The Impact of Legislative Term Limits on State Debt: Increased Spending, Flat Revenue

Abstract

This article examines the effect of state legislative term limits on government debt levels. Past research has shown the influence of term limits on spending, but the effect of term limits on state debt is arguably more important in considering their desirability. We explain the relation between term limits and debt using the expected impact of changes in the composition, institutional dynamics, and behavior of state legislatures after term limits take effect. The hypothesis is that term limits will increase state government debt. Using regressions with panel corrected standard errors on data from the states between 1993 and 2008, the results empirically support the expectation that term‐limited states have significantly higher debt than nonterm limited states. Term‐limited states greatly increase spending while not increasing revenue levels and thus substantially increase debt. Since states with term limits have higher debt, we advise caution in adopting them. Related Articles:“Assessing the Impact of Term Limits on Competition in Florida and Maine.” (2009) http://onlinelibrary.wiley.com/doi/10.1111/j.1747-1346.2008.00163.x/abstract“A Matter of Time: Some Consequences of State Legislative Term Limits.” (1994) http://onlinelibrary.wiley.com/doi/10.1111/j.1747-1346.1994.tb00317.x/abstract“An Analysis of the 1990–1992 Term Limitation Elections.” (1994) http://onlinelibrary.wiley.com/doi/10.1111/j.1747-1346.1994.tb00340.x/abstract Este artículo examina el efecto de los límites de periodos de mandato para legisladores estatales en los niveles de deuda gubernamental. Investigaciones previas han mostrado el impacto de los límites de periodos de mandato en el gasto gubernamental, pero el efecto de éstos en la deuda estatal es probablemente más importante cuando se evalúan sus beneficios. Explicamos esta relación basándonos en el impacto esperado de cambios en la composición, dinámica institucional, y comportamiento de legislaturas estatales luego de que el límite para el periodo entra en vigor. La hipótesis es que los límites para periodos de mandato aumentarán el nivel de deuda estatal. Usando regresiones un Panel de Corrección de Errores Estándar en datos de los 50 estados entre 1993‐2008, los resultados apoyan empíricamente la expectativa de que los estados con límites tendrán un mayor nivel de deuda que sus contrapartes. Los estados con límites en los periodos de mandato aumentan de manera considerable su gasto mientras sus niveles de ingresos no aumentan y por lo tanto elevan significativamente su deuda. Debido a que los estados con límites en los periodos de mandato tienen una mayor deuda, recomendamos tener precaución al adoptarlos.

State Taxes and Legislative Turnover in the United States

“…Similarly, Donovan () estimates that term limits at the local government level exacerbate fiscal impatience. More recent studies by Lewis () and Day and Boeckelman () find that states with term‐limits also suffer from higher debt levels and lower bond ratings.…”

Local Government Reform: Is it Effective on Debt Burdens?

“…This research explores the factors affecting debt management and proposes a hypothesis to explain the correlation between city-county consolidation and debt burdens. Previous studies provide evidence that increased debt burdens are associated with large tax revenues (Clingermayer & Wood, 1995;Day & Boeckelman, 2012;Johnson, 1999), high income level (Ashworth, Geys, & Heyndels, 2005;Brecher, Richwerger, & Wagner, 2003;Clingermayer & Wood, 1995;Denison, Yan, & Zhao, 2007;Temple, 1994), low unemployment rate (Hildreth & Miller, 2002;Krueger & Walker, 2010), and elected officials (Baber & Sen, 1986;Clingermayer, 1991). Some demographic factors influence the level of debt burden.…”

“…The literature allows this study to connect consolidation with debt burden. Although some consolidation effects, such as expenditures, tax revenues and local economic development, are also the crucial determinants of government debt burdens (Clingermayer, 1991;Day & Boeckelman, 2012;Hildreth & Miller, 2002;Krueger & Walker, 2010;Temple, 1994), little attention has been devoted to the correlation between city-county consolidation and the level of debt burden. This study attempts to fill this gap by examining the following research question:…”

When Do Natural Resources Harm Fiscal Health? Evidence from the United States

“…We follow these approaches, which tend to emphasize how this unique setting minimizes some of the cross‐country differences that are difficult to measure empirically and might influence the level of economic performance directly or alter the relationship between resources and such outcomes. While prior studies have examined the relationship between some of the factors we highlight and state fiscal outcomes or political competition (e.g., Day and Boeckelman ; Prier and Wagner ), we believe our study is the first to both analyze the resource curse in the U.S. states and focus directly on measures of fiscal health.…”