 values measuring change in the level of agency

budget appropriation. It ranged from an 11 percent or more decrease to an 11 percent

or more increase from the prior year’s legislative appropriation for the agency. (See

Appendix A for actual question wording.) The 13-point scale was collapsed into a scale

of six values to enhance the simplicity and the reliability of empirical analysis.26

Table 1 indicates that over one-third of state agencies received increased legislative

appropriations in the range of 1–4 percent above the previous year. Twenty-nine percent

of the respondents indicated no change in legislative appropriations. Noteworthy is the

fact that 11 percent of the agencies experienced legislatively approved budget cuts.

A substantial segment of agencies (17 percent) secured fund increases in the 5–10

percent bracket while an even smaller proportion obtained increases above 10 percent.

TABLE 1

Percentage Distributions of Agency Budget Requests, Governor’s Recommendations, and

Legislative Appropriations (N5 960) for American State Administrative Agencies, 1998

Category

description

Agency budget

request

Governor’s

recommendations

Legislative

appropriations

Decrease 411% * * 1

Decrease o10% 4 11 10

No change 21 33 29

Increase 1–4% 32 32 35

Increase 5–10% 29 16 17

Increase 11%4 14 7 8

Total 100 100 100

*o1 percent.

Source: The 1998 American State Administrator Project survey.


Carolina, Mimeo, 2001); J. L. Brudney and D. S. Wright, ‘‘Revisiting Administrative Reform in the

American States: The Status of Reinventing Government during the 1990s,’’ Public Administration Review

62, no. 3 (2002): 353–361.

26. The self-reported legislative appropriations from the ASAP data match the appropriations to the

particular agency or jurisdiction headed by the agency head. It is not possible to use more objective data

from budget documents because of the inherent difficulty in matching the budget documents accurately

with the ASAP survey respondents. Any error in self-reporting should be minimal due to the high salience

of budgeting outcomes to administrative executives. Actual expenditure data for 118 agencies or com-

missions in Ohio for 1998, for instance, indicate that the average increase in actual spending for all funds

was 4.425 percent (data were obtained from the Ohio Legislative Service Commission). The average of

legislative appropriation increase for the 26 Ohio agencies or commissions in this study sample is 5.1

percent. To further minimize a possible bias from self-reported survey results within two percentage point

intervals, the 13 scale values were collapsed into six categories: 11 percent or more decrease, 1–10 percent

decrease, no change, 1–4 percent increase, 5–10 percent increase, and 11 percent or more increase.


Two sets of moderate to strong aggrandizing agencies asked for more than 5 percent

increases. One set of agencies (29 percent) requested increases in the 5–10 percent range,

but governors endorsed such increases for only 16 percent of the agencies. A slightly

higher percentage (17 percent) obtained legislative appropriations in this range. Simi-

larly, the most aggrandizing agencies (14 percent) sought budget increases above 10

percent. Half of those (7 percent) were successful and a few more (8 percent) gained

legislative support for the highest expansion category. Overall, legislatures granted ap-

propriations relatively close to gubernatorial recommendations. This result is consistent

with similar findings that governors cut agency budget requests and legislatures conform

to these recommendations.27

AN EXPLANATORY MODEL OF STATE AGENCY APPROPRIATIONS

Sharkansky,28 Thompson,29 and Rubin30 provide a framework for two sets of budget

determinants for state agency budgets. First, as described above, three institutional

budget actors directly responsible for decision-makingFagencies, governors, and leg-

islaturesFrequest, recommend, and rule on budget allocations. We label the variables

associated with these actors as internal, and define them according to the following

criteria. First, an internal influence is directly related to the preferences of the main

budget actors described above. Second, an institutional rule or procedure that directly

impacts a main actor’s preferences for budgetary change is also an internal influence, as it

is directly related to the individuals’ goals and behaviors. Third, a personal characteristic

of an actor that influences his/her preferences is also internal to the budget process.

Typically, these will be temporary or changing characteristics. For instance, the political

party of the governor may change each election, and thus is internal to that particular

actor.

Second, a set of exogenous factorsFthe economic, political, and institutional envi-

ronments that surround state budgetingFmay affect the budget process more than

earlier incrementalism expected. Exogenous factors were categorized based on these

criteria. First, characteristics or activities by actors other than the agency head, governor,

or legislators are external to the budget process, typically impacting agency appropri-

ations indirectly. Second, established institutions shaping the rules of the budget game

are also exogenousFthey are outside the immediate control of budget actors. The pres-

ence of veto powers is an unchanging institutional power of the governor that provides a

rule under which budgeting occurs; the use of the veto is an internal variable as it is an

27. Sharkansky (1969); Thompson (1987); T. P. Lauth, ‘‘The Executive Budget in Georgia,’’ State and

Local Government Review 18, no. 2 (1986): 56–64.

28. Sharkansky (1968).

29. Thompson (1987).

30. Rubin (2000).


action of a central budget actor. Likewise, a state contextual variable, unable to be

influenced (at least in the short term) by actors or institutions also provide an exogenous

context in which the budget process takes place.

Several variables are used to explore each of these two sets of determinants. Table 2

presents a summary of independent variables with definitions, data sources, and

hypothesized association with the dependent variable. All variables, unless specified

otherwise, are for 1998.

Internal Budget Actors and Their Resources/Preferences: Agencies, Governors, and

Legislatures

Bureaucrats are often portrayed as maximizing their own self-interests.31 Other studies at

the state and national levels indicate that bureaucrats are not single-minded in trying to

maximize their bureau budgets.32 Therefore, the minimizing or maximizing preference of

the agency head might be one factor influencing an agency’s budget appropriation. These

preferences are manifested in the agency budget requests to the governor or budget

office. While agency budget requests are often cut in the short term, acquisitive agencies

are more likely to enjoy a substantial budget increase from one year to the next.33

A variable constituting an agency’s actual budget request (Agency Budget Requests) is

used as a measure comparable to those used by Sharkansky34 and Thompson.35 It is

constructed from two ASAP survey questions (see Appendix A) and is collapsed into a

six-point scale. The agency’s budget request is hypothesized to correlate positively with

the dependent variable, Legislative Appropriations.

Across the twentieth century state legislatures increasingly have chosen to begin bud-

get deliberations with the executive budget, ‘‘concentrating responsibility for budget

preparation and execution in the office of the governor.’’36 Agency budget requests are

submitted to legislatures after coordination and review by governors or central budget

offices. The governor’s budget reflects agency budget requests and the governor’s policy

31. W. A. Niskanen Jr., Bureaucracy and Representative Government (Chicago: Aldine Publishing,

1971); Davis, Dempster, and Wildavsky (1966, 1974).

