State Fiscal Constraints and Local Responses: Evidence from the Property Tax Limit Overrides in Massachusetts

• Published date: 01 May 2021
• Author: Wenchi Wei,J. S. Butler
• Date: 01 May 2021
• DOI: http://doi.org/10.1111/puar.13186

Research Article

State Fiscal Constraints and Local 399

Abstract: This research examines the determinants of the likelihood of property tax limit override attempts and

successes in the context of Massachusetts’s Proposition 2½. The authors apply the “Leviathan” government theory,

median voter theory, and agenda-setting theory to develop theoretical expectations and use data from Massachusetts

municipalities for 1991–2013 as a sample for empirical tests. Override attempts are not randomly proposed; therefore,

the two-stage Heckman selection model is used to address selection bias in the investigation of the likelihood of override

successes. Results show that a higher property tax rate reduces the likelihood of government officials’ override attempts,

but previous override experiences have a positive influence. Voters bearing a higher property tax rate are less likely to

approve the override, but override experiences in the previous year and the “menu” approach increase the likelihood

of approval. Relatively more evidence supports the Leviathan government and agenda-setting theories in explaining

overrides of Massachusetts’s property tax limit.

Evidence for Practice

• In the context of Massachusetts’s Proposition 2½, government officials’ decision to place a property tax limit

override on the ballot is affected by the property tax rate, override attempts and successes in the previous

year, as well as local socioeconomic conditions and governments’ fiscal reserves.

• Voters’ support of the property tax limit override is primarily determined by the property tax rate, override

attempts and successes in the previous year, and the design of the ballot, especially the “menu” approach.

• Government officials aiming to override the property tax limit should initiate overrides in consecutive years

and use the menu approach, instead of “choosing all or none.”

• Overriding the state-imposed property tax limit increases local fiscal autonomy and may help local

governments to enact fiscal policies in accordance with their own circumstances.

U.S. local governments are constitutional

creatures and administrative branches of the

states and are subject to constraints imposed

by the latter (Bowler and Donovan 2004; Leigland

1994). States grant various degrees of autonomy to

local governments to manage structural, functional,

fiscal, and personnel affairs. Local governments,

typically subject to Dillon’s rule, possess greater

autonomy if they have a home rule charter. This study

focuses on municipalities in Massachusetts, which is a

home rule state.

Since the passage of California’s Proposition 13 in

1978, scholars have paid much attention to state-

imposed tax and expenditure limitations (TELs)

on localities. Almost all states have some form of

TELs on local governments, usually on the property

tax (Mullins and Wallin 2004). Local governments

respond to states’ TELs in various ways. The shares

of local revenues from user fees, program charges,

and debt financing rise as TELs constrain property

tax increases (Bahl and Duncombe 1993; Joyce and

Mullins 1991). Local governments may attempt

to seek more state aid, making the state-local fiscal

relationship more centralized (Mullins 2004; Mullins

and Joyce 1996; Skidmore 1999). Special-purpose

governments are configured to deliver part of public

services (Bowler and Donovan 2004). Interlocal

and public-private cooperation to provide public

services is increasingly common (Krueger and Bernick

2009). Local governments may also respond to TELs

by allowing local voters to override the constraints

through referenda. That opportunity is the focus of

our research.

This article investigates, in the context of

Massachusetts’s Proposition 2½, why government

officials propose to use the referendum to override

the property tax limit and why voters support or

oppose the override. Massachusetts’s Proposition

2½ is one of the strictest state-imposed property

tax limits on localities across the United States. The

Wenchi Wei

Renmin University of China

State Fiscal Constraints and Local Responses: Evidence from

the Property Tax Limit Overrides in Massachusetts

J. S. Butler

University of Kentucky

J. S. Butler is professor of econometrics

and economics in the Martin School of

Public Policy and Administration at the

University of Kentucky. An accomplished

econometrician, he taught at Vanderbilt

University and Cornell University prior to

his work at the Martin School. His research

has been published in the American

Economic Review, Econometrica,

Review of Economics and Statistics,

Journal of Econometrics, and other

journals.

Email: j.s.butler@uky.edu

Wenchi Wei is assistant professor in the

School of Public Administration and Policy

at Renmin University of China. He holds

a PhD in public policy and administration

from the Martin School at the University of

Kentucky. His research focuses on public

management and performance, public

and nonprofit financial management,

and policy evaluation. His research has

appeared in Public Administration

Review, American Review of Public

Administration, Public Finance

Review, and other journals.

Email: weiwenchi@ruc.edu.cn

Public Administration Review,

Vol. 81, Iss. 3, pp. 399–413. © 2020 by

The American Society for Public Administration.

DOI: 10.1111/puar.13186.