Economics

State Spending Declines, Except For All The Cases When It Increases; Update!

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USA Today has a story about how states are cutting general fund spending due to belt-tightening, jock-scratching, knicker-twisting, you name it. The upshot? Even though such spending is going down for the third time in three years, budget shortfalls remain:

States passed fiscal 2010 general-fund budgets totaling $627.9 billion, 5.4% less than a year earlier, says a study released last month by the National Association of State Budget Officers and National Governors Association.

Despite cuts, shortfalls for the 2010 fiscal year, which in most states began July 1, are $14.8 billion, the study says. The gap in 2011: $21.9 billion.

More here. So why the shortfalls? Partly because revenues are down even more than spending cuts (this happens in a recession, as tax dollars and other fees tank). And USAT warns that stimulus funds are gonna be running dry pretty soon too.

But there's another culprit which dare not speak its name: Increased overall spending. General fund revenues are only one part of state spending. For a more comprehensive accounting of state (and local) spending, repair to the invaluable site US Government Spending and punch in your favorite state and see what's been going on the past few years. With virtually no exceptions, you'll find that states are spending significantly more than they were a year or two ago. Some of this is tied to the recession, too: Unemployment benefits and other sorts of safety net spending always increases during slowdowns. But that in no way explains all, or even a majority of increased expenditures. Examples of total state spending in 2007, 2008, 2009, 2010 in the following states (figures for 2009 and 2010 are estimates):

California: $141 billion; $153 billion; $169 billion; $187 billion

New Jersey: $45 billion; $48 billion; $51 billion; $54 billion

Ohio: $49 billion; $50 billion; $52 billion; $54 billion

Texas: $69 billion; $75 billion; $83 billion; $91 billion

It's fun and easy! And a staggering work of heartbreaking fiscal indiscipline (not a word, but should be one!).

Update: In the comments below, University at Buffalo political scientist Jason Sorens points to a fatal flaw in using the site above's figures for spending after 2008 in most cases:

* State and local data up to and including 2007 is actual data reported to and published by the Census Bureau.
* State spending and revenue data for 2008 is actual data reported to and published by the Census Bureau.
* State tax data for 2009 is actual data reported to and published by the Census Bureau in State Government Tax Collections.
* Data for 2008 (except state data for 2008 and state tax data for 2009) and subsequent years is "guesstimated" by projecting the change in each spending or revenue item between 2006 and 2007 forward. Maximum change is 15 percent. Minimum change is zero percent.

Thought I noted in my original comment that numbers for '09 and '10 were estimates, I think Sorens is right to underscore the methodology in question. Though it's worth charting the progression in spending from, say, 2005 through 2008. In the case of California, for instance, the numbers look like this: $130 billion; $137 billion; $141 billion; $153 billion. The site is also useful for checking revenue numbers in the states, which are actual data through 2008.

Even More Update: Pity the poor, poor states. In 2005, they had aggregate revenue amounting to $1,049 billion. In 2008, they pulled in a total of $1,251 billion and still were going broke (those are real numbers, btw, not estimates). It's like a disturbing version of F. Scott Fitzgerald's essay, "How to Live on $36,000 a Year," which describes how the author's balance sheet took a beating precisely when the big bucks started rolling in.