32. C. J. Bowling, C. Cho, and D. S. Wright, ‘‘Establishing a Continuum from Minimizing to Max-

imizing Bureaucrats: State Agency Head Preferences for Governmental ExpansionFA Typology of

Administrator Growth Postures, 1964–98,’’ Public Administration Review 64, no. 4 (2004): 489–499; L.

Sigelman, ‘‘The Bureaucrat as Budget Maximizer: An Assumption Examined,’’ Public Budgeting and

Finance 6, no. 1 (1986): 50–59; J. Dolan, ‘‘The Budget-Minimizing Bureaucrats? Empirical Evidence from

the Senior Executive Service,’’ Public Administration Review 62, no. 1 (2002): 42–50; Ryu et al. (2007).

33. Sharkansky (1968); L. T. LeLoup and W. B. Moreland, ‘‘Agency Strategies and Executive Review:

The Hidden Politics of Budgeting,’’ Public Administration Review 38, no. 3 (1978): 232–239; Thompson

(1987); Lauth (1992).



36. Lauth (1992): 1074.


TABLE2

InternalandExogenousVariablesAffectingLegislative

AppropriationsforState

Agencies

Variable

Category

Hypothesized

association

Internalinstitutionalbudget

actors

Agency

budget

requests

Agency

budget

requestto

governors:five-scale

measure

constructed

from

the1998

ASAPsurvey

1

Governor’sbudget

recommendations

Governor’sbudget

recommendation:five-scale

measure

constructed

from

the1998

ASAPsurvey

1

Professionalizedstate

legislators

Factorscore

fortheprofessionalizedstate

legislators:four-pointscale

measuring

staffassistance

forindividualHouse

mem

bersandindividualSenators

(respectively),

salaries

forlegislators,andtotallegislativestaffduring1996(C

SG;Hamm

and

Moncrief1999)

1/�


legislatures

Factorscore

fortheprofessionalizedstate

legislatures:four-pointscale

measuring

professionaland/orclericalstaffassistance

forlegislativestandingcommittees

inthe

Senate

andtheHouse

(respectively),term

sofHouse

mem

bers,andmem

bership

turnover

ratesofSenators

(CSG)

1/�

Per

capitaHouse

mem

bers

Per

capitaHouse

mem

bers(C

SG)

1

Per

capitaSenate

mem

bers

Per

capitaSenate

mem

bers(C

SG)

1

Legislative

partisanship

AverageratioofRepublicansto

Dem

ocrats

inboth

Houses(SAOUS)

�Exogenousenvironmentalvariables

Per

capitapersonal

income

Per

capitastate

personalincome(SAOUS)

1

Per

capitatotalfederal

aid

Per

capitatotalfederalaid

(BOC)

�

Clientele

groups

Four-pointscalemeasuringinfluence

onbudgetsforspecificprogramsfrom

clientele

groups:the1998ASAPsurvey

1


TABLE2

(Continued)

Variable

Category

Hypothesized

association

State

litigationsin

education

State

litigationsin

educationfinance

basedonfiscalneutrality

oradequacy

of

education(A

CIR

;Rebell2002)

1

Balancedbudget

requirem

ent

Sum

ofrequirem

ents

thatgovernors

submit,legislaturespass,andgovernors

signa

balancedbudget

(CSG)

�

Nocarryoverdeficit

Requirem

entnotto

carryover

deficitin

1997(N

ASBO)

�State

perform

ance

funding

Implementationofstate

perform

ance

fundingin

1997(JordanandHackbart

1999)

�

Governor’sveto

power

Governor’sitem

veto,deletionveto,andreductionvetopowers(C

SG)

�Budget

target

Gubernatorialauthority

togiveagencies

fundinglevel

requesttarget

in1997

(NASBO)

�

Legislative

macro-

budgeting

Factorscore

formacro-budgetingin

state

legislativestructures:centraljoint

legislativefiscaloffices,mem

bership

turnover

ratesofHouse

mem

bers,andjoint

legislativefiscalcommittees

(CSG;GrooterandEckl1998)

�

Source:

CSG,CouncilofState

Governments,TheBookoftheStates,1998–1999ed.(Lexington,KY:TheCouncilofState

Governments,1998–1999);ACIR

,

U.S.Advisory

CommissiononIntergovernmentalRelations,

TheStructure

ofState

Aid

toElementary

andSecondary

Education(W

ashington,DC:U.S.

Advisory

CommissiononIntergovernmentalRelations,

1990);BOC,BureauofCensus;

BLS,BureauofLaborStatistics;

NASBO,NationalAssociationof

State

Budget

Officers,Budget

Processes

intheStates(W

ashington,DC:NASBO,1997);

SAOUS,StatisticalAbstract

ofUnited

States2000;Hamm

and

Moncrief,

K.E.Hamm

andG.F.Moncrief,‘‘LegislativePolitics

intheStates,’’in

Politics

intheAmericanStates:

AComparative

Analysis,

7th

ed.,eds.

V.Gray,R.L.Hanson,andH.Jacob(W

ashington,DC:CQ

Press,1999):

144–190;Rebell,M.A.Rebell,‘‘EducationalAdequacy,Dem

ocracy,andthe

Courts,’’in

AchievingHighEducationalStandardsforAll:Conference

Summary,eds.

T.Ready,C.EdleyJr.,andC.E.Snow

(Washington,DC:National

Academ

yPress,2002):218–267;JordanandHackbart,M.M.JordanandM.M.Hackbart,‘‘Perform

ance

BudgetingandPerform

ance

Fundingin

theStates:A

StatusAssessm

ent,’’PublicBudgetingandFinance

19,no.1(1999);Grooters

andEckl,J.

Grooters

andC.Eckl,Legislative

Budget

Procedures:

AGuideto

AppropriationsandBudget

Processes

intheStates,CommonwealthsandTerritories

(Denver,CO:NationalConference

ofState

Legislatures,1998).


preferences.37 In the complexity surrounding the budget process, state legislators rely on

gubernatorial recommendations for budget cues. This may be more likely in states with

less professionalized legislatures.38

Previous studies suggest a typical process for state budgeting: (1) state agencies re-

quest more funding for the next fiscal year, (2) the governor cuts agency budget requests,

and (3) legislative appropriations approximate the governor’s budget recommendation.

