The Causes of Fiscal Stalemate

Abstract

Why do lawmakers in some states routinely pass late budgets, while their counterparts elsewhere rarely do? We argue that a late budget imposes a number of political and private costs on lawmakers, the magnitudes of which are shaped principally by institutions and features of the political environment. When the private and public costs of delay are high we expect the budget to be adopted on time, but when these costs are low the probability and length of delay should increase. We test our expectations using an original dataset of the timing of budget adoption for all states over a forty-six year period. As expected, we find that variables which shape the costs of delay - legislative session length, the reversion point in the absence of an on-time budget, and divided government - are key determinants of the probability of stalemate. The length of the stalemate, however, is best predicted by the complexity of the budget. Insights from our analysis can be applied to budgeting at the national level. In particular, they help explain variation in the frequency and length of late federal appropriations bills and suggest reasons why federal budgets experience more stalemate than those adopted by states.

Keywords: Stalemate, Budget, Late, State, Gridlock, Divided Government, Budgeting, State Government, Institutions, Late Budgets

JEL Classification: P16, H61, H72, H70