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Impoundment at the State Level: Executive Power and Budget Impact James W. Douglas and Kim U. Hoffman The American Review of Public Administration 2004 34: 252 DOI: 10.1177/0275074004268093 The online version of this article can be found at: http://arp.sagepub.com/content/34/3/252

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ARPA / September 10.1177/0275074004268093 Douglas, Hoffman /2004 EXECUTIVE POWER AND BUDGET IMPACT

IMPOUNDMENT AT THE STATE LEVEL Executive Power and Budget Impact JAMES W. DOUGLAS University of South Carolina KIM U. HOFFMAN University of Central Arkansas Presidential impoundment authority has been given extensive attention in the budgeting literature. Little research, however, has examined impoundment powers at the state level. This research note is an exploratory study of impoundment powers at the state level, focusing primarily on gubernatorial rescission authority. We use a survey of executive budgeting officers to examine the structure, use, and effectiveness of impoundment powers in the states. We find that gubernatorial impoundment authority is generally used to maintain balanced budgets during times of revenue shortfall. We also find that impoundments do not serve as a particularly effective policy mechanism for most governors. Keywords: budgeting; impoundment; state; rescission

Presidential impoundments have received a considerable amount of attention from budgeting scholars. Studies have found that presidents use impoundments to eliminate unnecessary appropriations, ensure efficient spending practices, and promote their policy preferences (Fisher, 1975; General Accounting Office, 1996, 1999; McMurtry, 1997; Office of Management and Budget, 1998; Pfiffner, 1979; Socolar, 1993; Wlezien, 1994). Impoundments, therefore, serve as an important fiscal adjustment tool at the national level. Surprisingly, given the existence of similar powers at the state level, research on budget impoundments has focused almost exclusively on the federal process. Only one study has even broached the topic of gubernatorial impoundment powers. From a survey of chief legislative and executive budget officials in the states, Abney and Lauth (1998) discovered that state-level impoundments are used largely to deal with revenue shortfalls, although governors in a few states have used their impoundment authority to promote their policy agendas. Little else is known about how impoundment authority is structured or used in the states. In this research note, we attempt to fill a void in the literature by more fully examining gubernatorial impoundment powers in the states. Our evidence, derived from a survey of state budget officers, suggests that gubernatorial impoundment authority is generally used to maintain balanced budgets during times of revenue shortfall. To a lesser extent, impoundments are used to promote fiscal responsibility. We also find that impoundments do not serve as an effective policy tool for governors in most states (e.g., they do not increase the governors’ ability to promote their political agendas) because of political and structural restrictions Initial Submission: June 10, 2002 Accepted: June 2, 2004 AMERICAN REVIEW OF PUBLIC ADMINISTRATION, Vol. 34 No. 3, September 2004 252-258 DOI: 10.1177/0275074004268093 © 2004 Sage Publications

