Author Summary by David Fortunato and Ian R. Turner
American state legislatures vary widely in the degree to which they provide legislators with the tools to efficiently translate policy preferences into policy outcomes. The world is complex and legislating is difficult; having more staff that can share the burden of research and bill-writing, more time to craft and scrutinize legislation, and alleviating the need for additional income (apart from one’s legislative salary) allows state legislators to better understand the world and draft policies to more closely reflect their voters’ will. We call the provision of these goods “legislative capacity” and previous research has found that in states where capacity is higher, legislators are more active and voters are substantially more likely to get the policies they want (e.g., Lax and Phillips 2012).[1]
But voters can be fickle, preferring one type of policy today and another tomorrow. Similarly, policy environments are affected by economic shocks and persistent drift. This means that, in states with high capacity legislatures, we should expect more policy change, on average, than in states with low capacity legislatures. This change can make it difficult for lending markets (the individual or institutional investors who buy and sell debt) to predict what a state’s political economic environment — its regulatory regimes, tax codes, etc. that determine its willingness and ability to service its debt — will look like 5, 10, or 20 years in the future. That is, states with high capacity legislatures are better equipped to alter policy in response to changing voter preferences, environmental considerations, or economic shocks, which can introduce variability into the political-economic environment of the state. As a result, we predict that high capacity states will be evaluated as riskier and will have to pay higher premiums to borrow.
We evaluate this claim empirically by comparing states’ credit risk evaluations (estimated from the general obligation bond ratings) to their legislative capacity (legislator salary, legislative session length, and the legislators’ informational resources). In the article we estimate more advanced statistical models, providing robust support for our hypothesized association, but here we simply show the correlation between the two values in all American states over a period of 16 years. In each year the relationship is positive and the modeling we perform in the article reveals that we are confident in this relationship.
Figure 1
What these data suggest is that lending markets negatively evaluate states with the legislative resources to more effectively represent their constituents by lowering their credit ratings. That is, we provide evidence that there is a real cost of democratic responsiveness that has thus far remained relatively unexplored. To put this in perspective substantively: On average, the increase in debt maintenance costs necessary to improve capacity from among the lowest ranking states (e.g., New Hampshire, New Mexico, Alabama) to states in middle of the pack (e.g., South Carolina, Connecticut, Arizona) is about $1 per capita, per year in additional debt maintenance costs — a cost that compounds over time as debts inevitably grow.
Of course, we do not argue that our study implies that states would be better off with low capacity policymaking institutions. There are myriad benefits associated with high capacity legislatures, not the least of which is increased policy responsiveness. However, we do suggest that treating democratic responsiveness as an unconditional public good misses important, and potentially very costly, perverse effects that may simultaneously manifest as responsiveness increases. In short, to understand the trade-offs associated with institutional development, such as legislative capacity, for democratic representation and accountability we need to continue to explore both the upsides and the (perhaps unintended) downsides.
About the Authors: David Fortunato is an Assistant Professor in the Department of Political Science at Texas A&M University. Ian R. Turner is an Assistant Professor in the Department of Political Science at Yale University. Their research “Legislative Capacity and Credit Risk” appears in the July 2018 issue (Volume 62, issue 3) of the American Journal of Political Science.
[1] Lax, Jeffrey R., and Justin H. Phillips. 2012. “The Democratic Deficit in the States.” American Journal of Political Science 56(1): 148—166.
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