Legislatures and Statutory Control of Bureaucracy Author(s): John D. Huber, Charles R. Shipan and Madelaine Pfahler Reviewed work(s): Source: American Journal of Political Science, Vol. 45, No. 2 (Apr., 2001), pp. 330-345 Published by: Midwest Political Science Association Stable URL: http://www.jstor.org/stable/2669344 . Accessed: 20/05/2012 17:41

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http://www.jstor.org Legislaturesand Statutory Control of Bureaucracy

JohnD. Huber ColumbiaUniversity CharlesR. Shipan UniversityofIowa MadelainePfahler UniversityofMichigan

Existingtheories of legislativedelega- ureaucraticinvolvement in policymakingis a pervasivecondition of tionto bureaucracies typicallyfocus modernpolitical life. Bureaucracies implement policies that legisla- on a single legislature,often the U.S. tureshave enacted,and theycreate policies where legislatures have Congress. We argue thatthis paro- avoideddoing so. Theycan act to regulateindustries, to distributebenefits chial focus has importantlimitations. If and costs,and to redistributewealth. They tackle policy areas as disparate one contends thatpoliticians respond as telecommunications,the environment,transportation, and public rationallyto theirpolitical environment health. when adoptingstrategies for control- Given the pervasivenessof bureaucraticactivity, it is not surprising lingbureaucrats, then theories of thatpolitical scientists long have sought to understandthe relationship be- controlshould be able to explain how tweenlegislatures and agencies.Understanding this relationship is essential differencesin the politicalenviron- to democratictheory, as it focusesattention on the legitimacyof the role ment-and in particularin the demo- playedby unelectedpolicymakers in a representativedemocracy. Further- craticinstitutional arrangements that more,it shedslight on theactions, abilities, and motivationsof legislators. shape thisenvironment-influence Thus,scholars have attempted to ascertainwhether, to whatextent, and un- strategiesfor controlling bureaucrats. derwhat conditions legislators influence the actions of agencies. We offersuch a theoryabout the Much of thefocus of thisresearch has been on theU.S. Congress,and conditionsunder which legislatures much of the debatehas centeredon the questionof whetherin factCon- should relyon statutorycontrol (i.e., gresscontrols the bureaucracy. This is a difficultquestion to answer,as it detailed legislation)in order to limitthe requiresfairly precise information on legislatorpreferences and agency discretionof agencies. The theory outputs.But while settling the empirical issue has been difficult,in address- focuses on the interactionsof four ing thisquestion scholars have clarifiedseveral strategies for control, in- factors:conflict between legislators cludingthe use of budgetprocesses (e.g., Banks 1989; Bendor,Taylor, and and bureaucrats,the bargainingcosts Van Gaalen 1987), ongoingoversight (e.g., Aberbach 1990), and statutory associated withchoosing the institu- control,whereby legislators use legislationto influenceagency decisions. tionsfor controlling bureaucrats, the professionalcapacity of legislatorsto create institutionsfor control, and the impactof politicalinstitutions on the JohnD. Huber is AssociateProfessor of PoliticalScience, 732 InternationalAffairs Building,Columbia University, 420 W. 118thStreet, New York,NY 10027 (jdh39@ relativecosts and benefitsof statutory columbia.edu).Charles R. Shipan is AssociateProfessor of PoliticalScience, 341 and nonstatutorystrategies of control. SchaefferHall, University of Iowa,Iowa City,IA 52242 ([email protected]). We testour argumentusing legislation MadelainePfahler is a Ph.D.Candidate in PoliticalScience, The Universityof Michigan, AnnArbor, MI 48104([email protected]). from1995 and 1996 thataffects Med- icaid programs.The resultsshow that Originallypresented at the 1998Annual Meeting of the American Political Science As- sociation,Boston, Mass. The authorswould like to thankThe RobertWood Johnson legislaturesare morelikely to make Foundationand theNational Science Foundation for financial support, Andrew Bargen, use of statutorycontrols when control MaureenComfort, Todd Austin, and KevinChlarson for excellent research assistance, of governmentis divided between the GregAdams, Tim Amato, Steve Balla, Jenna Bednar, Dan Carpenter,Dave Clark,Rui de Figueiredo,Matt Gabel, Rick Hall, Becky Morton, Pev twoparties, the twochambers ofthe Squire,Craig Volden, and semi- narparticipants'at George Washington, Chicago, Iowa, Kentucky, Michigan, Ohio State, legislatureare unifiedin their opposi- and WashingtonUniversity for helpful comments and discussions.Finally, Shipan tionto the executive,the legislatureis wouldlike to acknowledgethe support provided by the Obermann Center for Advanced moreprofessionalized, and the legisla- Studiesat theUniversity of Iowa. turedoes nothave easily available AmericanJournal of Political Science, Vol. 45, No. 2,April 2001, Pp. 330-345 optionsfor nonstatutory control. ?2001 bythe Midwest Political Science Association

