How Political Institutions Shape Education Spending: Supermajority Requirements in U.S. School Investments

• In Event: State Politics and School Finance

Abstract

Research across the social sciences studies the proximate causes of effective schools, such as the amount of resources devoted to them. Less is known about the ultimate causes of school quality, such as the institutional rules and political dynamics that determine how resources are raised and allocated. These include the electoral processes for districts to raise money for capital projects. In nearly all states, capital investments are funded through bonds subject to electoral approval in local referenda. Notably, ten states require a supermajority of up to two-thirds of voters for approval.

Such supermajority requirements appear frequently in U.S. politics at the federal, state, and local level. Yet we have little evidence or understanding of how they affect the magnitude, distribution, and efficacy of public spending. The existence of supermajority requirements is often justified as tool to reduce wasteful government spending (Buchanan and Tullock, 1965; Messner and Polborn, 2004; Dal Bo, 2006). However, opponents argue they depress education spending, for which voter preferences may not align with societal needs. They can also incentivize districts to distort spending towards the preferences of certain constituencies, to gain political consensus.

In this paper, we offer new evidence of the impact of supermajority requirements on the size and composition of school capital investments. To examine effects, we estimate a structural model of probabilistic voting in school districts. In the model, districts choose whether to call for a referendum on a bond and, if they do so, the size and composition of the proposed project. The electoral outcome depends on the decision of voters and the majority requirement. In equilibrium, districts choose bond size and composition so that their marginal payoff equals their marginal electoral risk, i.e., the marginal probability that the proposal gets rejected.

We estimate the model using newly collected data on 7,511 bond elections across seven U.S. states. We find that voter and district preferences differ substantially from each other. On average, voters prefer bonds that fund capacity expansions (e.g., new classroom space) and basic infrastructure (e.g., roofs, heating, and plumbing) over other upgrades (e.g., athletic facilities, auditoriums, and labs). However, preferences are dispersed among voters. On average, districts favor upgrades over capacity expansions. The cost of proposing a bond also varies substantially across districts.

We then use estimates to study how the bond characteristics would change if states change their majority requirement. Policy simulations show that an increase in the required supermajority leads districts to push for smaller projects more aligned with voter preferences. Conversely, a switch to simple majority would lead higher spending more in line with district, rather than voter preferences. This has important implications for student outcomes: simulations around California’s shift from a two-thirds to 55 percent majority requirement for capital bonds imply that roughly one-fifth of the test score increase in California over the subsequent decade can be attributed to the lower supermajority threshold. Our results illustrate how supermajority requirements can impact the size, composition, distribution, and impact of public investments.

Author

• Julien Matthieu Lafortune, Public Policy Institute of California
  Presenting Author