Fiscal Rulemaking, Institutionalism, and Constituent Power: A Synthetic Control Evaluation of Tabor's Effect on Colorado Counties
*Names in bold indicate Presenter
I introduce a third school of thought, as an alternative to the dominant institutional irrelevance and public choice perspectives; where the constraining capacity of municipal fiscal rules is consistency with constituent will. Effectively, municipalities enacting tax and expenditure limits may not otherwise be introducing tax increases because constituents are in opposition. An actualized impact on municipal fiscal behavior is only expected in cases where tax and expenditure limitations are imposed against voter preferences. This paper tests whether impacts on municipalities that have municipal fiscal restraints imposed against constituent intentions differ from impacts in municipalities where constituencies favor budgetary restrictions.
The subject evaluates whether the fiscal constraints enacted through the Colorado Taxpayer’s Bill of Rights in 1992 impact revenue and spending in Colorado counties with special interest on voter support. A synthetic control design is employed to explore differentiated outcomes based on whether municipalities voted in favor of TABOR in 1992, a loosening of state level restrictions in 2005 and intervening municipal-level overrides. In employing this design, constituent desires – seen through voting behaviors - are directly employed as a defining factor in counterfactual creation.
Preliminary results employing synthetic control provide strong evidence that TELs outcomes are highly dependent on constituent preferences. The research also provides novel evidence relating municipal fiscal rulemaking to behavioral shifts and their financial implications. Conclusions bridge the gap between institutional irrelevancy and public choice perspectives on fiscal rulemaking, and have the potential to provide a new explanation to the disparate results previously seen.