Mar 13
UNSUSTAINABLE
2007 at 10:58 am | posted by Rep. Craig Frank 4 comments
Unsustainable…that’s what you are…Unsustainable…(hummmm a few bars with me to the old Nat King Cole favorite, Unforgettable).
Although I’ve already linked to the report before (Click HERE), it would be worth it to call your attention once again to the REPORT (Click HERE) released by the Office of the Fiscal Analyst passed out to the Legislature in the last few minutes of the 2007 General Session. This report includes how the Legislature spent your tax dollars.
On the upper right-hand side of the page is a boxed portion titled “Total Appropriation” showing a very brief history of how much the Legislature and the Governor have spent on each segment of state government. The first page is where we’ll begin–State Budget Overview.
You’ll notice several numbers. Let’s break them down. Actual Budget for 2006–$9.249 Billion (I’m rounding). State Funds expended in FY06 budget–$4.249 Billion. (Now, I have to insert a note here: If state expenditures for FY06 are $4.249 Billion and the total the state spent was $9.249 Billion, where’d we get the “extra” $5 Billion? Well…from you of course! To make a long answer short, primarily your Federal Tax dollars. State portion from you…Fedral portion from you.) In FY07, Actual Budget…$10.463 Billion…state portion…$5.037 Billion. Now, this year’s budget FY08 figures…Actual…$11.499 Billion…state portion…$5.896 Billion. Do you see a trend!
The trend is…the numbers keep increasing…rapidly. State Fund increases between FY06 and FY07 a whopping 18.6%…now hold your breath. The increase in State Fund expenditure between FY07 and FY08 is a wallet-crunching 17.0%. Gulp. What am I saying? I’m saying that over the past two years we’ve grown the State Funded portion (that’s money out of Utahn’s wallets…you and me) of our budget by 35.6%. Gulp!
Now my mind does funny things when I get to this point. As a small business owner, I always like to project myself out a few years (pro forma) to watch potential trends in the marketplace. So let’s do that here. With an annualized growth rate of 17.8% it will only take 5.6 years for the state to double its current budget figure. Current population growth (of documented tax-paying residents) in Utah is not even close to 17.8%…walk with me a bit farther…and if taxpaying population growth is not as great as the growth of our state’s government spending appetite, then…
The economic principle Diminishing Marginal Rate of Return has never applied to government’s insatiable desire to spend every dime it takes in. Some have stated, and I belive it to be so, there’s no way we’ll see the same revenue growth rate we’ve seen over the past couple of years in Utah; however, that’s what we said last year.
The Governor’s Chief Economist, Robert Spendlove and I were speculating (that’s what economists do…speculate…and, I have a Minor in Economics from BYU) at the Capitol one day in February, about a graph he was using to convince me of the merits of the “Governor’s Almost-Nearly-Relatively-Flat-Tax Plan” (aka: the-plan-formerly-known-as-H3ish, J2 kindda, The Flatter Tax Plan, and who could forget the ever popular “single-rate system”??? etc, etc etc.) The chart showed just what we are discussing here. As I recall the graph started about ten years ago and showed moderate growth through the late 90’s. The segment of the graph that concerned me the most was the sharp decline in revenue over a three year period in the early 2000’s. It’s only been a few years since those marked declines, yet, people seem to have forgotten what happened less than five years ago. In FY06, FY07 and FY08 the graph clearly showed sharp increases in tax revenue. Cycle. Trend. Yes. History continues to illustrate economic cycles–over and over. Yet we forget so easily. Remember the kid with the quarter “burning a whole” in his pocket?!
Now, am I trying to divine the future?! No. Am I trying to get everyone in a lather?! No. A legislator’s job is not to undully frustrate and excite their constituency. A legislator’s job is to represent those whom he/she serves. Not only to represent, but to reasonably plan. Plan ahead. To be thoughtful. To not place our neighbors in a position of having to dig deep to keep government afloat while they’re already struggling to make ends meet when the proverbial belt starts to tighten once again…and it will.
The Utah Taxpayers Blog has a nice little piece on this issue. Click HERE.