As evidenced in Table 1, the governor’s recommendation acts as a strong driving force in

the budgetary process.39 The variable for governor’s budget recommendation (Gover-

nor’s Budget Recommendations) derives from an ASAP question (see Appendix A) and

is collapsed into a six-point scale ranging from recommendations for a decrease of

11 percent or more to an increase of 11 percent or more. As mentioned above, the pattern

of legislative appropriations is close to that of governor’s budget recommendations for

state agencies, and the recommendations are expected to correlate positively with leg-

islative appropriations for state agencies.

In the national budgeting literature the two houses of Congress played varied roles in

the budget process. The House Appropriations Committees were originally depicted as

guardians of the public purse40 while the Senate Appropriations Committees protected

essential agency programs.41 Recently, legislators have been depicted more as protectors

of pork-barrel projects for their local constituency interests. This inclination has been

noted especially at the state level.42 Thus, the legislatures are also major players in the

budget processFthe final decisions rest in the houses.

One feature of legislatures with the ability to influence legislative preferences and

behavior in the budget process is professionalism. With few exceptions, state legislatures

have had more resources available for legislative operations in recent years. These re-

sources have encouraged and enabled state legislatures to have some degree of inde-

pendence from the executive branch in budgetary decision-making. The legislatures

have gained increased and improved staffing, sessions, salaries, space, and structures.43

They have joint legislative fiscal committees or a central legislative budget office.44 For

example, California has a legislative budget committee in addition to House and Senate

Appropriations Committees, and Ohio has the Legislative Budget Office.

37. Ibid.; G. Abney and T. P. Lauth, ‘‘The Executive Budget in the States: Normative Idea and Em-

pirical Observation,’’ Policy Studies Journal 17, no. 4 (1989): 829–840.

38. Sharkansky (1968); Lauth (1989).

39. Sharkansky (1968); Lauth (1987); Thompson (1987).

40. Fenno (1966).

41. Wildavsky and Caiden (2004).

42. A. Rosenthal, The Decline of Representative Democracy: Process, Participation, and Power in State

Legislatures (Washington, DC: CQ Press, 1998); A. Rosenthal, Heavy Lifting: The Job of the American

Legislature (Washington, DC: CQ Press, 2004); Schick (1994a).

43. Rosenthal (1998).

44. J. Grooters and C. Eckl, Legislative Budget Procedures: A Guide to Appropriations and Budget

Processes in the States, Commonwealths and Territories (Denver, CO: National Conference of State Leg-

islatures, 1998).


To tap these various characteristics of state legislatures, a factor analysis was con-

ducted using multiple legislative variables including measures of staff assistance for

individual legislators and committees, total legislative staff persons, presence of legis-

lative budget offices and joint fiscal committees, terms of House members, turnover

rates, and total numbers of House and Senate members. Four factors with eigenvalues

41 were obtained and three-factor scores were employed in the analysis. (See Appendix

B for more details.)

The first factor score, labeled Professionalized State Legislators, is constructed from

staff assistance for House and Senate members, salaries of legislators, and total legis-

lative staff variables. The second factor score, labeled Professionalized State Legislatures,

is constructed from staff assistance for House and Senate standing committee members,

terms of House members, and membership turnover rates of Senators. Bourdeaux45

indicates that professional legislators tend to receive higher salaries, work more days in

session, and be less subject to term limits. In contrast, professional legislatures are likely

to have high levels of staff and support services. However, the variable (Professionalized

State Legislators) is constructed mostly from the features of individual legislators, in-

cluding enhanced staff supports. In contrast, Professionalized State Legislatures reflect

mainly features of the legislative bodies.46

Professionalism should enhance the legislature’s ability to increase (or decrease) the

budgets of their favored (or disfavored) agencies despite the initial presentations from

governors. It may enable the recently depicted legislative assertiveness in the pursuit of

constituent benefits. If so, the two-factor scores may be positively correlated with leg-

islative appropriations. Alternatively, professional legislators and legislatures might be

negatively correlated with legislative appropriations. Ryu et al.47 provide evidence that

additional information on agency programs available to state legislatures exerts some

curbing power on original agency budget requests. We label these variables internal

because, although they are institutional, long-term features, the presence of profession-

alism can change legislators’ preferences and the likelihood of legislative actions during

the budget process.

We also create another variable to reflect impacts of representation or constituency

service. As noted above, state-level observations have indicated that representatives may

tend to protect projects to provide benefits directly to their constituencies. This variable

is created from the total numbers of House and Senate members in the states’ legislative

chambers. To explore the potential difference in the predispositions of House and Senate

members, two variables are included: Per Capita House Members and Per Capita Senate

Members. These two variables might be positively correlated with increases in agency

45. C. Bordeaux, ‘‘Do Legislatures Matter in Budgetary Reform?’’ Public Budgeting and Finance 26,

no. 1 (2006): 120–142.

46. P. Squire, ‘‘Measuring State Legislative Professionalism: The Squire Index Revisited,’’ State

Politics and Policy Quarterly 7, no. 2 (2007): 211–227.

47. Ryu et al. (2007).


appropriations if state legislators, as recently claimed, are advocates for constituents’

benefits. We label this variable internal because although the numbers of legislative

members in each state is constant, making the pressure of constituencies relatively

stable in each year, the pressure to serve their constituency changes the preferences of the

legislators.

In addition, one measure of the general budgeting tendencies of the legislatures is

political partisanship. At the national level, Democrats tend to support larger govern-

mental spending, particularly for nondefense spending programs.48 A similar tendency

may exist at the state level. To test the impact of partisan legislatures on state budget

outcomes, the average ratio of Republicans to Democrats in both houses in state

legislatures, Legislative Partisanship, is included in the model.

Exogenous Budget Environments: Economic, Political, Fiscal, and Legal Contexts

Budget actors and their institutional resources clearly impact state budget processes and

agency appropriations. To what extent, however, are these processes and results also

subject to the resources, influences, contexts and constraints of the economic, political,

fiscal, and legal arenas in which decisions are made? These contextual, exogenous in-

fluences are important in securing a more complete understanding of budgeting. This

section discusses prior research and proposes hypotheses about the impact of exogenous

environments on budget outcomes. It also describes the operationalization of these

variables.

Aggregate public budgets are subject to the overall availability and certainty of re-

sources.49 This often means that the executive will set a broad budget ceiling for overall

spending and revenues based on expected resources.50 Two fiscal variables are included

in the model to capture the effects of available resources on legislative appropriations.

First, Per Capita Personal Income is expected to correlate positively with state agency

appropriations as the state resource ‘‘pie’’ is expanded. Second, Per Capita Total Federal

Aid is expected to be negatively correlated with the dependent variable. Thompson51

found that agencies with supplementary funding sources might be subjected to greater

budget cuts by governors and legislators in the negotiation process.

