Direct Democracy and Fiscal Gridlock: Have Voter Initiatives Paralyzed the California Budget?

Abstract

Does direct democracy make it impossible to balance public sector budgets? I address this question with evidence from California, where it is widely believed that voter initiatives have paralyzed the state budget process by locking in high spending while simultaneously prohibiting tax increases. A review of all initiatives approved since 1912 shows that no more than 32 percent of appropriations in the 2003-04 California state budget were locked in by initiatives and that initiatives placed only minimal constraints on the legislature's ability to raise revenue. Moreover, it is likely that the legislature would have allocated much of the money to its dedicated purpose even if it had not been required to do so by initiative. Initiatives do not appear to be a significant obstacle to balancing the state budget in California.