330 LEGISLATURES AND STATUTORY CONTROL OF BUREAUCRACY 331

Like much of the researchon Congress,this article empiricaltest, which focuses on Medicaid healthpolicy focuseson statutorymeans of control,with the objective in the states,and presentour results.The conclusion being to understandwhen, and underwhat conditions, summarizesthe main resultsand discussesideas forfu- legislatorswill attemptto use legislativestatutes to spell turework. out in detailwhat actions bureaucracies should or should not take. We, however,attempt to filla lacuna in the theoreticaland empiricalunderstanding of delegation,a lacuna thatinevitably arises when theories are developed AComparative Theory of Delegation and testedwithin a fixedinstitutional setting (like Con- gress).One shouldexpect that the broader political con- Our theoreticalargument about delegation is in the textin whichlegislators find themselves will affectlegis- rational-choicetradition that maintains politicians pur- lativestrategies for controlling bureaucrats (Huber and posefullyattempt to influencebureaucratic behavior (e.g., Shipan 2000a). Effortsto exercisecontrol, for example, McCubbins,Noll, and Weingast1987, 1989, Ramseyer should logicallydepend on factorssuch as the level of and Rosenbluth1993; Moe, 1989, 1990a, 1990b). Recent legislativeprofessionalism, the structure of legislative-ex- researchhas builton thistradition by developing and test- ecutiverelations, or the arrangementsfor legislative in- ing argumentsabout how featuresof the politicalenvi- terventionin bureaucraticactivity. When studiesof del- ronmentinfluence strategies for control. Epstein and egationare conductedin settingswhere such featuresof O'Halloran (1994, 1999),for example, develop and testa theenvironment are fixed(as theyare in studiesof Con- modelthat explains why legislators will be morelikely to gress),these featurescannot become elementsof our limitagency discretion during divided government. They, theoriesof delegation. alongwith Drotning (1993), also examinehow the level of Our primaryobjective is thereforeto develop and policy uncertaintyaffects delegation strategies.Bawn testa theoryof delegationthat is explicitlycomparative. (1995, 1997) looks at a similarset of issues,focusing pri- By"comparative," we are not simplyreferring to "outside marilyon tradeoffsbetween taking advantage of the ex- the UnitedStates," as the termis oftenused. Rather,we pertisethat bureaucrats possess and controllingagency mean thatvariation across institutionalarrangements drift.Her theoryindicates that the optimal level of discre- and politicalsystems allows us to makepredictions about tionthat legislators give to agencieswill be a functionof a the effectsof thesearrangements and systemson incen- systematicinteraction between the technicaland proce- tives to use statutorycontrol. We focus explicitlyon duraluncertainty that legislators face.' variationin institutionalarrangements within separa- Such researchhas done a greatdeal to improveour tion-of-powerssystems and testour theoryby conduct- understandingof delegationprocesses in Congress.But ing a comparativeanalysis of policymakingin the U.S. as notedabove, the near-exclusive focus on Congresshas states.The theory,however, easily can be adaptedto en- led to a set of explanatoryvariables that vary over time compass delegationin parliamentarysystems (Huber (e.g.,the levelof conflictbetween legislature and execu- and Shipan2000b). tive) or across issues (e.g., technicaluncertainty about We believethat a comparativeapproach is crucialto policies).This is obviouslyessential for explaining varia- testingtheories of delegationthat view the structures tion withinCongress, but thisdominant mode of theo- constrainingbureaucratic behavior as the resultsof ra- rizinghas impoverishedour understandingof how the tional choices by politicianswho care about the out- institutionalsetting in whichlegislators find themselves comesfrom bureaucratic behavior. After all, if politicians affectsthe way in whichthey design legislation to control respondrationally to theirpolitical environment when bureaucrats.It seemslikely, for example, that if the politi- adoptingstrategies for controlling bureaucrats, then dif- cal arrangementsin a particularsystem facilitate non- ferencesin thepolitical environment-and, in particular, statutorycontrol, then statutory mechanisms should be in the democraticinstitutional arrangements that shape less importantin thatsystem. Similarly, the influenceof thisenvironment-should create differences in theopti- variableslike dividedgovernment and technicaluncer- mal strategiesfor controlling bureaucrats. It is thisidea taintyon discretionstrategies should not be the same thatwe seekto developand test. everywhere,but should depend on factorssuch as the The articleproceeds as follows.In thefollowing sec- tion,we spell out our theoreticalargument about statu- 'Otherstudies that have found some empirical support for the ar- torycontrol, an argumentthat takes into account the in- gumentthat politicians delegate strategically include Potoski (1999), Spence (1999), Drotningand Rothenberg(1999), and fluenceof particular political institutions that vary across Volden(2000). Studiesthat cast doubt on thisargument include systems.After developing this argument, we discussour Balla (1998) and Hamiltonand Schroeder(1994). 332 JOHN D. HUBER, CHARLES R. SHIPAN, AND MADELAINE PFAHLER institutionalresources that legislators possess. More gen- puzzle,there is one remainingpiece. The ultimategoal of erally,we should expectthe importanceof the control writingdetailed legislation is to preventthe agency from strategiesthat previous studies have identifiedto vary takingan actionthat runs against the legislature's inter- withspecific features of a system'spolitical institutions. ests.If, however, the legislature has othermeans by which Our theorybegins with the premisethat legislators it can keep the agencyin line,it mightchoose to relyon careabout thepolicy actions taken by bureaucrats. Given theseother means rather than exerting the effort to write thisinterest in policy,consider the situation faced by the detailedlegislation. In otherwords, even though the leg- legislature.To beginwith, it mightbe in the legislature's islaturemight distrust the agencyand thushave the in- interestto letan agencydevelop policy, since agencies are centiveto engagein statutorycontrol, it mightprefer to staffedwith experts who mayknow more than the legis- relyon alternative(and less costly)means of influencing latureabout the policyarea and about the linkbetween theagency's actions. policyactions and outcomes.Thus, to theextent that the Our argumentthus focuses attention on foursets of legislaturecan trust the agency to make the "right" politicalvariables and theinteractions between these vari- choices-in other words, the choices the legislature ables.To beginwith, the political context-whether legis- would makeif it had as muchexpertise as theagency-it latorsand agenciesagree or disagreeabout policy-affects willwant to delegatebroadly and allowthe agency to de- theincentive, or need,to limitdiscretion. If legislators and terminepolicy details. bureaucratswish to achievethe same objective(because, Of course,it is also possiblethat the legislaturewill forexample, government is unified)then legislators have nottrust the agency to do theright thing. The legislature no incentiveto controlthe agencyby undertakingthe mayworry that the agencywill implementpolicies that arduoustask of writing detailed legislation. When the leg- are at odds withthe legislature'spreferences, acting in- islaturedoes havethe incentive to engagein statutorycon- steadaccording to its own preferences(or thoseof some trol,two othervariables become important.The legisla- otherpolitical actors). In such cases,the legislaturewill tureneeds the professionalcapacity, or ability,to write not wantto givefree rein over policy to the agency,but detailed,policy-specific legislation. And itneeds to be able insteadwill preferto constrainthe agencyby fillingen- to overcomethe bargainingcosts that make the passage of actinglegislation with specific policy details and instruc- legislationdifficult. While the political context influences tions.By writing such legislation,the legislature aims to theincentive to limitthe agency'sdiscretion, these other preventthe agencyfrom acting in waysinimical to the variablesprovide the ability to do so. Finally,the extent to legislature'sinterest. which legislatorsseek to limit discretiondepends on The legislature'sgoal of puttingpolicy detailsinto whetheralternative, nonstatutory opportunities for control legislation(i.e., engagingin statutorycontrol) when it exist.Limiting discretion by writingdetailed legislation does nottrust the agency is notthe end of our theoretical maybe a lessattractive strategy if the legislature can affect argument,but ratheris only the start.A lack of confi- agencybehavior through these other means. dencein theagency may give the legislature the incentive These fourfactors-the politicalcontext (i.e., con- to writedetailed legislation, and it undoubtedlywill act flictof interest), bargaining costs, legislative capacity, and on thisincentive. However, the extentto whichit willbe thenature and availabilityof nonstatutoryopportunities able to writedetailed legislationis also dependenton forcontrol-combine to influencethe use of statutory otherfactors. First, the legislature must have the capacity, control.Having set out thebasics of the theory,we now or ability,to writesuch laws. That is, it must have the discussthese factors in moredetail in orderto generatea necessaryskill and knowledgeto knowwhat to write.If it seriesof testablehypotheses. lacks this capacity,it may finditself in the position of wantingto writedetailed legislation, but being unsure ThePolitical Context: Conflict of Interest aboutwhat to writeand, in theend, being unable to pro- and LegislativeControl of Agencies vide as many specificinstructions to the agencyas it would like.Second, the legislature must be able to over- Not surprisingly,conflict of interesthas playeda central come obstacles,or whatwe referto in followingsections rolein theorybuilding and testingabout political control as bargainingcosts, to passinglegislation. Under some of agenciesin theU.S. Congress(e.g., Bawn 1995;Epstein conditions,the legislature will findit easierto overcome and O'Halloran 1994,1999). Electedpoliticians will have theseobstacles and pass legislation;under othercondi- the greatestincentive to constrainthe actions of an tions,the legislaturemay be unable to pass legislation, agencywhen thereis a conflictof interestbetween the evenwhen it wishesto do so. politicianand the agent.If a politicianand bureaucrat While the incentiveto constrainthe agencyand the wish to achievethe same objective,then the bureaucrat capacityto do so are importantparts of our theoretical has littleincentive to workagainst the politician, and the LEGISLATURES AND STATUTORY CONTROL OF BUREAUCRACY 333