Interest groups also function as policy activists in state government. They participate

in virtually all issues before state legislatures. Often, a primary objective of interest

groups is to increase state budget allocations favoring their own groups’ interests.52 A

group influence measure is taken from the 1998 ASAP survey (Clientele Group). This

variable measures the perceived level of influence that clientele groups have on specific

48. Dolan (2002); Su, Kamlet, and Mowery (1993); Davis, Dempster, and Wildavsky (1974).

49. Rubin (2000).

50. D. F. Kettl and J. W. Fesler, The Politics of the Administrative Process, 3rd ed. (Washington, DC:

CQ Press, 2005).


52. Rosenthal (1998).


program budgets as reported by agency administrators. Clientele groups might urge

increased spending for particular agencies resulting in an expected positive association.

The literature on public budgeting describes theories of the judicial power of the

purse.53 Court mandates sometimes affect budgetary decision making. Selected studies

indicate that court-mandated reforms have led to increased total education revenues in

some localities.54 To explore the influence of courts on budgetary outcomes,55 a dummy

variable (State Litigations in Education) is included to measure the impact of state lit-

igation involving education finance disparities.56 This litigation might relate primarily to

increased appropriations for education agencies, but it also might impact other agencies

if they are constrained by a limited ‘‘state pie’’ as education expenses increase.

Many states have created legal constraints and institutions to promote fiscal austerity.

These include constitutional or statutory balanced budget requirements limiting agen-

cies’ legislative appropriations.57 Requirements that governors submit, legislatures pass,

and governors sign a balanced budget (Balanced Budget Requirement) and a variable

prohibiting carryover deficits (No Carry Over Deficit) are tested in the explanatory

model. These requirements could have conflicting impacts. They could act as another

restriction on state agency budgets and thus limit appropriations. Alternatively, they

could demonstrate need for additional funding as a buffer against future revenue short-

age and influence increases in legislative appropriations.

In the 1990s, a wide variety of administrative reform efforts were initiated to achieve

more effective and efficient delivery of public programs.58 The reforms, such as rein-

53. D. Axelrod, A Budget Quartet (New York: St. Martin’s Press, 1989); J. D. Straussman, ‘‘Rights-

Based Budgeting,’’ in New Directions in Budget Theory, ed. I. S. Rubin (Albany, NY: State University of

New York Press, 1988): 100–123.

54. W. N. Evans, S. E. Murray, and R. M. Schwab, ‘‘The Impact of Court-Mandated School Finance

Reform,’’ in Equity and Adequacy in Education Finance: Issues and Perspectives, eds. H. F. Ladd, H. F. R.

Chalk, and J. S. Hansen (Washington, DC: National Academy Press, 1999): 72–98; W. N. Evans, S. E.

Murray and R. M. Schwab, ‘‘Schoolhouses, Courthouses, and Statehouses After Serrano,’’ Journal of

Policy Analysis and Management 16, no. 1 (1997): 10–31.

55. J. D. Straussman, ‘‘Courts and Public Purse Strings: Have Portraits of Budgeting Missed Some-

thing?’’ Public Administration Review 46, no. 4 (1986): 345–351.

56. U. S. Advisory Commission on Intergovernmental Relations, The Structure of State Aid to Ele-

mentary and Secondary Education (Washington, DC: U. S. Advisory Commission on Intergovernmental

Relations, 1990); M. A. Rebell, ‘‘Educational Adequacy, Democracy, and the Courts,’’ in Achieving High

Educational Standards for All: Conference Summary, eds. T. Ready, C. Edley Jr., and C. E. Snow

(Washington, DC: National Academy Press, 2002): 218–267; R. Rubenstein and L. O. Picus, ‘‘Politics, the

Courts, and the Economy: Implications for the Future of School Financing,’’ in State and Local Finance

under Pressure, ed. D. L. Sjoquist (Northampton, MA: Edward Elgar, 2003): 60–94.

57. R. Briffault, Balancing Acts: The Reality Behind State Balanced Budget Requirements (New York:

The Twentieth Century Fund Press, 1996); Rubin (2000).

58. J. L. Brudney and D. S. Wright, ‘‘Revisiting Administrative Reform in the American States: The

Status of Reinventing Government During the 1990s,’’ Public Administration Review 62, no. 3 (2002): 353–

361; M. M. Jordan and M. M. Hackbart, ‘‘Performance Budgeting and Performance Funding in the States:

A Status Assessment,’’ Public Budgeting and Finance 19, no. 1 (1999): 68–88; Kettl and Fesler (2005); J. R.


venting government, managing for results, performance measurement, and performance

funding, are all initiatives of the ‘‘reform decade’’ with a potential impact on state

budgeting processes. The regression model includes a dummy variable (State Perfor-

mance Funding) identifying states utilizing performance data in resource allocation

decisions. Strategies to deliver more with less through performance-based funding

or performance management59 are expected to be negatively correlated with agency

appropriation changes.

Most governors are vested with line-item veto power that is often intended to dis-

courage pork-barrel actions and logrolling in appropriation bills.60 Previous empirical

observations indicate that the item veto power is more likely to be used as partisan tool

instead of a tool for fiscal restraint.61 A more recent study suggests a greater potential for

the item veto power as a fiscal instrument to enhance a governor’s budget responsibility.62

Often, although, just the presence of the veto will influence the budgeting processFthe

‘‘threat’’ of the veto may be as mighty as the veto itself. Again, veto power presents a

contextual institution or ‘‘rule’’ under which the budget game is played. We expect that

gubernatorial item veto powers, including the item veto, deletion veto, and reduction

veto (Governor’s Veto Power) will be negatively correlated with the dependent variable.

In a similar vein, the normative and descriptive features of the executive budget are

centered on guarding against padded agency budgets through central coordination.

Some gubernatorial and procedural resources might enhance a governor’s ability to

shape the executive budget. Specifically, top-down budgeting mechanisms were instituted

to help the governor control agency and total state spending.63 One control mechanism is

the use of a budget cap set by central budget offices. A dummy variable (Budget Target)

denotes whether a governor has the authority to set budget targets. This is an exogenous

variable that taps top-down executive branch budgeting and creates a particular context

under which the budget process proceeds. It should be negatively correlated with the

agency’s legislative appropriation.


Thompson, ‘‘Reinvention as Reform: Assessing the National Performance Review,’’ Public Administration

Review 60, no. 6 (2000): 508–521.