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placed on rescission authority and the weakness of impoundments relative to other gubernatorial powers. METHOD The data used in this note come from a survey mailed to directors of executive budget offices in each state. The surveys were mailed in early June 2000. A second mailing was sent out 1 month later. After the second mailing, e-mails were sent to all nonrespondents. At this point, 29 states had responded to the survey. All nonrespondents were contacted by phone, and a third mailing was sent out in April 2001 that elicited 4 additional states for a total response rate of 66% (33 states). The responding states were found to be reasonably dispersed regarding geographic location, population, and strength of gubernatorial powers.1 It is important to note that although the survey was mailed directly to the budget directors, it is likely that many were completed by other budget staff rather than the directors themselves. Survey respondents were promised confidentiality in that neither they nor their states would be identified directly in any reporting of their answers. Impoundments at the national level are broken down into two categories, deferrals and rescissions. Our survey questions were consistent with this categorization. On the survey, we defined deferral as the power to temporarily withhold previously appropriated funds within the fiscal year. A rescission was defined as the power to permanently cut or reduce appropriated funds, agency expenditures, or agency allotments even if such actions must be approved by another entity. We further clarified our definition of rescission power by stating that this power could simply be the governor presenting a formal proposal for cuts to the legislature even if the proposal is unlikely to be approved by the legislature. This clarification was an attempt to obtain an affirmative response from states regarding the governor’s rescission authority, even if such rescissions are rarely approved. Our questions focused primarily on the rescission authority because it has received the most attention at the national level and is viewed to be the more powerful type of impoundment (see Fisher, 1975; General Accounting Office, 1996, 1999; McMurtry, 1997; Office of Management and Budget, 1998; Pfiffner, 1979; Socolar, 1993; Wlezien, 1994) FINDINGS Deferrals Of the 33 respondents, 23 (69.7%) reported that the governors in their states have the power to temporarily withhold previously appropriated funds within the fiscal year. Governors tend to use deferral power to maintain budgetary balance and to promote the responsible management of funds. Of the 23 respondents, 15 (65.2%) indicated that their governors used the deferral power to deal with revenue shortfalls and balanced budget requirements. Of the 23 respondents, 9 (39.1%) indicated that the deferral power is used in their states to promote the responsible management of funds. Only one respondent indicated that the deferral power is used by the governor to punish or reward legislators. Therefore, it appears that the deferral power in the states is used primarily as a fiscal tool and not as a policy instrument.


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Rescissions Structure. Governors bear the primary responsibility for initiating cuts when state budgets have been enacted. Of the 33 respondents, 27 (81.8%) reported that the governors in their states have the power to initiate rescissions. Seventeen (51.5%) indicated that the legislature as a whole has this power, with 4 (12.1%) responding that the legislative leadership can initiate rescissions. Six (18.2%) reported that department heads can initiate rescissions without the approval of the governor. Finally, 2 (6.1%) indicated that the budget director can initiate rescissions, and 1 (3.0%) indicated that a budgeting board had this power. Three of the 5 states reporting that their governors do not possess the rescission power failed to say who has this authority. The majority of the respondents (63.6%) reported that their governors tended to rescind more money than any other actor, whereas only 3 (9.1%) claimed that someone other than the governor rescinded the most. Most governors have restrictions placed on what they can cut, and/or they must get approval from other actors prior to implementing their proposed rescissions. Eight of the 27 respondents (29.6%) whose governors have the rescission power reported that gubernatorial rescissions can be performed in their states to only deal with revenue shortfalls. An additional respondent remarked that the governor in his state can rescind funds to deal only with revenue shortfalls or natural disasters. Several governors are also prohibited by law from rescinding funds appropriated for certain functions, including the state legislature (37.0% of the 27 respondents), the judiciary (33.3%), and public debt (33.3%). A small number of respondents (less than 3 each) revealed restriction on other functions such as capital projects, select executive agencies, and earmarked funds. Legislatures in many states are able to place additional restrictions on gubernatorial rescission powers when writing authorizing statutes and appropriations bills. Of the 27 respondents, 12 (44.4%) indicated that the legislatures in their states can write authorizing statutes and/or appropriations bills in a manner that prohibits gubernatorial rescissions for certain programs/projects, and 9 respondents (33.3%) indicated that their legislatures can restrict the total amount the governor can rescind from a particular program/project. The capacity to limit gubernatorial action in this way may prevent governors from using their rescission power to promote their policy initiatives at the expense of the policy goals of legislatures. The ability of governors to use their rescission authority to promote their policy goals is further restricted in many states by the requirement that another actor approve gubernatorial rescissions before they are implemented. Of the 27 respondents, 16 (59.3%) reported that the governors in their states need approval from another body before they can cut funding during the fiscal year. Nine (33.3%) indicated that gubernatorial rescissions must be approved by the legislature. In at least some states, this requires the legislature to pass a rescission bill, much similar to what is done by Congress at the federal level. Another 3 (11.1%) respondents indicated that gubernatorial rescissions must be approved by a legislative committee in their states. Finally, 4 (14.8%) respondents revealed that approval must be given by a state board or council. It is important to note that a few states commented that approval of gubernatorial rescissions is not needed under certain conditions. For example, one state wrote that acrossthe-board rescissions during times of revenue shortfall do not require legislative approval, however rescissions for all other purposes do. Reasons for using rescissions. Gubernatorial rescission authority is used widely to maintain balanced budgets. Of the 27 respondents, 25 (92.6%) who indicated that their



