Economics of Governance

, Volume 19, Issue 1, pp 21–50 | Cite as

The unintended impact of tax and expenditure limitations on the use of special districts: the politics of circumvention

  • Pengju Zhang
Original Paper


The increasing trend of special districts deserves more attention as it raises concerns on the efficiency and accountability of the fragmented local governance system in America. This paper examines whether the rapid growth of special districts can be partially explained by the expansion of state-imposed tax and expenditure limitations (TELs) during the last several decades. Using panel data from 1972 to 2007, this paper finds that TELs produce unintended circumvention effects among local governments. Specifically, the results reveal TELs motivate local general-purpose governments to create new special districts as an institutional strategy to evade the fiscal constraints imposed by the state.


Special districts Tax and expenditure limitations The politics of circumvention State and local public finance Fiscal federalism 

JEL Classification

H11 H20 H70 



The author thanks an anonymous reviewer for constructive feedback. The author is also very grateful for helpful comments from John Yinger, Robert Bifulco, Yilin Hou, Sharon Kioko, Douglas Wolf, Wen Wang, Judson Murchie, Daniel Mullins, Steven Deller, Evgenia Gorina, Justin Ross, Lincoln Groves, Yahong Zhang, Tatyana Guzman and Emily Cardon. Any errors are solely my own.

Funding The author received financial support for related research from the Lincoln Institute of Land Policy.


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Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  1. 1.School of Public Affairs and Administration RutgersThe State University of New Jersey - NewarkNewarkUSA

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