59. H. A. Frank, ‘‘Budget Theory: New Perspectives for a New Millennium,’’ in Handbook of Public

Administration, 3rd ed., eds. J. Rabin, W. B. Hildreth, and G. J. Miller (Boca Raton, FL: Taylor and

Francis, 2007): 227–247.

60. Lauth (1992).

61. D. Holtz-Eakin, ‘‘The Line Item Veto and Public Sector Budgets,’’ Journal of Public Economics 36,

no. 3 (1988): 269–292; Lauth (1986); C. C. Reese, ‘‘The Line-Item Veto in Practice in Ten Southern States,’’

Public Administration Review 57, no. 6 (1997): 510–516; P. G. Joyce, ‘‘The Federal Line Item Veto

Experiment: After the Supreme Court Ruling, What’s Next?’’ Public Budgeting and Finance 18, no. 4 (1998):

3–21.

62. G. Abney and T. P. Lauth, ‘‘The Item Veto and Fiscal Responsibility,’’ The Journal of Politics 59,

no. 3 (1997): 882–892.

63. Abney and Lauth (1989); Lauth (1992).


The 1974 Congressional Budget and Impoundment Control Act established macro-

budgeting in Congress. Congressional budget resolutions allowed budget committees to

control federal spending by setting budget totals, a congressional equivalent to the

macro-budgetary power exercised by presidents.64 More extensive research is needed to

determine whether state legislatures have a mechanism similar to national budget res-

olutions or budget reconciliations. At the state level, the factor analysis reported in

Appendix B creates a factor score that is intended to measure a top-down or macro-

budgeting feature in state legislatures. Legislative Macro-Budgeting is derived from cen-

tral or joint legislative fiscal offices, joint legislative fiscal committees, and membership

turnover rates of House members. Therefore, Legislative Macro-Budgeting measures

more an institutional setting over legislative budget review processes rather than the

frequency of actual, short-term legislative budget control similar to Congressional bud-

get resolution. Macro-budgeting in legislatures could constrain pork barrel activities and

reduce some agency budgets. If this logic holds, Legislative Macro-Budgeting should be

negatively correlated with legislative appropriations.65 Finally, various measures of state

political environment were included in preliminary analyses but they were mostly in-

significant. Instead, Legislative Partisanship was included in the final model to tap po-

litical environments surrounding state budget processes. However, this variable also

identifies short-term aspects of state legislatures, which directly influence the budget

processes. For this reason, this political variable was categorized as an internal factor as

mentioned above.

METHODOLOGY

There is some concern for endogeneity that might be caused by Agency Budget Request

and Governor’s Budget Recommendation. Davis, Dempster, and Wildavsky66 identified

six equations to test their assumptions of budgetary incrementalism. Two of the equa-

tions analyzed agency budget requests as a function of previous year’s legislative ap-

propriations or previous year’s appropriations adjusted by the difference in previous

year’s appropriations and budget requests. This two-way causality might be the first

source of endogeneity. Second, under a typical executive budgeting system, governors

64. Schick (1994a); A. Schick, ‘‘Why Study Microbudgeting,’’ in The Budget Puzzle: Understanding

Federal Spending, eds. J. F. Cogan, T. J. Muris, and A. Schick (Stanford, CA: Stanford University Press,

1994b): 1–15; J. F. Cogan, ‘‘The Dispersion of Spending Authority and Federal Budget Deficits,’’ in The

Budget Puzzle: Understanding Federal Spending, eds. J. F. Cogan, T. J. Muris, and A. Schick (Stanford, CA:

Stanford University Press, 1994): 16–40.

65. It should also be noted that Legislative Macro-Budgeting serves as constraints to appropriation

committees that are prone to pork barrel politics. In this case this variable might be categorized as budget

environmental factors. This might also be the case for Budget Target. Even when we treated the two

variables as exogenous factors, however, the final findings and conclusions were virtually unchanged.

Details are available upon request to the authors.

66. Davis, Dempster, and Wildavsky (1966).


circulate their guidelines for agency budget requests. Gubernatorial budget guidelines

reflect state fiscal conditions, policy and political preferences, and various legal and

institutional budget constraints.67 For this reason, gubernatorial budget recommenda-

tions might also be influenced by other independent variables. This aspect may be a

second source of endogeneity.

To counteract the effects of endogeneity, a Two Stage Least Square (2SLS) regression

model was run. When the two variables described above were identified as endogenous

variables, however, estimation of coefficients was biased because the predicted value of

Governor’s Budget Recommendations obtained from the first stage regression and the

intercept were observed to be perfect linear combinations of other independent variables

in the second stage regression.68 For this reason, Agency Budget Requests were identified

as an endogenous variable with all other variables in the second stage regression used as

instruments.69 For a comparison with 2SLS estimation, Ordinary Least Square (OLS)

estimation is also included in final results.

One other caveat should be made. Legislative Appropriations are slightly positively

skewed for the six categories (see Table 1) and an ordered logistic regression (OLR)

model is used in addition to the OLS estimation. The model further includes twelve

dummy variables to capture unobservable fixed effects associated with the 13 functional

types of state agencies.70

RESULTS

Table 3 reports the 2SLS regression results. Half of the exogenous variables significantly

impact agency appropriation outcomes. However, the main budget actors envisioned by

67. R. D. Lee Jr., R. W. Johnson, and P. G. Joyce, Public Budgeting Systems, 8th ed. (Sudbury, MA:

Jones and Bartlett Publishers, 2008).

68. PROC SYSLIN in SAS was used for estimation of 2SLS. The two endogenous variables were not

used as instruments.

69. Instead of using the problematic variable, Governor’s Budget Recommendations in the current model,

the original 13-point scale measuring governor’s budget recommendation introduced above was used as an

instrument. Inclusion of governor’s recommendation as an instrument is also reasonable because agency

budget requests are significantly influenced and adjusted by gubernatorial clearance of budget requests. We

further treated only Governor’s Budget Recommendations as endogenous but found that this variable was

statistically significant in the 2SLS estimation.

70. The agency categories are: elected officials, staff (fiscal), staff (nonfiscal), income security and social

services, education, health, natural resources, environment and energy, economic development, criminal

justice, regulatory functions, transportation, and other. One caveat is that there could be clustering across

states that might share similar political, legal, fiscal, and institutional features. This condition typically

inflates statistical significance (S. W. Raudenbush and A. S. Bryk, Hierarchical Linear Models: Applications

and Data Analysis Methods, 2nd ed. (Thousand Oaks, CA: Sage Publications, 2002)). To address this issue,

a multilevel ordered logit model was also run but the result was virtually the same as the result reported in

this paper.