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governors had the rescission power reported that it is used for this purpose. This is not surprising given that most state legislatures are part-time institutions. Governors need some authority to deal with revenue shortfalls when their legislatures are not in session. The rescission power is an appropriate tool for dealing with such eventualities. The next four most-cited purposes for rescission use can be labeled as fiscally prudent measures; controlling spending (51.8% of respondents), eliminating unnecessary programs (33.3% of respondents), deterring agencies from spending unanticipated savings (25.9% of respondents), and preventing unnecessary expenditures (25.9% of respondents). Once again, many state legislatures do not remain in session for the duration of the fiscal year. It is necessary, therefore, to enable the governor to make midyear adjustments in response to changing events. The evidence that governors use their rescission powers to undertake fiscally prudent actions is an encouraging sign. However, most of these actions were reported to be used in one third or less of the responding states. This could indicate that the gubernatorial rescission power is underutilized as a mechanism for making such changes during the fiscal year. However, it is also possible that actors other than the governor are initiating fiscally responsible rescissions when they are needed during the fiscal year. If this were the case, we would expect gubernatorial rescissions to be less common. The evidence that most rescissions to state budgets are initiated by governors makes this latter explanation less plausible. Finally, the low use of gubernatorial rescissions to deal with midyear changes could mean that few adjustments are generally needed. This, however, seems unlikely given the enormity of state budgets and the use of biennial budgets by many states. It does not appear that many governors use the rescission power as either an instrument of partisanship or a mechanism to gain influence with the legislature. Governors in few states appear to use rescissions to eliminate pork barrel projects, eliminate programs inconsistent with the governor’s policy agenda, or punish or reward legislators. Only five (18.5%) states reported that their governors use the rescission power to eliminate programs inconsistent with their policy agendas. Not surprising, the governors in each of these states are permitted to propose rescissions even when revenue shortfalls are not present. Four states reported that governors use the rescission to eliminate pork barrel projects, and no state reported that governors use the rescission to punish or reward legislators. Interestingly, this finding stands in sharp contrast to evidence concerning how governors use their line-item veto authority (see Abney & Lauth, 1985; Lauth, 1996). Respondents were asked to indicate why governors in their states have not used rescission powers more often. The two most-cited reasons are that the governor gets what he or she wants without it (37% of 27 respondents), and it can be used only during times of revenue shortfall (37%).2 Other reasons reported by at least 20% of the respondents include the legislature being fiscally responsible, and the use of the rescission-damaging relations with the legislature. These reasons could explain why few governors seem to use their rescission powers to promote their policy initiatives. Obviously, restricting rescission authority to dealing with revenue shortfalls make it difficult for a governor to use the rescission power to eliminate programs he or she disagrees with. It is also reasonable to assume that governors would be reluctant to use their rescission powers to promote their policy preferences if their other powers enable them to adequately promote their policies or if doing so could harm their relationship with the legislature. Impact of rescissions. Given the uses of the gubernatorial rescission power discussed above, how effective are rescissions at helping governors to influence the budgetary process? To answer this question, the respondents were queried along a number of


