Direct Democracy and Redistribution
One of the most robust empirical findings about direct democracy is that US states with the voter initiative tax and spend significantly less than states without the initiative, at least since the mid-1970s. The fiscal differential between initiative states and non-initiative states has been interpreted as an indication that voters prefer smaller government than legislators. Yet, existing research has not explained exactly which elements of the public budget are cut as a result of the initiative. This paper does so. I find that the major fiscal effect of the initiative is not smaller government in general, but specifically the effect is lesser and more unequal education funding. In particular, the overall spending differential in initiative states is due primarily to reductions in state aid to school districts for elementary and secondary education. Local governments do not compensate for the lost state aid through increases in revenue from other sources. Therefore, because state funding of education is a progressive force that works toward equalizing school spending, initiative states also experience significantly higher levels of inequality across districts in per pupil spending. I discuss implications of these results for the understanding of direct democracy and its effects on the relationship between voters and politicians.
