This paper describes and analyzes the ongoing process of interaction between proposed budget increases and the margin of voter support involved in annual school budget referenda. The referendum procedures in New York State are described, and proposed budgets and referendum outcomes in 49 districts over 10 years (1971–80) are analyzed. The findings indicate that voters influence subsequently proposed budgets through the referendum process. The analysis shows a positive association between voter support and subsequently proposed budget increases, and a negative association between proposed budget increases and the voter support that they receive. A simple formal model of the ongoing democratic process of budget setting and ratification is developed based on the “cobweb” models of economics.