politicianhas littleto fearfrom delegating substantial au- cultit is to come to an agreement,the higher the bargain- tonomyto the bureaucrat.Indeed, in such situations ing coststhey must pay. These costs,in otherwords, can politiciansstand to gain fromallowing bureaucrats to be thoughtof in termsof the obstaclesthat the legisla- makeuse of theirconsiderable expertise. If, on theother turemust overcome in orderto pass legislation. hand,the bureaucrat and politicianhave differentgoals, Such bargainingcosts are particularlyrelevant to thenthere is greaterdownside risk of delegatingauthor- separation-of-powerssystems, where a singlelegislature itybecause the bureaucratwill have incentivesand op- cannot unilaterallydecide what level of discretionto portunitiesto workagainst the politician. Thus, if politi- grantan agency.The chiefexecutive typically must sign cians care about choosing institutionsthat maximize legislationin orderfor it to takeeffect. And in exactlythe theirutility from the delegationprocess, they should situationin whichthe legislature most wants to writede- choose institutionsthat place the greatestlimits on bu- tailed legislation-divided government-the chiefex- reaucraticautonomy in situationswhere conflict of in- ecutivemost wants to avoid detailedlegislation, prefer- terestis greatest. ring instead that the agencybe freeto do his or her In separation-of-powerssystems, divided govern- bidding,relatively unconstrained by the legislature. menthas been thefactor most commonly associated with Moreover,there are two formsof divided govern- conflictof interest.Divided government should influence ment.It maybe thecase thatduring divided government thebenefits of limitingagency discretion because execu- thelegislature is unifiedin itsopposition to thechief ex- tivestypically have a stronginfluence on thepreferences ecutive.In otherwords, one partycontrols both cham- and actionsof leadersin executiveagencies. Thus, if the bersof thelegislature but does not controlthe executive. legislatureis controlledby one party,and theexecutive by Alternatively,it may be the case thatthe legislature is it- another,we should expectthe legislatureand agencyto selfdivided, with one chamberbeing of the same party as havemore divergent preferences than when the executive thechief executive, and theother chamber being of a dif- and thelegislature are of thesame party.And ifthe pref- ferentparty. It is importantto distinguishbetween these erencesof the agencydiverge from those of legislators, two formsof divided government-one witha unified thenthe immediate benefits of specifyingdetails in legis- legislature,the other with a dividedlegislature-since the lationshould be largerthan if these preferences converge. coststo legislatorsof adoptingdetailed legislation will be Thisperspective is consistentwith arguments derived higherif the two chambersdisagree with each other,and fromspatial models of politics (e.g., Hammond and one of the two chambershas a higherlevel of conflict Miller 1987; Ferejohnand Shipan 1990; Hammond and withbureaucrats than the other. Knott1996; Morris and Munger1998). In thesemodels, Consider the differencebetween divided govern- when the legislatureand the executivehave divergent mentwith a unifiedlegislature and dividedgovernment preferences,the agency has moreleeway to implementits witha dividedlegislature. The chiefexecutive should ac- own preferredpolicies. If the agencyshares the prefer- cept any legislativeproposals thatlead to an outcome ences of the chiefexecutive, and the chiefexecutive and thathe or she prefersto thestatus quo. This mayoften be the legislaturedisagree over policy, then the agencycan a ratherlarge set, especiallyafter some externalshock implementits ideal pointwithout interference from the produces the need forpolicy change. During divided legislature.The legislature,anticipating this, will need to government,a unified legislature opposing the executive constrainthe agency from doing so. It is preciselybecause can choose anypolicy that it likesfrom this set of accept- a largercore permits more agency discretion that the leg- able policies.But duringdivided government with a di- islaturewill have the incentive to use statutorycontrol to vided legislature,the two chambersmust engage in bar- helpassure faithful implementation. gaining and compromise in an effortto choose the outcomethat will ultimately be proposedto thechief ex- BargainingCosts and Legislative ecutive.The chamberin a dividedlegislature that shares Controlof Agencies thesame preferencesas theexecutive will have few incen- tivesto include language in legislationthat constrains It is seldomthe case thata coherent"legislature" unilater- agenciesand will oftenhave incentivesto leave agencies allycan choose itsoptimal instruments for control (Moe unconstrained(to takeadvantage of agencyexpertise). It 1990b). Instead,there may be severalinstitutional actors should thereforefight attempts by the chamberthat op- who must sign-offon the choice of such instruments poses the chief executive to limit agency discretion (such as executivesand legislatures,or two chambersin throughstatutory control. Thus, although we shouldex- bicameralsystems). If thesevarious actorsdisagree on pect some increasein statutorycontrol over bureaucrats what formof institutionsto adopt,then they must pay during any type of divided government(because the bargainingcosts to reachan agreement.The more diffi- chamberopposing the executivehas some bargaining 334 JOHN D. HUBER, CHARLES R. SHIPAN, AND MADELAINE PFAHLER

leverage),it shouldbe moredifficult for the legislature to legislatorswho have been around a long timelearn im- impose statutorycontrol when the legislatureitself is portantinformation about policies.And the expertiseof divided. legislatorsmay also be a functionof thelegislative insti- In sum, conflictof interestand bargainingcosts tutionsthemselves. If the legislature is highlyinstitution- should interactto influencestatutory efforts to control alized, with a large numberof specialized committees agencies.In separation-of-powerssystems, bargaining and supportstaff, then it maybe easierfor the legislature costsunder divided government will be higherfor a di- to draftdetailed legislation. vided legislaturethan fora unifiedlegislature. Thus, al- It maybe thatlegislative capacity leads to increased thoughthe level of statutorycontrol should be largerun- effortsto controlagencies, regardless of the context.But der anytype of dividedgovernment than under unified the discussion above suggestsotherwise. If thereis no government,the legislature'sability to use legislationas conflictof interest,then there is no need to drawupon an instrumentfor control should be greaterwith a uni- legislativecapacity to micro-managebureaucrats. If there fiedlegislature than with a dividedlegislature. This logic, is such conflict,then legislative capacity should matter. along with our argumentabout the political context, These observationssuggest that we need to embed leads to thefollowing hypothesis: our argumentsabout dividedgovernment into an insti- tutionalcontext that is shaped by the degreeof profes- HI: Statutorycontrol should be greater under divided sional capacity.In particular,although divided govern- governmentthan under unified government. In addi- mentmay providethe incentiveto engage in statutory tion,given divided government, a unified legislature control,the extent to whichlegislators actually write spe- shouldproduce more statutory control than a divided cificinstructions into legislation also should depend on legislature. theirlegislative capacity. The greaterthis capacity,the greaterthe (positive) impactthat divided government LegislativeCapacity and the Cost should have on legislativeefforts to limitagency discre- ofStatutory Control tion.Since the bargaining costs to thelegislature of limit- ing agencydiscretion are smallestwhen the legislature is Legislativecapacity also shouldbe crucialfor engaging in unified,the influenceof professionalcapacity on efforts statutorycontrol. The conflictof interestcreated by di- to limitdiscretion should be greaterfor a unifiedlegisla- vided government,for example, may create policy gains turethan for a dividedlegislature. Thus, our theoryindi- fromexercising statutory control, but legislatorsmust cates thatto accuratelymeasure the empiricaleffect of havethe personal motivation and abilityto writelegisla- professionalcapacity, we will need to interactit withthe tionthat will constrainthe agency in theways that legis- typeof dividedgovernment. latorsdesire. Even if the politicalenvironment indicates substantialbenefits from writing detailed legislation, high H2: Whenthere is dividedgovernment, an increasein costswill limit the ability of legislatorsto do so. legislativeprofessionalism will produce an increasein In thisrespect, opportunity costs loom large.Not all statutorycontrol. The amount of statutory control will legislatorscan devoteall of theirprofessional energies to begreater under a unifiedlegislature than under a di- theirlegislative careers. Although this is not the case in videdlegislature. theU.S. Congress,legislative careers in manyother legis- laturesare part-time jobs thatare relativelylow paying.If NonstatutoryMechanisms for Control an individuallegislator depends heavilyfor his or her livelihoodon activitiesunrelated to being a legislator, Legislatorsare not limitedto statutorycontrol strategies thenthe opportunity costs of devotinga greatdeal of at- to achievethe policy outcomes they desire from bureau- tentionto legislativeresponsibilities will be relatively cratic activity.Politicians sometimes can also relyon high. In such situations,legislators should be less in- otherfeatures of the political environmentto enforce clinedto attemptto micro-manageagencies. theirpolicy wishes. In some contexts,for example, the Legislativeexpertise and abilityare also crucial.Leg- authorsof statuteshave ample opportunityto monitor islatorsmust be able to understandwhich specific poli- and correctthe actionsof agents,such as when legisla- cies will produce which specificoutcomes and to give turescan veto rules adopted by agencies,or when it is preciseinstructions to agenciesabout what sorts of poli- easy to hold hearingsthat hold agentsaccountable for cies to adopt.This is achievedin partby attractinghigh- theiractions. In othercontexts, the authorsof statutes abilityindividuals to legislativecareers. It is also influ- can relyon othersto influencethe actions of agencies.In encedby retaining these highly qualified legislators, since some politicalsystems, for example, cabinet ministers or LEGISLATURES AND STATUTORY CONTROL OF BUREAUCRACY 335 administrativelaw judges can performthis function. shouldbe a substitutioneffect. Controlling for the other This is not, of course,an exhaustivelist, but our more factorsaffecting bureaucratic discretion, unified legisla- generalargument is thatin decidingwhether to pay the turesshould be lesslikely to limitdiscretion when alterna- costsof writingdetailed statutes, legislators must antici- tivemeans of control are available. We applythis substitu- pate the extentto whichthe politicalenvironment may tioneffect to thespecific institution of legislative vetoes. produce favorableoutcomes independentof statutory detail. We focuson one verydirect and importantmecha- nism forlegislators to exercisenonstatutory control in LimitingAgency Discretion: Medicaid separation-of-powerssystems: the legislativeveto. This, andState Health Policymaking of course,is not theonly nonstatutory mechanism avail- able. But we use it fortwo reasons.First, the existence of Testingour argumentis difficultbecause we need com- the legislativeveto variesacross the states,allowing the parabledata on legislativecontrol across political systems variationwe need fortesting. Other legislative institu- thatvary in theirrelevant institutional features (i.e., pro- tions,such as the abilityto hold hearingsor to vote on fessionalismand legislativevetoes). We can easilyobtain budgets,might affect nonstatutory control, but do not variationin our independentvariables by focusingon varysignificantly across states.Second, legislatorscan the Americanstates. The dependentvariable is much clearlyanticipate the impactof the legislativeveto, be- moredifficult. We need a measureof bureaucratic discre- cause legislatorsthemselves determine its use. Other tion in legislationthat can be compared meaningfully nonlegislativeinstitutions have a much less predictable acrossthese states. Such meaningful comparisons require impact.Legislators may not knowwith a highdegree of thatwe choose a dependentvariable that (a) focuseson certainty,for example, whether, in the absenceof statu- the same policyissue across states(so thatvariation in torydetail, the judicial system will cause theagency to act statutorycontrol across states cannot be attributableto in waysfavorable to thelegislature. issue variation);(b) focuseson an issue that,due to ex- Legislativevetoes, then, give the legislaturea direct, ternalshocks, is importantin all states(so thatregardless institutionalizedopportunity to veto agencyrules (or of existinglegislation from previous years,legislators evento amendsuch rules, as is possiblein WestVirginia). acrossstates have incentivesto addressthe particularis- Wheresuch institutionsexist, and wherelegislatures are sue at stake,and so thatvariation in legislativeactivity unified(and thusagree on the potentialbenefits of the acrossstates does not simplyreflect variation in theneed veto),the costsof statutorycontrol should be relatively forpolicy in thatstate); and (c) is politicallycontentious low,and thebenefits of specifyingprecise details in legis- (so thatdivided government is likelyto lead to conflictof lationconsequently should be low as well.If no such op- interest). portunitiesfor legislative vetoes exist, then incentives to Our measureof effortsto limitagency discretion in a limitdiscretion will be greater.Thus, when government stateis the totalnumber of new wordsthat the stateen- is dividedand thelegislature is unified,legislators should actedinto law in 1995-96 (in nonappropriationslegisla- be less likelyto use legislationto limitagency discretion tionfollowing the 1994 election)on issuesrelated to any in situationswhere legislative vetoes provide opportuni- aspect of medical care thatis providedto Medicaid re- ties to influenceagency behavior. This logic is summed cipients.Focusing on medical care that is providedto up bythe following hypothesis: Medicaid (or medicalassistance) patients obviously en- tailsfocusing on an issuethat is reasonablysimilar across H3: Whenunified legislatures can use alternative, states(satisfying (a), above). We are not comparing,say, nonstatutorymechanisms tocontrol agencies, they will transportationpolicy in Californiawith energy policy in be lesslikely to rely on statutory control. New Yorkwith medical policy in Iowa. Moreover,this particularissue is one that all statesmust address: all To summarize,three specific hypotheses emerge from stateshave chosen to participatein the Medicaid pro- theforegoing discussion. First, given the bargaining costs gram,and the federalgovernment mandates a broad set thatarise when controlof the legislatureis dividedbe- of guidelines.Importantly, however, each stateis respon- tweenthe two parties,divided government should yield sible forsetting many important parameters of its pro- greaterefforts to limitdiscretion when the legislatureis gram,including eligibility standards, the scope of ser- unifiedrather than divided. Second, during divided gov- vicesavailable, payment rates to providers,and methods ernment,legislative efforts to limitdiscretion should in- for programadministration. Consequently, there are creasewith legislators' professional capacity. Third, there considerabledifferences in theprograms across states. 336 JOHN D. HUBER, CHARLES R. SHIPAN, AND MADELAINE PFAHLER