TABLE3

ExplainingAgency

Budget

ResultsInternalandExogenousVariablesAssociatedwithState

Agency

AppropriationLevels,1998

Variable

description

2SLS

OLS

OLR

Coefficient

Pr.4

|t|

Coefficient

Pr.4

|t|

Coefficient

Pr.4w2

Internalbudget

actors

Agency

budget

requests

�0.11

0.506

0.22***

o0.0001

0.59***

o0.0001

Governor’sbudget

recommendations

0.77***

o0.0001

0.61***

o0.0001

2.1

***

o0.0001


legislators

0.06

0.191

0.097***

0.008

0.24**

0.022


legislatures

0.06*

0.054

0.04*

0.098

0.13*

0.080

Per

capitaHouse

mem

bers

1,448.9

*0.069

1,616.8

**

0.027

3,666.4

*0.080

Per

capitaSenate

mem

bers

2,301.5

0.478

3,408.6

0.251

13,378.0

0.117

Legislativepartisanship

�0.08**

0.011

�0.07**

0.015

�0.21**

0.015

Budget

environmentalfactors

Per

capitapersonalincome

�0.000**

0.018

�0.000***

0.004

�0.000**

0.035

Per

capitatotalfederalaid

�0.75***

o0.0001

�0.72***

o0.0001

�1.95***

o0.0001

Clientele

groups

0.07**

0.023

0.06**

0.028

0.14*

0.070

State

litigationsin

education

0.06

0.318

0.08

0.175

0.21

0.183

Balancedbudget

requirem

ent

0.04

0.286

0.04

0.225

0.12

0.234

Nocarryover

deficit

�0.15*

0.063

�0.18**

0.015

�0.55**

0.012

State

perform

ance

funding

�0.16**

0.015

�0.20***

o0.001

�0.496***

0.004

Governor’svetopower

0.06

0.137

0.03

0.304

0.06

0.524

Budget

targets

�0.02

0.722

0.01

0.86

0.02

0.890

Legislativemacro-budgeting

�0.01

0.727

0.002

0.926

0.01

0.942

Observationsused(total)

960(1,175)

R2

0.54

0.59

-2Res

LogLikelihood

1,871.8

*SignificantwithPo0.10,

**SignificantwithPo0.05,

***SignificantwithPo0.01.

Source:

Fiveintercepts

forOLR

andcoefficients

ofagency

dummiesforallmodelsare

notreported.


incrementalism and their institutional tools exert strong influence on state agency

appropriation levels as well.

Internal Budget Actors

The expected influence of contextual factors or forces on budget outcomes is confirmed.

Simultaneously, however, institutional budget actors also clearly serve as influential

forces on budget outcomes. Slightly different from classical incrementalist predictions,

the governor’s recommendation is a pivotal influence on the level of legislative appro-

priations for state agencies; the initial agency budget requests are not significant when

endogenity is specified with the 2SLS estimation. Sharkansky71 found that gubernatorial

support is critical in agency budget expansion. In contrast, Thompson’s more recent

study72 shows that agencies exert relatively stronger influences on state budget outcomes.

Our findings imply that the governor’s budget recommendations dominate agency bud-

get requests.

Legislative characteristics also exert noteworthy effects on agency appropriations.

State legislators and legislatures have recently been depicted as assertive advocates of

pork-barrel projects. One finding from the regression supports this observation. State

house membership (per capita) is positively correlated with legislative appropriations for

state agencies.

Prior research suggested that increasing professionalism of legislatures might offset

gubernatorial dominance in the budgetary process.73 The regression results indicate that

the enhanced capacity, integrity, and autonomy of state legislatures, Professionalized

State Legislatures, strengthens legislative assertiveness instead of controlling spending. In

other words, professional support and attendant additional information on agency pro-

grams might have augmented legislative capacity to increase agency budgets rather than

constraining governors’ recommendations.

One measure of partisan political preferences in states, the average ratio of Repub-

licans to Democrats in the legislatures, is negatively and significantly correlated with

legislative appropriations. There is a need to investigate further how partisanship

and other political variables exert different impacts on various programs.74 Here it

appears that partisan preference of state legislatures exerts an identifiable influence

on agency budget outcomes. Greater Republican representation lowers the level(s) of

appropriations.

We now turn to exogenous characteristics of the state and agency budget environ-

ments.



73. G. Abney and T. P. Lauth, ‘‘The End of Executive Dominance in State Appropriations,’’ Public

Administration Review 58, no. 5 (1998): 388–394; Rosenthal (1998).

74. Su, Kamlet, and Mowery (1993).


Exogenous Factors

The presence and relevance of external forces affecting budget decisions has been the

subject of long-standing speculation and interpretation. Per capita state personal income

appears to influence state agency budget outcomes but in an unexpected negative di-

rection. The magnitude of its impact, however, is virtually zero. By contrast, per capita

federal aid to each state agency is negatively correlated with increased legislative

appropriations. Agencies with substantial external revenue sources tend to have their

acquisitiveness restricted as legislatures lower levels of state appropriations. This finding

is consistent with Thompson’s75 results based on budget documents from 13 states.

Clientele groups do not simply receive agency services. They also provide strong

support for agency programs and resources.76 In agencies where top administrators

perceive stronger influence from clientele groups, legislative appropriations are signifi-

cantly larger. Further research should clarify the particular interest group environ-

ment(s) that foster higher agency budgets.

Another dimension of the exogenous budget environment is rights-based budgeting.

Court mandates have been identified as a crisis technique agencies use when advocating

for budget expansion.77 The results show that one facet of rights-based budgeting, state

litigation in education finance, does not influence agency budget outcomes. State liti-

gation based on the adequacy and fiscal neutrality of state school finances policy might

influence the appropriations of education-related agencies, but it does not affect all state

agency budgets. Further research exploring how court decisions affect budget outcomes

in specific functional areas, such as education, prison systems, or mental health services,

is needed to further assess the now common occurrence of court litigation.

Legal requirements imposing a balanced budget are prominent in state budgeting.

State constitutional and statutory requirements for balanced budgets, however, do not

attain statistical significance in this study. In contrast, specific provisions prohibiting

carryover deficits do appear to be effective fiscal constraints.

Since the early 1990s national and subnational governments have engaged in several

administrative and budgetary reforms ‘‘reengineering’’ or reinventing government.

