Friday, June 30, 2006
A Remedy for the State’s Spending Ills
As the state’s fiscal year draws to a close, legislators are ready to approve a $26 billion budget for the next twelve months. The proposed budget represents an increase over this year’s budget, a reported 7 percent rise.
Year over year increases would not be business as usual if we adopted an expenditure limitation. In fact, the state Senate passed such as measure last November that would have used a combination of inflation, population growth, and/or personal income growth as the yardstick by which to measure spending increases. Overall budget growth would have been legally required to stay under the measure.
Let’s go back to the 2005 fiscal year as a starting point: that year, the budget was $22.8 billion. The next year, spending grew to $24.6 billion, and to the now proposed $26 billion before the General Assembly.
If the state had adopted a spending limit that year, growth in future years would have been limited to 4 percent. Based on recent changes in the Northeast Consumer Price Index (3.6 percent) and the increase in the state’s population (0.3 percent), the budget could grow at a rate commensurate with real world factors and not the whims of elected officials answering the needs of bureaucrats or special interests. With a 4 percent limit, this year legislators would be talking about spending no more than $24.6 billion, over a billion less than what is on the table.
Fiscal Year Actual State Budget State Budget Under Cap Savings
2004-05 $22.8 billion $22.8 billion
2005-06 $24.6 billion $23.7 billion $900 million
2006-07 $26 billion $24.6 billion $1.4 billion
The $2.3 billion in total savings could provide the basis for a nice income tax reduction, capital stock and franchise tax cut, or property tax rebates without the mess of relying on legalized gaming. It would do more to force choices among competing priorities. And if the Governor and legislators were more aggressive, they could hold spending to a rate of less than the cap, producing more savings.
Year over year increases would not be business as usual if we adopted an expenditure limitation. In fact, the state Senate passed such as measure last November that would have used a combination of inflation, population growth, and/or personal income growth as the yardstick by which to measure spending increases. Overall budget growth would have been legally required to stay under the measure.
Let’s go back to the 2005 fiscal year as a starting point: that year, the budget was $22.8 billion. The next year, spending grew to $24.6 billion, and to the now proposed $26 billion before the General Assembly.
If the state had adopted a spending limit that year, growth in future years would have been limited to 4 percent. Based on recent changes in the Northeast Consumer Price Index (3.6 percent) and the increase in the state’s population (0.3 percent), the budget could grow at a rate commensurate with real world factors and not the whims of elected officials answering the needs of bureaucrats or special interests. With a 4 percent limit, this year legislators would be talking about spending no more than $24.6 billion, over a billion less than what is on the table.
Fiscal Year Actual State Budget State Budget Under Cap Savings
2004-05 $22.8 billion $22.8 billion
2005-06 $24.6 billion $23.7 billion $900 million
2006-07 $26 billion $24.6 billion $1.4 billion
The $2.3 billion in total savings could provide the basis for a nice income tax reduction, capital stock and franchise tax cut, or property tax rebates without the mess of relying on legalized gaming. It would do more to force choices among competing priorities. And if the Governor and legislators were more aggressive, they could hold spending to a rate of less than the cap, producing more savings.