It is also thecase thatthis health care issue, especially in the objectives of the major political parties,with in 1995-96,is one wheretwo exogenous shocks led to the Democratstypically more focused on issuesof accessto need foraction across the states.One shock was rising care and the rightsof low-incomeMedicaid clientsand costs.In theearly 1990s, rising Medicaid expenditures, an Republicanstypically more concerned with limiting costs increasein thenumber of Medicaideligibles, and a push and protectingproviders. forhealth-care reform at thenational level put Medicaid reformat thetop of statepolitical agendas. According to theHealth Care FinancingAdministration (HCFA), total Medicaid programpayments increased from $47.7 bil- MeasuringStatutory Control lion dollars in 1987 to $152.9 billion dollars in 1996 (HCFA 1998). The number of individualseligible for Our dependentvariable, Statutory Control, is thenumber Medicaid across all statesalso increasedfrom 23.1 mil- of new words (i.e., newlyadded language) containedin lion in 1987 to 36.1 millionin 1996 (HCFA 1998). Med- all relevantlegislation for the 1995-96 legislativesession icaid spendingis of particularconcern, however, not just (thatfollowed the 1994 elections).We identifiedrelevant because it is increasing,but because it is becoming a legislationin each stateby searchingLexis's "Advanced largershare of the states'total health-care spending. Ac- LegislativeService" database. 2 For each statewe used the cordingto a reportby the CongressionalResearch Ser- searchterms "Medicaid" and "medicalassistance," which vice,Medicaid spendingas a shareof stateand local ex- are used interchangeablyby statesto referto theMedic- pendituresincreased from 1.0 percentin 1966 to 5.7 aid program,as wellas anystate-specific names for Med- percentin 1990 (CongressionalResearch Service 1993). icaid programs (such as "MediCal" in California or The second shock concernedchanges in politicsat "MC+" in Missouri).We retainedany nonappropriations the federaland statelevel that encouraged states to take billsthat turned up in thissearch that were related to the up health care and Medicaid reformefforts. After the provisionof medicalcare forMedicaid participants.We failedattempt at nationalhealth-care reform and with thenexamined the content of the bill for relevance, and if themidterm Republican landslide in 1994,supporters of itwas onlypartially relevant (i.e., only partly about Med- health-carereform have largelyfocused on the states icaid healthcare) we editedout the irrelevantportions. (Sparer 1996; Leichter1996). In addition,in 1993, the We thenused a macroin MicrosoftWord to countall the Clinton administrationissued new guidelinesthat en- words in the legislationthat were new.3This count of couraged statesto seek waiversfrom federal rules and new wordsis the dependentvariable, Statutory Control, made it easierto do so (Schneider1997). Thus,following thatwe focuson in our empiricaltests. the 1994 election,there not onlywas an acute political Ideally,we would carefullycode thesubstantive con- need to addressthe provisionof medicalcare to Medic- tentof each of thesebills. This, of course,is a practical aid and medicalassistance clients, there also wereefforts impossibility,given that there were over 1.1 million made in Washingtonto ease theability of statesto do so. wordsadopted during this time period alone. Insteadwe As a result,we believethis two-year cross-section repre- use theobjective measure of the number of newwords of sents the best possibilitywe are aware of for making legislationto representthe amountof statutorycontrol. meaningfulcomparisons across states. Our readingof dozens of pieces of legislativeconvinces Finally,it is crucialto notethat the politics of Medic- us that this provides a good, if imperfect,measure of aid and medicalcare are extremelycontentious. Powerful cross-statedifferences in theamount of changein agency interestgroups representing both providersand recipi- discretionthat was made bystate legislatures in 1995-96. entsare acutelyinterested in the vast amountof money Longerbills increase constraints on theagency. When de- at stake.Providers such as nursinghomes, home health care agencies,community clinics, pharmacists, physi- cians,and hospitalsall vie foravailable money. Recipi- 2Wecoded legislation for forty-eight states. We omittedNebraska fromthe analysis because it has a unicamerallegislature and our the disabled, and low-income ents,including elderly, theoryfocuses on thedifference between unified and dividedlegis- familieswith children, desire comprehensive services. To latures.We omittedVirginia because in eachyear the state legisla- muddythe landscape further, with the move to managed turewould pass multiple copies of bills, each containing extremely carein some formin most states,managed-care compa- similar(but not necessarily identical) language. Because of this re- dundancy,it was impossibleto obtaineven a reasonablyaccurate nies havejoined traditionalinsurance companies on the countof new words. scene.Although the politicsof Medicaid mayvary from 3Lexispublishes the entire text of adoptedacts, but includes nota- state to state,the universalconflict of interestacross tionthat enables a userto identifywhich portions of the text were statesguarantees heated political debate and differences added,and whichwere carried over from earlier legislation. LEGISLATURES AND STATUTORY CONTROL OF BUREAUCRACY 337 signinga new children'shealth initiative to be partof the Medicaid. Both give the agency discretionregarding Medicaid program,for example, it takes a greatmany wherethe program should be located.But the Massachu- morewords for the legislature to specifywho is to be cov- settsbill goes to greatlength to specifythe actual ulti- ered, what sorts of enrollmenttechniques should be matepolicy that health agencies must enact, whereas the used, whichprocedures should be followed,and so on, much shorterAlaska bill simplydelegates these policy thanit does to simplyask the agencyto "do something" choicesto theagency. withoutproviding any additional instructions. Long bills Our readingof considerablelegislation, then, sug- with lots of words tend to specifythese details,while gests that the number of words in the legislationis a shortbills do not. More words implymore precisein- good measure of the amount of policy discretionthat structionsto theagency, and thusless discretion. legislationgives bureaucrats in the implementationpro- Two Medicaidbills on managedcare included in our cess. Once one acceptsthat more legislativewords on a sample-Alaska's House Bill 393 and Massachusetts' particularissue amounts to less legislativediscretion, House Bill 6107-illustrate the strongcorrelation that thenone could operationalizeStatutory Control by using exists between the number of words and the level of eitherthe numberof new wordsor the totalnumber of statutorycontrol. The Alaska bill, with just over 600 enactedwords. These twomeasures are highlycorrelated words,gives few specific instructions to theAlaska De- (r=.83), but the numberof new words is a betterand partmentof Healthand Social Servicesregarding the de- more reliablemeasure of legislativeeffort to constrain velopmentof a managed-caresystem. The legislation agencybehavior because of cross-statedifferences in how tellsthe agency to "begindevelopment of a managedcare legislationis enacted(and in how it is reportedby Lexis). system...by designingand implementingno fewerthan In some states,if legislatorswant to amend a bill,they two innovativemanaged care pilot projects."It further adopt the entirebill (and Lexis spellsout whichsection instructsthe agencythat the pilot projectsshould take of the new bill consistsof new words). In otherstates, place in one or morepredominantly urban areas,taking legislatorscould makethe exact same changeto theexact intoaccount any unique featuresof the project areas. The same bill,but the conventionin thatstate would be to law also givesthe department the right to requireMedic- publishlegislation stating merely that the new bill is an aid clientsto participatein a managed-caresystem and amendmentor changeto existinglegislation. Legislation the authorityto determinewho will be affectedby this created by states that follow this second convention requirement. would thus referto previouslegislation, but would not Like theAlaska bill, the Massachusettsbill givesthe containthe wording of thatprevious legislation. In both agencythe authorityto createdemonstration projects to states,the exact same legislationis on thebooks, and the assessthe benefits of a systemof managed care. But rather numberof new words is identical.But enacted words than delegatingbroad decision-makingpower to the wouldbe considerablygreater in thefirst state than in the agency,it spends more than 3000 wordstelling the agency secondstate because ofthe differing conventions on how how to arrangethese demonstrationprojects. The bill to makechanges to legislation.To avoid thisproblem, we specifies,for example, precisely who shouldbe enrolledin use the numberof new wordsas our measureof differ- managed care and how enrollmentmust occur forthe ences in legislativeeffort to limitdiscretion. In the tests chronicallyill, the disabled,and the long-termunem- below,we expectthat the numberof words should in- ployed.It specifiesthe conditionsunder which potential crease with the incentivesand opportunitiesto limit clientsmight be deniedeligibility (e.g., those people "with agencydiscretion. incomesin excessof one hundredand thirty-threeper- - Our measureof statutory control varies widely across centof the federalpoverty level who wereenrolled in a thestates. In SouthDakota, for example, the government healthinsurance plan not administeredby the stateor enactedonly 216 new wordsof legislation,while in Cali- federalgovernment at any time during the eighteen forniathe government added 277,496words. With the ex- monthsprior to applying[for managed care]"), along ceptionof California,however, the number of wordsop- withother details about how the agencyshould imple- eratesalong a moreor less continuousdistribution.4 The mentmanaged care, such as whereclinics should be lo- averagenumber of words is 24,681;the state closest to this cated,how potentialclients should be notifiedabout the program,the role of school-based clinicsin providing 4Californiaadded more words of new legislation in 1995and 1996 care to school-aged childrenand adolescents,among than did the nextthree most active states combined (Arizona, otherthings. Michigan,and Minnesota).In part,this is because California, morethan any other state, passes a greatdeal of county-specific Both bills, then, set out to accomplish the same legislation(e.g., to authorizethe formation of newmanaged care goal-the adoption of a managed care programwithin organizationsin variouscounties). 338 JOHN D. HUBER, CHARLES R. SHIPAN, AND MADELAINE PFAHLER numberof wordsis Louisiana,with 25,602. Not surpris- cies.Legislative compensation works as a strongproxy in ingly,some states that have been identifiedas "policylead- thisregard. Members who have more experiencein the ers"in thearea ofhealth care have produced a largenum- legislaturewill have higherlevels of expertise;higher ber of new words-New York,for example, produced compensationleads to less turnover,and thusmore ex- 61,976,and Minnesotawrote 91,659. Yet at thesame time, perience(Squire 1988). Higherlevels of compensation otherstates that are seen as policyleaders produced very also attracthigher quality candidates in the firstplace littlenew legislation(e.g., Floridaand Hawaii produced and givethese candidates more incentive to stayin office. only9282 and 3395 words,respectively). And otherstates Finally,low-paid statelegislators generally hold other thatare notviewed as leadersproduced a largevolume of jobs; therefore,such legislators will face considerable op- legislation(e.g., Arizona, with 101,312). Thus, it is notthe portunitycosts for devoting substantial time to legisla- case thatall statesthat are policyleaders produce a high tiveactivities. As compensationincreases, a seat in the volumeof detailedlegislation, or thatonly policy leaders legislaturebecomes more valuable,which increases the producea lot of newwords. payoffof devotingenergies to legislativeactivities. Thus, because legislative compensation provides a useful single-variableproxy for the typesof effectswe look for in a measureof legislative capacity, we use Compensation, ExplanatoryVariables which includes the annual salaryplus guaranteedper diem expensesto membersof the lowerhouse in 1995. Three of the primaryindependent variables from our As indicatedby our theory,we interactCompensation theoryare straightforwardto measure. If the governor's withthe two forms of dividedgovernment. partycontrols only one of the legislativechambers in 1995 and 1996,then Divided Legislature takes on a value ControlVariables of 1. Similarly,if the governor's party controls neither of the legislativechambers, then UnifiedLegislature takes Evenwithin the limited domain of Medicaid,there exist on a value of 1. Finally,in stateswhere the legislature has a varietyof differenttypes of issues thatthe legislature a vetoover agency actions, Legislative Veto is set equal to can address. Thus, StatutoryControl could measure 1. Followingour theoreticalargument, which contends more legislativecontrol, or could simplymeasure more thatunder divided government the availabilityof an al- policy change. It is thereforeimportant to controlfor ternativemeans of control will reduce the need for factorsthat could lead to more words independentof statutorycontrol, we interactLegislative Veto with Uni- the need to limitdiscretion. To accountfor the possibil- fiedLegislature.5 itythat legislative detail is a functionof policychange, Centralto our argumentis the idea thatlegislative we need to have some measureof demandfor Medicaid capacitymust be sufficientlylarge for the predicted insti- policymakingin each state.That is, since legislativeat- tutionaland partisaneffects to occur. To measure this tentionto Medicaid-relatedlegislation should be influ- variablewe use theamount of compensationpaid to leg- encedby the demandfor such legislation,we should ex- islatorsper year.In part,our reasonsfor using this mea- pect the numberof wordsto increasewith the size of a sure are statistical.Compensation is stronglycorrelated state'sMedicaid program.Thus, the regressionmodels withother measures of professionalism (e.g., the number we estimatecontain a controlvariable, Medicaid expen- of staff,or thenumber of daysper session),so including ditures,which is theper capitaMedicaid expendituresin multiplemeasures introduces an unacceptabledegree of each state. collinearity.In addition,using a single-variablemeasure Second,we mayalso need to accountfor changes in likethis also has theadvantage of being more straightfor- the politicalenvironment that might lead to new policy ward and easilyinterpretable than a variablethat com- initiatives.If partycontrol of thelegislature switched in binesdifferent measures. 1995,we mightexpect, all else equal, thatthe amountof More importantly,we have strongsubstantive rea- legislationwill increaseindependent of the need to con- sons forusing thismeasure. Our theoreticalargument trolthe agency. Thus, we can includea varietyof dummy emphasizesthe degreeto which membersneed a high variablesthat measure changes in thepartisan composi- levelof personalmotivation and expertiseif they are go- tion of thevarious institutions of governance.We note, ingto writedetailed legislation that will constrainagen- however,that if we are correctabout the importanceof the exogenous shocks with respectto Medicaid, then 5Weobtained the data forthese and otherindependent variables such partisanchanges might not predictStatutory Con- fromThe Book of the States. trol,because these shocks should promptall statesto LEGISLATURES AND STATUTORY CONTROL OF BUREAUCRACY 339

