Strategic Timing of Ballot Initiatives:Evidence from Wisconsin School ReferendaMarc MeredithStanford Graduate School of BusinessPolitical Economics Field Paper(Last Updated: 11/15/04)ABSTRACT:One important consideration when studying direct democracy iI. Introduction:III. Theoretical Model:IV. Empirical PredictionsV. DataVI. Empirical ResultsVII. ConclusionsAppendixProof of Lemma 1:Counts of Elections By YearTable IIDescriptive StatisticsTable IVStrategic Timing of Ballot Initiatives: Evidence from Wisconsin School Referenda Marc Meredith Stanford Graduate School of Business Political Economics Field Paper (Last Updated: 11/15/04) ABSTRACT: One important consideration when studying direct democracy is the rules on agenda establishment. In their seminal series of articles, Romer and Rosenthal (1978, 1979) identified the ability of a budget maximizing monopolist referendum agenda-setter to extract a greater amount of expenditure than desired by the median voter. While in Romer and Rosenthal’s models, the agenda setter exercised control only over the amount of the referendum, this paper focuses on the ability of an agenda-setter to gain favorable outcomes through the strategic timing of elections. Since different subsets of the electorate may turnout to vote for an initiative or a referendum given the remaining composition of the ballot, elections scheduled for different times may produce different median voters. As a result, an agenda setter with the power to schedule the election may attempt to schedule the election at a time that produces a median voter closest to their ideal point. This paper presents a formal model of strategically timing of school referenda. The remainder of the paper then empirically tests the formal model using a dataset of school district referendum in Wisconsin from 1990-2003. The results show some evidence of strategic timing, though they are not particularly robust.I. Introduction: In the United States many policy decisions are made by a vote of an electorate at large. Approximately half of the states in the United States have provisions for some form of citizen-initiated direct legislation (Matsusaka, 1995). In addition, many states and municipalities make tax and expenditure decisions through referendum. There is a great deal of heterogeneity in the rules specifying how and when these initiatives and referenda reach voters. For example, states generally require the number of signatures in support of a citizen initiative to exceed some percentage of the voters participating in the most recent gubernatorial election. This requirement varies from two percent in North Dakota to fifteen percent in Wyoming (Matsusaka, 1995). California’s proposition 13 and Massachusetts’ proposition 1 ½ demonstrate the enormous potential policy influence of direct democracy. As a result, it is important to understand how the presence of direct democracy, and the rules surrounding its administration, affects economic and political outcomes. The rules on agenda establishment have been of historical interest in the study of direct democracy. In their seminal series of articles, Romer and Rosenthal (1978, 1979) identified the ability of a budget maximizing monopolist referendum agenda-setter to extract a greater amount of expenditure than desired by the median voter. In the Romer and Rosenthal models, the budget maximizing monopolist agenda-setter exercised power by controlling the amount of the referendum. In some circumstances, however, there may be additional sources of agenda control. This paper focuses on the ability of an agenda-setter to gain favorable outcomes through the strategic timing of elections. Sincedifferent subsets of the electorate turnout to vote for an initiative or a referendum given the remaining composition of the ballot (Rubinfeld, 1980; Smith 2001; Tolbert, Grummel, and Smith, 2001), elections scheduled for different times may produce different median voters. As a result, an agenda setter with the power to schedule the election may attempt to schedule the election at a time that produces a median voter closest to their ideal point. The remainder of the paper proceeds as follows. Section II provides a brief review of the previous literature on direct democracy. A formal model of strategically scheduling elections is developed in section III. Section IV presents empirical tests of the predictions made in section III. The remainder of the paper then applies data to the empirical predictions. The dataset, which covers school district referenda in Wisconsin from 1990 to 2003, is described in section V. Results from the empirical tests are presented in section VI. Section VII concludes. II. Previous Literature: A number of recent papers have looked at the relationship between the presence of citizen-initiated direct legislation and government expenditures. Zax (1989) finds that states and municipalities in the United States that permitted direct initiatives for statutory purposes had higher government expenditures than non-initiative states and municipalities. In contrast, Matsusaka (1995) finds that state expenditures and tax revenues are approximately four and eight percent lower respectively in those states thatpermit direct legislation. Similarly, Feld and Matsusaka (2003) estimate that Swiss cantons that require mandatory referendum for new spending had 19% less spending than comparable cantons without mandatory referendum. Besley and Case (2003) also find a negative correlation between the presence of initiative and measures of government spending and taxation, though they generally find that this relationship is not statistically significant. Less literature has been produced on the effects of referendum on governmental expenditure. Much of the existing literature has focused on how the demographics of an electorate affect expenditure outcomes in municipalities that face a common state referendum process. For example, Romer, Rosenthal, and Munley (1992) and Stevens and Mason (1996) test how the composition of the electorate affects school referendum proposals and outcomes in New York and Oregon respectively. A number of other papers, like Bergstrom, Rubinfeld, and Shapiro (1982), Rubinfeld (1977), and Tedin, Matland, and Weiher (2001), have studied how individual’s characteristics affect their voting behavior on an expenditure referendum. In only a few papers in the recent literature on direct