Frank78 suggests that budget systems and formats be studied as an independent variable

rather than dependent variables reflecting politics or organizational culture. This re-

search examined the effects of performance-oriented budgeting on agency budget out-

comes. Results reported in Table 3 offer some support for the prospect of rational

approaches to governmental budgeting through improved efficiency-oriented proce-

dures. State use of performance funding is significantly and negatively correlated with

state agency budgets. Rarely has administrative reform (or performance) prescriptions


76. L. T. LeLoup, ‘‘Appropriations Politics in Congress: The House Appropriations Committee and

the Executive Agencies,’’ Public Budgeting and Finance 4, no. 4 (1984): 78–98.

77. Straussman (1986).

78. Frank (2007).


produced expenditure reductions.79 Here, however, is evidence that selective reforms may

inhibit agency expansion.

Surprisingly, macro-budgeting in state legislatures does not appear to affect agency

budget outcomes. Schick80 highlighted why macro-budgeting in the national legislature

failed to constrain the national budget. Successful influence was possible only ‘‘when

other participants (such as the President or the appropriations committees) saw the

budget resolution as an opportunity to advance their own budgetary interests.’’81 At the

state level, these interests may be equally or more parochial. Macro-budgetary mech-

anism in the states appears less institutionalized than at the national level. In addition,

the indicators used to measure state macro-budgeting may be problematic. Whatever the

case, legislative tools for macroFor collective purposes may be bypassed in favor of

legislators’ particularistic interests. In addition, the institution of gubernatorial veto

power and budget target does not exert significant influence on legislative appropriations

for state agencies.

Internal Budget Actors or Exogenous Factors?

Table 3 indicates that five environmental factors are statistically significant while four

variables of internal actors are significant, thus confirming the scholarly emphasis on the

influence of exogenous factors on budget outcomes. The statistical significance of the

external factors is slightly greater than that of the internal actors. In terms of explanatory

power, however, internal institutional actors still exert substantial influence on legislative

appropriations for state agencies. Table 4 provides a summary comparison of the ex-

planatory power of internal budget actors and exogenous variables. Starting from the

first model only with budget environments, relevant variables were added in the 2SLS

estimation in a stepwise fashion. The changes in R2 were calculated to measure how the

inclusion of new variables contributed to explaining variation in the dependent variable.

TABLE4

Comparison of the Explanatory Power between Main Budgetary Participants and Budget

Environments from 2SLS Estimation

Independent variables included R2

Budget environments only 4.6%

Internal budget actors only 56.4%

Governor’s budget recommendation only 53.9%

All variables 54.0%

79. K. Meier, ‘‘Executive Reorganization of Government: Impact on Expenditures and Employment,’’

American Journal of Political Science 24, no. 3 (1980): 396–412.

80. Schick (1994b).

81. Schick (1994b): 13.


When all exogenous factors were added to the first model, R2 was about 4.6 percent.

When only internal budget actors were in the model, R2 increased to about 56.4 percent.

When all variables including agency dummies were included, R2 slightly decreased to

54.0 percent. State budget outcomes seem to reflect the influence and actions of internal

institutional budget actors to a much larger extent than exogenous budget environments.

There is still one caveat, however, in this observation. The dominating impact of internal

budget actors is substantially attributable to one powerful budget actor. When only

governor’s budget recommendation was included in our model, R2 was as high as 53.9

percent. This finding is significantly consistent with earlier incrementalist insights.

CONCLUDING OBSERVATIONS AND INTERPRETATIONS

This research relies on original and actor-based data (for 1998) involving respondents

from all 50 states. The diversity of respondents, the scope and content of the data, and

the methods of analysis lend credence to the substantive results. The findings provide

greater clarity, transparency, and confirmation regarding long-standing suppositions

about state budgeting.

It should come as little surprise to find that exogenous budget environments selectively

influence state agency budget outcomes. Fiscal, political, legal, and administrative re-

form factors, as well as support from clientele groups, affect agency appropriations.

Rubin’s extension of Wildavsky’s argument has some explanatory leverage. The inter-

dependent and complex character of public programs increases the likelihood that ex-

ogenous factors will have identifiable influences on budgetary actions and choices.

Clientele groups exert pressure on the budget process for favored agencies and achieve at

least modest success in increasing legislative appropriations. This research also shows

that budget decisions are subject to contextual, legal, and institutional circumstances that

tend to suppress agency successes. In sum, agency budget outcomes are influenced by the

budget environment or context.

Despite the influence of exogenous and environmental contexts, the present study

finds that institutional budget actors play the unquestioned predominant role in ex-

plaining state agency budget outcomes. Governors and legislators/legislatures are the

driving forces behind agency budget appropriations. In relative terms, these two insti-

tutional actors overwhelmingly shape state agency budgets. The findings firmly fit the

Abney and Lauth statement,82 ‘‘that state budgeting will inevitably be as much about

interbranch politics as it is about administrative process.’’ One departure from classical

incrementalism is that agencies are not directly as influential in forming agency bud-

get outcomes as they were depicted to be. Instead, a closer match was found between

gubernatorial recommendations and legislative appropriations. This lends another

82. Abney and Lauth (1989): 839.


perspective to the Goodman and Clynch finding83 that ‘‘both executive and legislative

analysts follow similar decision-making patterns.’’ The political cues given and received

by these actors are convergent. More broadly, however, the findings reveal both the

central and the crucial role of the governor in translating and framing agency requests into

final fiscal outcomes. Nearly 70 years ago, Lipson84 argued that the American governor

had evolved ‘‘From Figurehead to Leader.’’ Later, Sabato85 called governors ‘‘truly the

masters’’ of state government. Beyle86 confirmed descriptively, based on multiyear mea-

sures (1960–1994), that the gubernatorial power of budget making authority outranked

appointment, veto, and tenure potential as the primary formal power of the governor.

A second noteworthy finding with implications for agency executives and budget

practitioners is that legislators/legislatures are assertive, especially in light of the lower

than predicted description of agency acquisitiveness found in the literature. Legislative

resources that enhance professionalism support expansionist goals. It should be noted,

however, that while agencies do seek to increase their budgets, a majority of agency

heads seek (and governors and legislators support) increases of less than 5 percent. This

is a far more modest level of expansion than other scholars had reported in previous

studies87 and is more compatible with early incrementalist insights and the national

experience. Typical U.S. national government programs increased by about 4 percent

between 1947 and 2003.88

The framework envisioned in earlier incrementalism has recently been criticized in

various aspects. Despite the repeated critiques of incrementalism, however, this study

finds that state budget processes are substantially explained by the incrementalist ob-

servations. Robinson et al.,89 with empirical analysis of local educational expenditures in

Texas, attempted to test the assumptions in the punctuated equilibrium theory against

incrementalist assumptions. Their study implies that incrementalism explains the expen-

diture patterns still fairly well. Likewise, the stabilized budget patterns in earlier incre-

mentalism are also evidenced even under more complicated budget environments and

augmented/complex features of internal budget actors in the 50 American states.