some action,regardless of recentchanges in thepartisan and a varietyof controlvariables related to thesize of the compositionof thelegislature. Medicaid program,recent political change, political un- Third, one mightexpect that in political systems certainty,the professionalismof the bureaucracyand wherecontrol of the governmentregularly switches be- powersof the governor.We estimatethe models using tweenthe two parties,politicians may be morelikely to OLS. We use a simple linear model, both because our writedetailed legislationwhenever they are in power. theorydoes not suggestthat other functional forms are This is,of course,similar to Moe's (1989) conceptof po- moreappropriate and because theresults are easilyinter- liticaluncertainty. Moe arguesthat political majorities are preted.6 uncertainabout whetherthey will continue to be in Table 1 estimatesour statisticalmodels using the power in the future,and this uncertaintygives strong nonsouthernstates (a restrictionwe relaxbelow). Schol- majoritiesthe incentiveto writelegislation that locks in ars havewidely recognized that southern Democrats are thepolicy outcomes they desire. One could interpretthis more conservativethan are Democratselsewhere in the argumentto implythat the greaterthe level of uncer- countryand that the policy differencesbetween the taintyabout futurecontrol of government,the greater Democratsand the Republicansare thereforeless in the the incentiveto use legislativedetails to structurefuture South than elsewhere.Consequently, divided govern- agencybehavior. While this is a plausibleinterpretation, mentin the South is much less likelythan elsewhereto the theoreticalimpact of political uncertaintyis not measuregenuine conflict of interestbetween the legisla- completelyclear. Moe himselfdoes not treatpolitical un- tureand theexecutive.7 certaintyas a continuousvariable, but ratherargues that Column 1 of Table 1 presentsthe most straightfor- such uncertaintyis inherentto politicsand thatits im- wardtest of our theory.The regressionin thiscolumn in- pact on politicalstrategy is alwayspresent. Moreover, de cludes fourdivided government variables: one dummy Figueiredo's(1998) model of politicaluncertainty indi- variablefor each typeof dividedgovernment, and bothof catesa weaklink between the level of uncertaintyand in- these dummyvariables interacted with Compensation. centivesto lock in agencybehavior. Given the ambiguity Our expectationis that forcompensation sufficiently about thetheoretical relevance of politicaluncertainty in large,an increasein compensationduring divided gov- the contextwe consider,we will estimatemodels both ernmentwill lead to an increasein statutorycontrol, with with and without variables measuring political un- the effectbeing larger during Unified Legislature govern- certainty. mentthan during Divided Legislature government. Finally,features specific to theexecutive might influ- Column 1 also includestwo controlvariables. First, ence the amount of statutorycontrol. In particular,the as discussedearlier, we includeper capita MedicaidEx- legislature'sdecision to delegatebroad discretionto the pendituresto controlfor the overall level of policymaking agencymay be influencedby the bureaucracy'slevel of activity.Second, we includea dummyvariable to account professionalism.All else beingequal, a legislaturemay be forthe large amount of legislativeactivity in California.8 morewilling to givebroader discretion to an agencythat We do not enterCompensation separately, as our theory has a higherlevel of competence.Thus, we testwhether does not indicatethat this variable should have any inde- bureaucraticprofessionalism influences the amount of pendent effect,distinct from its interactionwith our statutorycontrol. In addition,we examineseveral vari- ables relatedto the governor'sinstitutional power to see 6Resultsobtained using negative binomial regression are nearly whetherthey influence the way in whichthe legislature identicalto thosereported here. delegatesto theagency. 7Whendivided government occurs in theSouth, it usually consists of a Republicangovernor and a conservativeDemocratic legisla- ture.While this would be categorizedas "dividedgovernment," the policydifferences between the two branches are often not nearly as greatas thedifferences in nonsouthernstates (Erikson, Wright, EmpiricalTests and McIver1993). 8Asnoted earlier, the number of new words enacted by the govern- The dependentvariable in our empiricaltests is, as de- mentof Californiafar exceeds that of anyother state. While we scribed Control.A coefficientfor add a dummyvariable to accountfor this extreme volume of legis- above,Statutory positive lation,we hastento add thatthe results of our analysis remain sub- the independentvariables indicates more statutory con- stantiallythe same when we simplyomit Californiafrom the trol,and thus greatereffort to limitagency discretion. empiricalanalysis. Excluding California from the analysis causes The main independentvariables, as describedin thepre- goodness-of-fitmeasures to fall,of course,but theyremain re- spectable.More importantly, the significance (or insignificance,as vious section,measure the various forms of dividedgov- thecase may be) ofour independent variables does not depend on ernment,legislative professionalization, legislative vetoes, whetherCalifornia is includedin theanalysis. 340 JOHN D. HUBER, CHARLES R. SHIPAN, AND MADELAINE PFAHLER

