This thesis analyzes the impact of capital budget on capital spending in the U.S. states. The analysis is based on the James Poterba's 1995 study of the impact of a capital budget on capital spending using 1962 U.S. state-level data. I first replicate Poterba's model using the 1992-1996 data set that I had constructed for this study. I then extend Poterba's model to include a set of variables that allows exploration of the specific effects of the regulatory environment on spending outcomes in each state. These are mainly categorical variables that classify states in accordance with their definition of capital expenditure, organization of capital planning process, project selection and cost estimating techniques and capital financing practices. These were constructed using the data of the 1997 NASBO survey after reviewing the suggestions of practitioners and policy makers, as well as those engaged in research in this field. The introduction of a set of budget rule/budget composition variables into the analysis is an important contribution of this study. I also introduce additional control variables such as those controlling for the age of infrastructure. This study supports the claim that government spending is determined by a host of causal factors that can be grouped into four broad categories, (1) demographic-economic factors, representing both demand for public capital and source of its financing, (2) political decision-making factors that reflect electorate/party in power preferences for spending, (3) capital stock variables that relate to the age of infrastructure and control for spending culture in a state, and (4) budget composition/spending rules. The main finding of this study is the confirmation of Poterba's finding with respect to the positive effect of capital budget on capital spending using a recent data set and longer time frame of analysis. Another major contribution of this study is a statistically significant effect of sixteen spending rule/ budget composition variables. The results of this study support the basic premise found in the literature that budget process affects capital spending. / Master of Public and International Affairs

Higher education is the third largest state expenditure behind K-12 and Medicaid but is generally more discretionary than most other budget categories. As demographic trends and economic downturns constrain state budgets, the delivery of state subsidies in higher education has increasingly shifted toward students via grant aid and away from institutions via appropriations. Since the 1990s, many states have changed the composition of their state subsidies in higher education to varying degrees. There is a rich literature that examines the effects of state subsidies on various aspects of the higher education market. This dissertation aims to contribute to the literature on two broad fronts. First, rather than state subsidy levels, theoretical and empirical emphasis is placed on subsidy composition, or the distribution of subsidies across three primary modes of delivery—appropriations, need-based grants, and non-need-based grants. This focus is meant to reflect the policy decision faced by states, especially during times of fiscal stress, and reveal insights into important economic considerations. Second, differential impacts of state subsidies are examined not only with respect to student ability and income but also college inputs of academic quality and amenities. College amenities are an important input in the higher education market in need of more theoretical and empirical analysis. The introduction briefly discusses the economic rationale for public subsidies in higher education and the complexity confronting states to subsidize the cost of college under various constraints and policy goals. Chapter 2 aims to orient the reader to the policy, trends, and research pertaining to state subsidies in higher education. Chapter 3 theoretically examines the response in student demand for educational resources and amenities to changes in state subsidy composition from which several policy implications and directions for future research are considered. Chapter 4 focuses on subsequent effects that changes in demand between educational resources and amenities may have on institutions. State subsidies and institutional expenditures between 1990 and 2016 are examined in order to determine whether the composition of state subsidies causes in-state institutions to alter expenditures in a way that reflects a divergence between educational and amenity inputs. Chapter 5 considers the role of college student migration with respect to state subsidies and student outcomes. State subsidies impact college choice, and in turn, alter the distance students migrate to attend college. The effect of distance on college student success is theoretically and empirically examined. Chapter 6 concludes with a summary and discussion of the main findings as well as ideas and directions for future research.