March 13th, 2007 at 1:04 pm
Every time I bring up the concerns you have ably addressed, I am told that I am out of sync with the real world. I am told that we need to spend this ‘extra’ money now to fund ‘necessary’ infrastructure maintenance and growth, because it will cost a lot more to do these things if we wait.
For example, if we don’t massively invest in transportation now, it will only become more problematic and more expensive down the road. If we don’t give a half billion to public education now, we will only end up further behind other states that are going hog wild on education spending.
When I suggest restraint, I am told that government isn’t growing that rapidly compared with the private sector and that refunding the overpayment to taxpayers would amount to pandering and wouldn’t really put that much money in the pocket of each family.
How do you respond to these kinds of criticisms?
March 14th, 2007 at 8:59 am
The biggest problem I see is that we’re not only growing too much but growing the wrong budgets.
There’s a national problem with state law enforcement being on a significantly lower pay scale than local forces (Utah is no exception), yet we didn’t see anything really fixing that lack of parity. The judiciary is in a constant backlog with poorly-paid judgeships attracting less than the best and brightest. The state spends less on corrections than on public health, yet the former is the more essential responsibility!
We keep pumping hundreds of millions of dollars into public education while getting no measurable returns on investment. When we want an accounting for our spending, we’re told to sod off. It was pretty insulting when school administrators could muster little more than an “I dunno” when asked why classroom sizes aren’t smaller even after significant investments. We’re caught in a game of “keeping up with the Joneses” with other states, paying much more attention to what we spend than what we’re getting for the money.
Commute times keep getting longer and longer yet we choose to go into debt for transportation projects instead of paying for them out-of-pocket. To get money earmarked for transportation, we’ve resorted to taxing ourselves more money (which was then subsequently micro-managed by the state). Not only are we watching the price of concrete soar as China gobbles up more of the world supply, but now we’re going into debt to buy it at tomorrow’s higher prices and spending MUCH more in the long haul. (It’s kind of like buying something on a credit card and making minimum payments instead of pulling the money from your savings account.)
What the heck is going on? Where is all this money going? I think we’re being nickeled and dimed to death by special interests. “Oh, this program is *only* $2 million.” “Hey, this program is *just* $30M.” Each of these requests add up to a flood of spending, but no single raindrop seems to believe it’s to blame. Each group lining up to get it’s little piece of the action from the gravy train thinks they have a genuine need and they aren’t going home empty-handed, especially when they know the money is there.
The state has three main responsibilities that it needs to stick to: safety, schools and streets. All of the other spending diverts funds and oversight from these essentials. Until the legislature as a whole is willing to scuttle their own pet projects, we’ll be stuck with this death by a thousand papercuts. I don’t doubt that if we stood fast on these “little” things, we’d probably be able to send another $400M+ back to taxpayers.
March 14th, 2007 at 9:21 am
Finally someone is willing to talk about the real budget problems. In the late 90s the state budget (corrected for inflation) grew at a rate three times the population growth. I expressed concern at the time that if we hit hard times we would have budget items set in stone that we would not be able to fund. Then when the hard times hit (if I remember right) we pretend to balance our budget from borrowing from our transportation infrastructure budget that is bond funded. In short we went into debt but it didn’t look like it on the books. Is this true? I see the same thing repeated in the next few years. Such lack of self control will eventually ruin our state economy and drive out potential business. Finally, I had a hard time getting straight forward budget numbers off the internet. Is there a site that provides the total budget numbers in an easy to read format?
March 14th, 2007 at 5:44 pm
Called to my attention earlier today was the fact that in my calculation of the time required for the budget to double itself, I neglected to use the proper formula. Using a “straight line” approach of 17.8% per annum yields approximately 100% over 5.6 years; Unfortunately, time does not stand still. And, because it does not stand still…the application of 17.8% each year for the next 4.231 years will yield a proper doubling of the budget. One needs to apply the “Rule of 72″ to make an accurate assessment of this problem. (An old employer taught this concept to me as a young man: Money invested at 12% will double every 6 years OR money invested at 6% will double every 12 years…the Rule of 72!!!) Thanks “M” for helping clear that up! Which brings me back to my point…
By using the proper calculation, we are in a bigger bind than I had originally anticipated.