What are the policy consequences of creating functionally specialized venues for decision making? This study directly compares special districts with general purpose local governments to evaluate how specialization influences responsiveness and policy choice. Previous theorizing has assumed that specialization should have the same effect across all policy contexts. The findings presented here show instead that its effect is conditional on the status of public problems. Objective conditions related to a policy issue more strongly influence the responsiveness of multipurpose legislatures than that of special districts; thus the institutional effect of functional specialization varies with the severity of the public problem. The result is that governing structure matters most where problems are least severe. The findings demonstrate the importance of considering policy context when analyzing the effects of political institutions.