How gubernatorial budgetary power and interest groups affect vertical fiscal imbalances in the US states: Focusing on fiscal centralization and decentralization

Abstract

AbstractThis study empirically examines the roles of gubernatorial budgetary power and interest groups in vertical fiscal imbalances across US states via a two‐step generalized method of moments estimation during a 22‐year period (1987–2008). States' share of intergovernmental transfers and the local share of intergovernmental transfers are often affected by interaction between governors and interest groups, as are expenditure centralization and revenue/expenditure centralization. Revenue decentralization and the local share of intergovernmental transfers are frequently influenced by cooperation between governors and interest groups via mutual support. Long‐term cooperation and gridlock each influence expenditure centralization, revenue/expenditure centralization, and revenue decentralization. Long‐term cooperation is not statistically significant in terms of the state and local shares of intergovernmental transfers; that is, governors and interest groups cooperate in pursuit of short‐term benefits rather than long‐term results. Long‐term political influence also has no impact, affirming a short‐term‐oriented political viewpoint.