Buried deep in the bowels of the Senate budget document is a line that needs to appear more often if state government is to right its listing ship: “These functions are not part of the core mission of the Department.”
Unfortunately, this sentence appears only once in 347 pages of spending recommendations and implementing language. It yields a savings of $475,000 from a starting budget of $22 billion with a $3.4 billion deficit.
Could it be that just one one-hundredth of 1 percent of the projected deficit is spent on programs not part of the core mission of a department or government in general? Is state government run that well? Or is it just unexamined?
History could be a guide. In looking at budgets since 1984, a clear spend-and-tax pattern emerges. Taxes ebb and flow with the business cycle, but spending commitments do not. Higher fees and tax rates get added in downturns to sustain spending, then spending rises above previous levels when the economy expands again.
This pattern repeated again in the current business cycle. Spending peaked in the 2000 budget year at $2,248 per person in 2007 dollars, then fell to $2,037 per person over the next three years. From 2005 through 2008, spending climbed again to $2,336 per person before a slight retreat in the 2009 budget.
Gov. Perdue’s budget proposal for the 2010 fiscal year spends $2,200 per person, more than any but the four biggest state budgets (those for fiscal years 2000, 2007, 2008, and 2009). If the Senate had budgeted federal Medicaid money the same way the governor did, its proposal would spend a similar amount. Both budgets use the time-limited federal bailout money to cover recurring costs, which risks creating another deficit in two years when the federal money runs out.
Instead of this irresponsible spending, the Back to Basics Budget I drafted for the John Locke Foundation shows how using federal money on nonrecurring items, Medicaid reform, and debt repayment can leave state government in a stronger position and taxpayers with smaller tax burdens in the future.
The key difference is budgeting according with some basic principles in mind: priorities, transparency, accountability, and fairness. Given the glut of new spending since 2007, it also makes sense to revisit the newest additions and remove them. This approach saves more than $1 billion compared to either the governor’s or Senate’s spending plan each year.
Two budgeting changes would lock in the small burden on state taxpayers and help lawmakers focus on the core mission of government. First, a taxpayer protection amendment would force budget writers to limit spending growth to a constant inflation-adjusted amount per person and set aside excess revenue in a rainy day fund to maintain spending in the next economic downturn. The rainy day fund now is funded inadequately, but it should be the first resort to get through short-term problems, instead of higher taxes.
Second, fiscal reports for state budgets should show five-year or 10-year spending and revenue projects instead of the current two-year projections. Even more useful would be to incorporate different scenarios for the economy to show spending and revenue effects of an economic downturn. Lawmakers, like the rest of us, assume the good times will continue. State government’s reliance on a progressive income tax, however, makes the consequences of spending under this assumption potentially painful for taxpayers and those who rely on government services. It is better to restrain growth at the start than to renege on promises once they’re made.
In addition to these changes, Gov. Perdue has two more potentially powerful weapons in the battle to keep government focused on its core mission. These are the budget reform and accountability commission (BRAC), which will recommend a group of programs that can be eliminated to the next session of the General Assembly. Lawmakers would then have a simple up or down vote on the bloc of programs. The combined savings should provide all taxpayers stronger motivation to support the recommendations than program recipients have to oppose them. Putting spending information online in a usable format will also empower agency managers, citizens, and vendors to suggest new savings in specific programs.
These changes would go a long way toward ensuring future programs are frequently part of the core mission of government.
Joseph Coletti is fiscal and health care policy analyst for the John Locke Foundation.