TABLE I OLS Modelsof State LegislativeEfforts to LimitAgency Discretion in NonsouthernStates

IndependentVariables (1) (2) (3) (4) UnifiedLegislature -24,854 -20,846 -31,695 -25,611 (9,903) (9,815) (13,219) (10,788) UnifiedLegislature x Compensation 2.25 2.23 2.29 2.35 (.91) (.86) (.92) (.95) DividedLegislature -20,020 -17,999 -23,917 -20,353 (11,435) (11,705) (12,197) (11,090) DividedLegislature x Compensation .51 .49 .38 .47 (.39) (.37) (.45) (.38) UnifiedLegislature x LegislativeVeto -25,520 -28,190 -27,407 -27,795 (11,247) (10,847) (11,910) 13,427 RanneyIndex - 60,846 (61,270) Unified-to-Divided -7,946 (8,603) BureaucraticProfessionalism - .10 (.40) MedicaidExpenditures 36,145 36,943 36,360 36,079 (20,698) (20,298) (20,227) (22,245) Californiadummy 248,867 247,901 249,397 248,727 (12,984) (12,573) (13,197) 14,434 Constant 2,351 1,922 -46,401 -6,101 (14,008) (13,935) (52,963) (30,359) AdjustedR2 .72 .71 .72 .71