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dimensions. First, respondents were asked if they believed that governors need the rescission power to be effective budgetary leaders. Of the 27 respondents, 23 (85.2%) agreed with this statement. Second, respondents were asked to rate on a 5-point likert-type scale (1=not effective, 5 = very effective) how effective the governor’s rescission power is at accomplishing a number of goals. Rescission power is perceived by respondents to be most effective at maintaining budgetary balance throughout the fiscal year (M = 4.05). Rescission effectiveness is rated relatively low regarding the remaining goals of reducing annual appropriations totals (M = 2.67), reducing wasteful spending (M = 2.05), promoting the governor’s policy agenda (M = 2.00), and promoting efficiency in government (M = 2.05). The only goal from this group that even approaches moderate effectiveness is reducing annual appropriations totals. The low mean score for promoting the governor’s policy agenda provides further evidence that rescission powers are not used often by governors to further their policy goals. It is interesting to note, however, that the mean score on this goal for the five states reporting that their governors use the rescission power to eliminate programs not consistent with their policy agendas is 3.40. Although the number of states is small, this finding provides evidence that the rescission power has the potential to serve as a policy-promoting instrument for governors if they are willing and able to use it for this purpose. Finally, respondents were asked to rate on a 5-point likert-type scale (1 = indicating low usefulness, 5 = indicating high usefulness)3 the extent to which several gubernatorial powers help their governors to influence the appropriations process. This question was asked as a means to compare the influence of gubernatorial rescission authority with other executive powers. In the current study, other gubernatorial powers include the ability of the governor to solely define the revenue estimate (M = 3.89), the ability of the governor to propose the executive budget (M = 4.22), the possession of superior information by the governor (M = 3.52), the threat or use of the line-item veto (M = 3.50), and the governor’s position as the party leader (M = 3.14). The rescission power is not particularly useful relative to these other powers (M = 1.84). The threat or use of the deferral power is rated even lower (M = 1.67). For the five states indicating that their governors use the rescission power to eliminate programs/projects inconsistent with the governor’s policy agenda, the rescission power is perceived to be more useful (M = 2.60) than it is in all other states where the governor possesses rescission authority. This score, however, still remains relatively low. These findings indicate that the rescission power can help governors to influence the appropriations process, however it is comparatively unimportant when stacked up against other gubernatorial powers. SUMMARY AND CONCLUSION The current study is an important first step in identifying and describing gubernatorial impoundment powers. From the survey data, it appears that impoundment powers are available to many governors yet underutilized. Deferrals and rescissions are used mainly for dealing with revenue shortfalls or maintaining balanced budgets. However, other indicators of fiscal responsibility (eliminating unnecessary programs and preventing unnecessary yearend expenditures) were not reported to be used in one half of the states where the governors have rescission powers. Rarely is the rescission used for policy reasons. This may be because of the restrictions placed on the use of rescissions, particularly in those states where the governor is limited to using the rescission to deal with revenue shortfalls only. Yet there is some indication that if governors have the ability to use the rescission for policy purposes, it can be



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somewhat effective in promoting their policy agendas. Overall, the rescission power is not particularly useful as a policy instrument relative to other gubernatorial powers such as the governor’s ability to propose the executive budget and the use of the line-item veto. Although many governors in the states responding to this survey have the rescission power, increasing its policy impact on the appropriations process may be dependent on the easing of restrictions surrounding its use. Our findings regarding the policy implications of gubernatorial impoundment powers are somewhat counterintuitive. The line-item veto power wielded by most governors is frequently used by them to promote their policy agendas (Abney & Lauth, 1985; Lauth, 1996). Research on the line-item veto, however, reveals that governors often have a difficult time using this power effectively because state legislatures can package line-items in a manner that makes them difficult to eliminate without also cutting gubernatorial priorities (Lauth, 1996). One would expect the need to enable governors to make midyear adjustments would furnish them with impoundment powers that could help them better target spending programs they disagree with. This, however, does not appear to be the case. Instead, the restrictions, institutional and political, placed on gubernatorial rescissions limit their usefulness as a policy device. As a result, legislative prerogatives are protected. Rather than giving governors another weapon in their arsenals to influence budgetary outcomes, rescissions serve largely as a tool of fiscal correction. NOTES 1. After reviewing the states from which we received responses, we found that they are disbursed across several characteristics. In terms of population, states with less than two million inhabitants make up 28% of the respondents; states with populations between two million and five million represent 34% of the respondents, with the remaining states (38%) falling in the large-state category with populations of more than five million. Our respondents also represent every region of the country with at least four states from each region (northeast, southeast, midwest, southwest, and west). According to Beyle (1990), most states have governors with moderate gubernatorial powers in terms of tenure and succession, appointment and removal, budget control and veto, and whether the governor and legislature belong to the same party. Beyle categorized each state according to the strength of the governor’s formal powers in office and found that 60% of the states have governors with moderate formal powers, 10% have governors with strong formal powers, and 14% with weak formal powers. The sample of states in the current study largely conforms to this distribution. When comparing the states in the current study to Beyle’s list of states in the moderate, strong, and weak categories, we find that 66% of the responding states have governors with moderate gubernatorial powers, 14% have governors with strong powers, and 20% have governors with weak gubernatorial powers. To get a better picture of how impoundment powers are structured and used in all of the states, we examined state constitutions and statutes for nonresponding states. Unfortunately, we found that these sources did not provide all of the types of information included in our survey. To add this information while also describing how the survey data is different in key areas would make the manuscript awkward and somewhat difficult to follow. Therefore, we feel more comfortable relying exclusively on the survey data. 2. Eight states reported that their governors can use their rescission authority to deal with revenue shortfalls only. Ten states, however, report that they do not use the rescission power more often because it can only be used during times of revenue shortfall. Both of the 2 additional states provide information in their surveys indicating that they can rescind funds for other reasons. It is likely that they are limited in their ability to do this. One of the states reported as much on its survey, stating that its governor can rescind funds to deal with revenue shortfalls and natural disasters only. 3. Respondents were asked to record a 0 (zero) if the governor in their state did not possess a specific power. The scores reported here for each power are those from states where the governor was reported to possess the power.


