Theories of budgetary decisionmaking and revenue decline

The responses of municipal governments to declining real revenue are used to conduct a critical test of three theories of budgetary decisionmaking. Contrary to the expectations generated by the bureaucratic process theory, there is little evidence of the application of any budget cutting algorithm based on stable account priorities. Contrary to the expectations generated by the interest group politics model, there is equally little evidence of across-the-board cuts. The results are, however, broadly consistent with what we have termed the managerial theory which emphasizes the relative "controllability" of expenditure categories, transient decisionmaker preferences, and the stochastic impact of short-term expenditure solutions. The difficulties associated with the conduct of critical tests in this area are also discussed.