For practitioners a third finding is noteworthy. Despite repeated criticisms of exec-

utive-driven budget reforms such as PPBS and ZBB, performance-funding systems seem

83. D. Goodman and E. J. Clynch, ‘‘Budgetary Decision Making by Executive and Legislative An-

alysts: The Impact of Political Cues and Analytical Information,’’ Public Budgeting and Finance 24, no. 3

(2004): 20.

84. L. Lipson, The American Governor: From Figurehead to Leader (Chicago, IL: University of Chicago

Press, 1939).

85. L. J. Sabato, Goodbye to Goodtime Charlie: The American Governor Transformed, 1950–1975 (Lex-

ington, MA: Lexington Books, 1978): 63.

86. T. L. Beyle, ‘‘Being Governor,’’ in The State of the States, 3rd ed., ed. C. E. Van Horn (Washington,

DC: CQ Press, 1996): 77–107, 86.

87. Sharkansky (1969); Thompson (1987); LeLoup (1978); Ryu et al. (2007).

88. Berry (1990); Jones and Baumgartner (2005).

89. S. E. Robinson, et al. ‘‘Explaining Policy Punctuations: Bureaucratization and Budget Change,’’

American Journal of Political Science 51, no. 1 (2007): 140–150.


to depress agency appropriations. A limit on carryover funds also lowers appropriations.

Whether these are positive or negative outcomes for agencies is a subjective question. If

austerity is dictated by particular fiscal situations, then performance criteria systems may

be helpful and legal limits necessary.

If practitioners are agency executives attempting to attain preferred or adequate re-

sources, or fiscal analysts attempting to reconcile spending with revenue resources, the

above findings should improve navigation strategies through the increasingly complex

state budget environments. Future research may help understand and explain these

findings more fully. They hold hope for increasing the information and improving the

process for all participants. Further, additional research also might focus on how state

agency budget outcomes vary between institutional budget actors, exogenous environ-

ments, and budget practices within different political and fiscal contingencies. Budget

theory and budget practices may converge to identify more clearly the varying roles of

the major actors and the larger atmosphere surrounding them.

NOTES

The authors gratefully acknowledge the support of the Earhart Foundation of Ann Arbor, Michigan;

the Center for Governmental Services and Department of Political Science at Auburn University; and

the Odum Institute of North Carolina-Chapel Hill.

APPENDIX A

The 1998 ASAP Survey Questions on Agency Budget Requests, Governor’s Budget

Recommendation, and Legislative Appropriations

B. Questions about Programs and Priorities

4. Your agency requires adequate funding to carry out its mission(s). Please reflect on

your agency’s last budget process, that is, the sequence by which your current year’s

agency budget was decided.

Agency budget request

4a. Considering your initial request to the governor (or relevant budget authority) did

you

propose a: ___Decrease,___Increase, or___No change from the previous year?

If an Increase or Decrease, what percentage change did you propose from the previous

year? ___1–2%; ___3–4%; ___5–6%; ___7–8%; ___9–10%; ___11% or more

Governor’s budget recommendation

4b. Did the governor (or relevant budget authority) recommend a:

___Decrease,___Increase, or___No change from the previous year?

If an Increase or Decrease, what percentage change was recommended from the pre-

vious year? ___1–2%; ___3–4%; ___5–6%; ___7–8%; ___9–10%; ___11% or more


Legislative appropriations

4c. Did the legislature appropriate a:

___Decrease,___Increase, or___No change from the previous year?

If an Increase or Decrease, what percentage change was appropriated from the pre-

vious year? ___1–2%; ___3–4%; ___5–6%; ___7–8%; ___9–10%; ___11% or more

APPENDIX B

Factor Analysis of Legislator and Legislature Characteristics

Rotation method: varimax

Rotated factor pattern

Factor1 Factor2 Factor3 Factor4

STLEGHOUSE 0.92566 0.03199 � 0.04034 � 0.16180

SFLEGISEN 0.86973 0.11081 � 0.03753 0.12503

LEGSALARY 0.83794 0.08806 � 0.05986 0.05077

TOTLEGSTAF 0.82651 0.10181 0.09141 0.19362

STCOMSEN 0.18081 0.87577 � 0.15530 0.02410

STCOMHOUSE 0.15817 0.83665 � 0.10800 � 0.04787

HOUSETERM_ � 0.12184 � 0.41881 0.37347 0.23466

SENTURN_ 0.11825 � 0.60395 � 0.28557 � 0.13012

JOINTCOM_ � 0.11018 0.02909 0.85143 � 0.08082

HOUSETURN_ 0.26039 � 0.10415 0.54480 0.12681

LEGBUOFFICE_ � 0.43125 � 0.02691 0.52118 � 0.39239

SENATETOT_ 0.07800 � 0.05283 � 0.22402 0.80775

HOUSETOT_ 0.06061 0.06476 0.26641 0.71177

Four factors with eigenvalue 4 1 were retained. Rotated factor pattern indicates that the variance explained by

each factor is as follows; Factor1 (3.361), Factor2 (2.058), Factor3 (1.686), and Factor4 (1.492). The first three

factors are used to create the three factor scores, Professionalized State Legislators, Professionalized State Leg-

islatures, and Legislative Macro-Budgeting. All the above variables are in the order described in Table 2. One

interesting point with professional legislatures is that terms of House members and Senate membership turnover

rates are negatively loaded.Bourdeaux (2006). offers insights into the negative loading. Term-limited legislators

might be less sensitive to interest group pressures and may tend to deliberate about the state as a whole. Senate

Appropriations Committees, as indicated above, protect essential agency programs but also tend to protect the

public purse from their irresponsible House counterparts. Wildavsky and Caiden (2004). At the state level, the

Senate is usually smaller and less formal, yet more stable in membership than the House. Rosenthal (2004).

Presumably responsible Senators with longer membership might use more information from professionalized

supports, which explains the negative loading of Senate turnover rates to this factor score. Another point is that

higher membership turnover rates in the state lower chambers might reflect a focus on statewide policy issues

rather than parochial or constituency interests. With turnover, either through term limits or choosing not to run

for reelection, legislators may be less subject to interest group pressures and more likely to deliberate on the

statewide priorities. Bourdeaux (2006). This might explain the positive loading of the House membership turnover

rates on Legislative Macro-Budgeting.


exploring explanations of state agency budgets

Documents