Fiscal Federalism and Budgetary Tradeoffs in the American States

Abstract

Despite the massive scale of state-level budgeting, there currently exists no theoretically grounded and empirically sound examination of budgetary tradeoffs at this level of government. In order to provide such an examination, we extend a well-accepted approach to tradeoffs at the federal level in order to accommodate the unique intergovernmental aspects of state-level budgeting. We develop expectations that need for a good, ideology of state-level decisionmakers, and the relative amounts of federal grants received in each expenditure category all influence tradeoff decisions. We test these hypotheses in an analysis of budgetary decisions in all 50 states between 1971 and 1996.