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REFERENCES Abney, G., & Lauth, T. P. (1985). The line-item veto in the States: An instrument for fiscal restraint or an instrument for partisanship? Public Administration Review, 45(May/June), 372-377. Abney, G., & Lauth, T. P. (1998). The end of executive dominance in state appropriations. Public Administration Review, 58(September/October), 388-394. Beyle, T. L. (1990). The powers of the governors. North Carolina Insight, 12(March), 27-45. Fisher, L. (1975). Presidential spending power. Princeton, NJ: Princeton University Press. General Accounting Office. (1996). Summary of proposed and enacted rescissions. Washington, DC: U.S. Government Printing Office. General Accounting Office. (1999). Impoundment Control Act: Use and impact of rescission procedures (Testimony before the Subcommittee on Legislative and Budget Process, Committee on Rules, House of Representatives). Washington, DC: U.S. Government Printing Office. Lauth, T. P. (1996). The line-item veto in government budgeting. Public Budgeting and Finance, 16(Summer), 97111. McMurtry, V. A. (1997). The Impoundment Control Act of 1974: Restraining or reviving presidential power? Public Budgeting and Finance, 17, 39-61. Office of Management and Budget. (1998). The cumulative report on rescissions and deferral of budget authority as of April 8, 1998, pursuant to 2 U.S.C. 685(e). Washington, DC: U.S. Government Printing Office. Pfiffner, J. P. (1979). The president, the budget, and congress: Impoundment and the 1974 budget act. Boulder, CO: Westview. Socolar, M. J. (1993, March 10). Budget process: Use and impact of rescission procedures (Testimony before the Subcommittee on Legislation and National Security of the Committee on Government Operations, House of Representatives. Washington DC: U.S. Government Printing Office. Wlezien, C. (1994). The politics of impoundments. Political Research Quarterly, 47, 59-84.

James W. Douglas is an associate professor in the Department of Political Science at the University of South Carolina. Current research interests focus on state budgeting practices as they relate to the judiciary. Articles have appeared in Public Administration Review, Public Budgeting and Finance, State and Local Government Review, American Review of Public Administration, Administration and Society, Review of Public Personnel Administration, and Journal of Public Affairs Education. Kim U. Hoffman is an assistant professor in the Department of Political Science at the University of Central Arkansas. She received her Ph.D. in political science from the University of Oklahoma in 2003. She also has an MPA from the University of North Texas and a bachelor’s degree in public administration from the University of Central Arkansas. Current research interests focus on state budgeting practices and the influence of legislative fiscal analysts in state budget policy.