N 38 38 38 38

Note:The dependentvariable is StatutoryControl in Medicaid-relatedlegislation in 1995-96 (see textfor details). Posi- tivecoefficients reflect less agency discretion.Numbers in parenthesesare Whitestandard errors.

dividedgovernment variables. It is worthnoting, how- Second, the resultsprovide some support forour ever,that if we do includethis variable on itsown, it is al- theoreticalexpectations regarding Divided Legislature. waysinsignificant and itsinclusion generally has littleef- Both DividedLegislature and DividedLegislature x Com- fecton theother results that we report. pensationare significant(at p < .05 and p < .10, respec- Several aspects of the resultsfrom Column 1 are tively,one-tailed tests). For anygiven level of compensa- worthnoting. First, there is strongsupport for the argu- tion, the effectof UnifiedLegislature exceeds that of mentabout the effectsof UnifiedLegislature. The coeffi- DividedLegislature, which is consistentwith our hypoth- cientsfor both UnifiedLegislature and UnifiedLegislature esis about bargainingcosts. However, the relatively small x Compensationare statisticallysignificant (p < .05,one- coefficienton DividedLegislature x Compensationmeans tailedtests). Of course,the coefficient for the UnifiedLeg- thata dividedlegislature results in an increasein words islatureis negativewhile the coefficient for Unified Legis- onlyfor highly compensated legislatures.10 laturex Compensationis positive.Considering the two coefficientstogether, discretion decreases during Unified Legislaturegovernment if legislativecompensation in a Legislature.For values greater than $11,046, the combined effect of UnifiedLegislature and UnifiedLegislature x Compensationwill be stateexceeds $11,046, a totalexceeded by twenty-nine of greaterthan zero. theforty-eight states in our sample.9 I0DividedLegislature produces more control for levels of Compen- sationabove $39,254,a levelexceeded by six of thestates in our 'This figurefor compensation is obtainedby dividing the absolute sample.It shouldbe keptin mind,however, that the coefficient of valueof the coefficient for Unified Legislature by the coefficient for theinteractive term is estimatedsomewhat imprecisely. To theex- UnifiedLegislature x Compensation.Since $24,854/2.25=$11,046, tentthat the "true" value of this coefficient is higher than .51, the whenCompensation equals $11,046,the effect of UnifiedLegisla- levelof Compensationneeded to producea positivenumber of turex Compensationwill be exactlyequal to theeffect of Unified addedwords will decrease. LEGISLATURES AND STATUTORY CONTROL OF BUREAUCRACY 341

Third,there is strongsupport for our argumentabout be used to measurerelevant political changes in the 1994 the substitutioneffect: Unified Legislature x Legislative elections. Vetois negative,large, and veryprecisely estimated. Thus, Column 2 presentsthe resultswhen we controlfor ifstates have the incentive and capacityto use legislation politicalchange. Unified-to-Divided is measured very im- to micro-manageagencies, they will be mostlikely to do precisely,lending little support to the notion thatthe so if theylack the institutionalizedmeans forvetoing numberof new words is a functionof politicalchange agencyrules.11 independentof theneed to controlan agency.More im- It is worthnoting that if we use an indexcreated from portantly,controlling for this variable does not substan- legislativecompensation, the numberof staff,and the tiallychange the results reported in Column 1. numberof committees,we obtainessentially identical re- It is possible,of course,that Unified-to-Dividedis sults.The coefficientfor UnifiedLegislature x Legislative simplya bad proxyfor political change. But we also ran Vetoagain is significant(p < .05),with a verysimilar value the regressionin Column 2 withthree other proxies for (-22897). The coefficientsfor Unified Legislature, both on political change: (1) a dummyvariable that took the itsown and interactedwith Compensation, are significant value 1 ifthe governmentwent from divided to unified; at p < .05; and the correspondingcoefficients when the (2) a dummyvariable that took the value 1 ifany branch legislatureis dividedare significantat p < .10. Finally,the of governmentchanged party in 1994;and (3) a dummy effectfor a UnifiedLegislature is greaterfor all levelsof variablethat took the value 1 ifthe legislature went from compensationthat the effect for a DividedLegislature.12 dividedto unified.None of the estimatesfor these vari- ables was remotelysignificant, and the inclusionof the TestingAlternative Specifications variousalternatives did not affectthe positive or negative resultsdescribed above forColumn 1. As discussedearlier, it is possiblethat the number of new Whilethese results provide little support for the pos- wordsmight be a functionof changesin thepolitical en- sibilitythat political change influencesthe numberof vironment.Although this is notpart of our theory,we new words,we also need to investigateanother alterna- need to controlfor this possibility in orderto gain more tive hypothesisdiscussed earlier,the hypothesisthat confidencethat the resultsshown in Column 1 are not greaterpolitical uncertainty would lead thosein powerto spurious. Unified-to-Dividedis a dummyvariable that writemore detailedlegislation. Thus, we includea vari- takesthe value 1 if the 1994 electionresulted in a move able called RanneyIndex, which is a widelyused proxy fromunified to dividedgovernment. This variableis in- forthe level of political competitionin the American tended to capturethe factthat political change in the states.13If politicaluncertainty increases with electoral 1994 electionscould haveled to thedemand for new leg- competitiveness,then this variable should have a positive islationindependent of the need to controlthe bureau- coefficient.As with our variable measuringpolitical cracy.If the election generated divided government, then change,however, the results in Column3 showlittle sup- partisancontrol of at leastone branchof government has portfor the alternativehypothesis. Political uncertainty, changed,and it has done so in a way (towardsdivided as measuredby the Ranney Index, has no effecton Statu- control)that should lead to an increasednumber of new toryControl.14 words.Thus, to the extentthat StatutoryControl mea- So farwe havefound no supportfor the political un- surespolicy change independent of the need to control certaintyargument using the RanneyIndex. Although agencies,and to the extentthat political change leads to thisis a widelyused proxyfor political competitiveness, policychange, the coefficientof thisvariable should be perhapsit is not a good proxyfor political uncertainty. positive.Below, we discussother variables that could also

"3Ourmeasure of the RanneyIndex is forthe 1995-98 period "1We also lookedat LegislativeVeto on itsown (i.e.,without inter- (Bibbyand Holbrook1999). We use theRanney Competition In- actingit withUnified Legislature). As our theorywould predict, dex,which varies from 0 to 1,and where a highernumber indicates thisvariable is notstatistically significant. a greaterlevel of electoralcompetitiveness. The formulafor this indexis 1 - l(.5- RanneyParty Control Index) I. The PartyControl 12Similarly,a UnifiedLegislature produces a positivenumber of Indexis calculatedas a functionof three variables: (1) thepercent- wordsfor more states than does a DividedLegislature. The former age ofvotes won in gubernatorialelections and setswon in state actuallyproduces a positivenumber of words for all states,while legislativeelections, (2) the durationof partisancontrol of the thelatter produces a positivenumber for states where the profes- statelegislature and governorship,and (3) thefrequency of di- sionalismindex exceeds 3.85. As pointedout in thetext, this num- videdcontrol. See Ranneyand Kendall(1954) and Ranney(1976). berhas no intuitivemeaning, which is whywe chooseto reportthe resultsusing legislative compensation. What it implies, however, is 14Wealso interactedRanney Index and Unified-to-Dividedwith that foronly fourstates in our sample is the overalllevel of Compensationand includedthese terms in ourtests. They were not professionalizationhigh enough to producemore statutory con- significant(when entered either separately or together)and did trolwhen the legislature itself is divided. notinfluence our other results. 342 JOHN D. HUBER, CHARLES R. SHIPAN, AND MADELAINE PFAHLER

