Economics

How to Cut State Spending: Increase It (Ohio Edition, But Fill In Your State's Name Here)

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Like most states, Ohio is in a jam, what with a budget deficit, high unemployment, and slumping economy. It operates on a two-year budget cycle and in fiscal years 2008-9, the state spent $49.8 billion. Now, they've just signed a new budget. A tough budget that reflects a lot of tough decisions, hard choices, and yadda yadda yadda.

The result? In fiscal 2010-11, the state will spend an estimated $50.5 billion. How does that happen? Read on, McDuff:

[Gov.] Strickland said the budget he and lawmakers passed makes education a priority and tries to protect children, the elderly, and the disabled at a time when many state programs have sustained deep cuts.

The final bill, which missed its June 30 deadline for the first time in 18 years, ultimately cut state aid to public education slightly, from $8 billion this year to $7.5 billion next year and $7.2 billion in fiscal year 2011. Authors of the new school funding formula say it will eventually allow the state to take on a bigger share of school costs, leaving less to be paid by local levies.

When you count one-time federal economic stimulus dollars, public education funding rises by $502 million over the two-year budget cycle.

What with all that cutting going on, you'd think that spending might actually, you know, drop. This is the fakest cutting seen outside Angelina Jolie's performance in Girl, Interrupted. But go Buckeyes.

Prepare for, oh, about 49 other versions of this story, some already published and some still in production. The one thing you will not find anywhere is a story about a state that actually cuts (as in decreases year-to-year) spending.

All of those responsible should immediately read Reason's senses-shattering saga, "Failed States: After a long spending binge, governors go begging for a handout. It won't be their last."

Times are tough, but the real reason why state finances are in the Johnny-on-the-Spot?

In the five years between 2002 and 2007, combined state general-fund revenue increased twice as fast as the rate of inflation, producing an excess $600 billion. If legislatures had chosen to be responsible, they could have maintained all current state services, increased spending to compensate for inflation and population growth, and still enacted a $500 billion tax cut.

Instead, lawmakers spent the windfall. From 2002 to 2007, overall spending rose 50 percent faster than inflation. Education spending increased almost 70 percent faster than inflation, even though the relative school-age population was falling. Medicaid and salaries for state workers rose almost twice as fast as inflation.

And if you want to understand more fully the pressures exerted on increased spending, check out Reason.tv's "Hasta La Vista, Arnold: What California's Economic Mess Means for America," the biggest Schwarzenegger disaster flick ever (go here for embed code, HD, iPod, etc. versions).

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  1. Strickland said the budget he and lawmakers passed makes education a priority
    and tries to protect children

    The obvious solution to the nation’s budget woes is to stop producing children for a few years till we get things paid off. Let’s do it for…The Adults.

  2. Hey don’t forget the People’s Republic of Illinois. We solved our > $10B budget
    deficit by passing a $31B capital spending plan.

    The two favorite cliches of big government Democrats:

    “crumbling infrastructure”
    “structural deficit”

    Repeat until your massive spending program passes.

  3. I’ve got high hopes for John Kasich. He’s still a politician (and a republican) but I find him more appealing than almost any other one of these guys. In fact, I think I could have supported him for President.

    He’s got a pretty decent track record of understanding how to control government’s desire for debt spending.

  4. No government program is ever undertaken unless it helps the unfortunate, right? And no government program ever solves the problem it was meant to solve, right? The number of unfortunates keeps growing (after all, we are all unfortunate in some sense) so why would any rational person expect government to cut back spending? “Compassion” knows no end and is merely constrained a bit less every year by those damned flint-hearted libertarians and fiscal conservatives.

  5. Are there any states contemplating having the lowest tax rates in their region? A move like that should draw people who actually pay taxes into their state and increase the base.

    Too easy?

  6. There will be no cuts because the politicians have no easy targets left to cut. Every government teat-sucking group has grown so substantially that they’re all to powerful for the politicians to ignore. There’s no one left to cut (relatively) painlessly, so…they don’t.

  7. “We’ve cut spending to the bone! There’s not one cent of unnecessary spending in this budget. Society as we know it will crumble without those chinchilla research dollars. And the Sousaphone scholarship program? Essential!”

  8. Prepare for, oh, about 49 other versions of this story, some already published and some still in production. The one thing you will not find anywhere is a story about a state that actually cuts (as in decreases year-to-year) spending.

    I’m not totally convinced about this. Florida’s state budget is slightly up this year because of stimulus dollars, but if we have any midyear callbacks like we did last year, state spending will be down from FY 2009. There’s a chart here.

    In any event, Florida’s budget has not been monotone increasing over the past several years, as it has in many other states.

  9. ROTFL, makes perfect sense to me dude!

    RT
    http://www.be-anonymous.tk

  10. What happened to you, Anonymity Guy? You used to at least try to make your stupid-ass comments be tangentially related to the thread. What’s wrong? Hopefully something terrible.

  11. The problem is that a lot of states think the debt they’re taking on is leveraged, meaning they think it will yeild greater revenues later. Unfortunately, they can’t stop spending to even remotely let that happen…if it would happen in the first place.

    This is what’s happening at the national level too, so I guess we know where the state’s get it from.

  12. Of course, what will be hilarious is when the slot machines, imposed on the state by gubernatorial fiat, fail to make the estimated 900 Million they are supposed to make, especially when we approve the major-cities casino initiatives. Estimates by government on spending are categorically underestimated; revenue estimates are always overblown.

    I’ve never voted Republican, but Kasich is probably going to get my vote this time. I think the LPO should support him, too.

  13. As pointed out above, one problem with state spending is that it’s mostly education and law enforcement and health care and helping the old and poor: what sort of monster is against any of that? With federal spending, people can be against money for things like the military or foreign aid or scientific research, but at the state level, nearly all of it sounds good to voters and legislators.

  14. Spartacus

    I believe a lot of Florida’s spending happens at the county level.

    Some counties are in much better shape than others.

    Counties and local governments are especially dependent on property taxes and some made longterm commitments based on projections based on the windfalls they were getting due to increased property valuations.

  15. Isaac Bartram–

    I won’t disagree with your statement. My county has been on the top ten list in foreclosure rates (in the US) for several months now, so I have a pretty good idea of what you’re talking about. The original post focused on state-level spending and my response was just directed toward that. I believe the link I put in my earlier post goes to a site that also has data on combined state/county spending (in Florida).

  16. Angry Optimist,

    You’re an Ohioan? Where from? (Columbus here).

    What’s the deal with this Kasich guy? How terrible will he be on civil liberties issues?

  17. I took a shit in Ohio once.

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