Recession? State Spending Hits Record High
Here’s an excellent clip-and-save for the next time you hear any politician bemoaning the draconian cuts that have allegedly been made to state spending, while pushing for a tax hike as the only way to pay for more programs to save the children, or something.
The poor-mouthing is misleading, at best, and outright deception at worst. In a nutshell, state spending reached a record high in 2012, according to a new John Locke Foundation study penned by Fergus Hodgson, the Foundation’s director of fiscal policy studies.
“Total state spending per capita is at its highest level ever in the 2012 fiscal year and has more than tripled since 1970,” Hodgson concludes. “Adjusting for inflation, state spending has increased in that period from $1,701 per person to $5,247.”
Spending on all reported state budget categories has more than doubled since the mid-1970s, Hodgson said. “This is true for education, corrections, health and human services, transportation, and debt payments.”
Other evidence refutes arguments about declining education spending. “Gauged as a percentage of income, state spending on education has fluctuated around 4 percent of total income for the past 40 years,” Hodgson explained. “This year, 2012, sits right on the 40-year average of 4.2 percent.”
Meanwhile, transportation spending is set to reach its highest level on an income-percentage basis since 1979, and Hodgson notes a “disproportionately high rise” in spending on debt service payments. “Since 2000, debt servicing has increased in per capita terms by 128 percent and more than doubled as a percentage of income.”
Part of the smoke and mirrors that has allowed politicos to con the public into thinking the state has actually cut spending, Hodgson argues, comes from a slick spin that focuses attention on general fund spending, while ignoring everything that falls outside that scope, and employing some nifty accounting gimmicks.
“General fund spending per capita has declined by 16 percent since 2009, but per capita spending outside of the general fund increased by 26 percent at the same time,” Hodgson said. “This more than compensated for the general fund’s decline. It’s also important to note that the general fund makes up just 38 percent of total state spending this year, down from 53 percent in 1970 and 59 percent in 2000.”
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North Carolina’s approach to accounting conceals another important fact. “State officials across the U.S. — including North Carolina — use something called cash-basis accounting, which does not account for bills that will be due in future years,” he said. “The largest future bill, or unfunded liability, is retirement health benefits. Those benefits totaled $34.2 billion at the end of the 2010 calendar year. That figure had increased by $4.4 billion in just two years.”
Hodgson also notes that North Carolina, like most states, has increasingly relied on federal dollars to feed its spending habit, zooming to 36 percent of current state revenue, up from 24 percent in in 2000.
As a solution to rein in the spending, absent any adult legislators who can’t control a budget any better than a teenager let loose with a credit card at the mall, Hodgson calls for new constitutional spending limits, along the lines of a simple cap on state spending at inflation and population growth, as well as pushing for a federal balanced budget amendment.
The first of those shouldn’t be any problem because the GOP, fiscal hawks that the party is, has control up in Raleigh – right?
I’m holding my breath, with paramedics on speed dial.
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