Applying Method to the Madness: An Empirical Analysis of California Budget Delays

Abstract

California is notorious for its budget gridlock. From 1950 to 2008, the budget was adopted late 44 percent of the time. Although short delays have few consequences, delays in passage have become longer in the last two decades leading to more severe consequences, such as a lower credit rating and higher borrowing costs. The purpose of this paper is to systematically analyze late adoptions of the state budget and the factors responsible for them. I employ annual data from 1950 to 2008 and estimate regression models of the length of budget delays, controlling for economic conditions. This study reveals that divided government, party polarization, and revenue volatility, among other factors, prolong delays. Interestingly, budget gridlock is less pronounced in legislative election years when legislators seem to be fearful of voter retribution. I conclude by discussing potential reforms that could help the state avoid budget stalemates in the future.