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Alt and Lowry. 2000. A dynamic model of state budget outcomes under divided partisan government. Journal of Politics 62:1035-1070.

In Brief

The authors present a formal model that shows that American state legislatures will always have more power than governors when negotiating the state budget--at least in states with two typical laws:

1. If the budget is late (or vetoed), the preceding year's budget is used in the meantime;
2. The state has a law requiring a balanced budget.

Main Argument

The authors present a formal model to understand legislative-executive bargaining in the American states under divided government. They assume that bargaining takes place with the same reversion point as in Federal bargaining situations; that is, states tend to continue under the previous year's budget plan if the new budget proposal is vetoed.

However, this reversion point might be problematic. Since the previous year, state revenues might have gone up or down, leading to a surplus or deficit if the budget is not adjusted. Since most states have laws requiring a balanced budget (unlike the Federal context), the authors seek to show how divided government might affect budget bargaining in this situation--does the balanced budget law strengthen the governor or the legislature?

Alt, Lowry, and Ferree (1998) found that unbalanced budgets result in the governor's party in the legislature getting punished at the next election. This really hurts the governor. Thus, we should expect a hostage situation to develop in which the legislature holds the governor's electoral support hostage (because a budget deadlock will hurt the governor's party at election time). To avoid this bad outcome, the governor will accept a budget of any size as long as it is balanced. The legislature wins, the governor loses.

The main conclusion: Balanced budget laws interact with the reversion point (continuing the preceding year's budget) to give governors little, if any, power over the state budget.