We thereforeconsidered several other proxies for politi- DividedGovernment and the South cal uncertainty:(1) the size of the legislativemajority foundthat betweenthe (withthe idea beingthat smaller majorities should lead Scholarshave differences South and the restof the countryremain but are narrowingin to more uncertainty),(2) the sum of the number of recentyears (Hood, Kidd, and Morris 1999). We there- changesin majoritycontrol of each branchof govern- about mentover the last four elections (with the idea beingthat foreconsider our arguments dividedgovernment and thelegislative veto with the Southern states included a historyof changeshould lead to greateruncertainty), in the analysis.As in Table 1, we begin with the most and (3) termlimits (with the idea beingthat if legislators straightforwardtest of our model.17 knowthey will not be aroundin thefuture, incentives to Table2 showsthat when we includeSouthern states, insulateare maximal).It turnsout thatthere is onlyone we again findpositive results for all of our theoretical state(Maine) whereboth chambershave memberswho variables.In Column 1,both the dummy variables and the wereprevented by term limits from running in 1996,and interactedvariables for each typeof dividedgovernment onlyone other(California) where term limits were put are significant.Furthermore, when we look at the com- intoeffect in one chamberin 1996 and theother in 1998. bined effects,we findthat a unifiedlegislature produces Thus,we cannottest the term-limits idea in anysystem- positivevalues for levels of compensationabove $10,635, aticway; however, a dummyvariable for these two states and a dividedlegislature does the same whenevercom- was not significantand did not changeour otherresults. pensationexceeds $29,326. Thus, as our theoreticalargu- The othertwo variables similarly produced insignificant mentsuggests, there is lessof an effectwith a DividedLeg- results.Neither the size of the majoritynor the sum of islaturethan with a partisanchanges has a significanteffect (regardless of UnifiedLegislature. In Column 2, we includea dummyvariable for the whetherentered alone or interactedwith Compensation), Southern as Southern differsin other and the inclusionof thesevariables has no effecton our states, politics ways than fromthe restof the previousresults. ideology country(Black 1987). The Southern variablehas the Finally,in Column 4 we controlfor the levelof bu- dummy expectednegative sign,but it has a huge standarderror. Inclusion of this reaucraticprofessionalism. Here we operationalizethis variabledoes not affectthe results. measureby using the annual salaryof the head of the previous Column3 teststhe idea thatour theoreticalargument healthagency in each state.'5This variableis not signifi- appliesto bothsouthern and nonsouthernstates, but with cant.At the same time,all of our othervariables remain a weakereffect in theSouth (because partisan differences significant.To checkon the robustnessof thisresult, we are weaker We thereforeestimate a model thatin- also triedtwo othermeasures for this variable: the aver- there). cludes the various dividedgovernment variables inter- age pay forall noneducationalstate employees, and the actedwith region. The resultsprovide no supportfor our averagepay forstate employees who workin the area of theoreticalarguments in theSouth, but strong support for health.Once again,these variables were not significant, our argumentsregarding Unified Legislature government and theirinclusion did not affectour othervariables. and legislativevetoes in nonsouthernstates. This under- Last, in additional unreportedtests we also included scoresthe appropriateness of omitting the South from the measuresspecific to the governorthat might influence analysis,as we did in Table 1. the level of statutorycontrol, such as the percentageof legislatorsneeded to overridea veto,the governor's over- all appointmentpowers, the governor'sprospects for stayingin power,a summarymeasure of the governor's Conclusion veto powers,and a summarymeasure of the governor's institutionalpowers. None ofthese variables were signifi- Our main objectivehas been to developand testa com- cant,and none affectedour results.16 parativetheory of legislativedelegation to bureaucrats. The theoryis comparativein thatit explicitlytakes into 15Whencontrol of healthpolicy was splitbetween two agencies, account how featuresof the politicalenvironment that we usedthe average of the salaries paid to theofficials in chargeof differacross political systemsaffect the strategiesthat thetwo agencies. '6Weobtained the various measures of bureaucratic professional- ism and thegovernor's powers from The Book of the States and 17Wealso ranregressions with the political uncertainty and politi- fromBeyle (1999). We findit somewhatsurprising that none of cal changevariables. We do notreport these as theresults are iden- thesemeasures are significant, and we believethat the relationship ticalto thosein Table1-there is no effectfor the uncertainty and betweenbureaucratic professionalism, the governor's powers, and changevariables, and inclusionof thesevariables does not affect delegationof discretion deserves further investigation. theresults for the other variables. LEGISLATURES AND STATUTORY CONTROL OF BUREAUCRACY 343

TABLE 2 OLS Modelsof State Legislative Efforts to LimitAgency Discretion inForty-eight States

Independentvariables (1) (2) (3) UnifiedLegislature -16,910 -16,229 (8,275) (8,169) UnifiedLegislature x Compensation 1.59 1.56 (.70) (.71) DividedLegislature -17,244 -16,169 (9,958) (9,718) DividedLegislature x Compensation .59 .56 (.32) (.34) UnifiedLegislature (South) 446 (10,237) UnifiedLegislature x Compensation(South) .46 (.72) DividedLegislature (South) -16,479 (17,818) DividedLegislature x Compensation(South) .73 (.95) UnifiedLegislature (Non-south) -23,039 (9,785) UnifiedLegislature x Compensation(Non-south) 2.00 (.81) DividedLegislature (Non-south) -18,094 (11,241) DividedLegislature x Compensation(Non-south) .52 (.40) LegislativeVeto x UnifiedLegislature -13,804 -13,513 -18,526 (7,549) (8,091) (6,356) South -2,071 (5,200) MedicaidExpenditures 28,301 28,274 35,559 (17,533) (18,047) (21,190) Californiadummy 244,040 243,972 248,520 (10,933) (11,253) (13,308) Constant 4,442 4,716 538 (11,822) (12,206) (13,871) AdjustedR2 .72 .71 .70

N 48 48 48

Note:The dependentvariable is StatutoryControl. White standard errors are in parentheses. politiciansadopt forcontrolling bureaucratic agencies. amongthose that choose such institutions,and thereare We beginby notingthat a centralvariable in theexisting costs to legislatorsthat fall with increases in legislative literature-conflictof interestbetween legislators and professionalism.Finally, we arguethat the use of statu- bureaucrats-is a necessarybut not sufficientcondition torycontrol depends on how politicalinstitutions influ- forlegislators to implementstatutory control of agencies. ence the cost of alternativestrategies for control. Thus, If conflictexists, then legislators must have the capacity optimalstrategies for statutory control depend on inter- to engagein such control.We also argueagainst assum- actionsbetween conflict of interest,bargaining costs, leg- ingthat legislators can unilaterallychoose thedesired in- islativecapacity, and nonstatutorycontrol mechanisms, stitutionsfor controlling bureaucrats. Instead, there are all ofwhich are affectedby political institutions that vary bargainingcosts that will risewith increases in conflict acrosssystems. 344 JOHN D. HUBER, CHARLES R. SHIPAN, AND MADELAINE PFAHLER

We testour argumentby focusingon theAmerican References states.States are oftendescribed as laboratoriesof de- mocracy.The usual connotationof thisstatement is that Aberbach,Joel. 1990. Keepinga WatchfulEye. Washington, statesrepresent ideal locationsin whichto tryout differ- D.C.: The BrookingsInstitution. ent policy ideas and options. However,states can be Balla, StevenJ. 1998. "AdministrativeProcedures and Political Controlof the Bureaucracy."American Political Science Re- viewedas laboratoriesin a differentsense: they allow us view92:663-673. that to testand developtheories cannotbe tested,or per- Banks,Jeffrey S. 1989."Agency budgets, cost information,and haps even developed,with a sole focus on the United auditing."American Journal of Political Science 33:670-699. StatesCongress. Bawn,Kathleen. 1995. "Political Control versus Expertise: Con- We haveused thestates in exactlysuch a manner.We gressionalChoice aboutAdministrative Procedures." 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