Trapped in Fiscal Fantasy
by Matthew A. Givens
Posted: January 22, 2005
There is an old saying, “A lie repeated often enough becomes truth.” This appears to be a saying which our state government is very familiar with. I say this because, as the February legislative session nears, we’re seeing an excellent example of it.
As anyone who reads a newspaper or watches television news knows by now, our State has a budget shortfall of $250 million. News sources around the state are happy to tell us all that the state doesn’t have enough money to meet budget needs, and that the only solution is one or more tax increases.
They say the reason for this shortfall is, primarily, increased Federal obligations for Medicaid. A few other similar items help make up the full $250 million, but the Medicaid increase is the cause usually cited as the reason for new taxes.
The major problem with this is that it’s not true. Or, to be more specific, in concentrating on the revenue aspect of the budget, they completely ignore the part played by spending.
Currently the best guess for revenue in the next budget is that the state will collect 5% - 7% more money than is being spent in the current budget. That is at best an educated guess, but it serves as a guideline. For the purposes of this article, we’ll split the difference and assume a 6% increase.
That’s important, because many news reports leave the impression that the state will have less money next year than it does this year, which is incorrect. Based on the 6% figure, the state will spend an additional $1.1 billion next year.
Once the state government knows how much revenue to plan for, the state agencies submit their budget requests. By comparing these budget requests to the anticipated amount of revenue, we supposedly are $250 million short. As can be plainly seen, this shortfall could easily be caused by excessive spending requests. But is it?
Some agencies have requested spending increases essentially in line with anticipated revenue. For example, Alabama’s two-year colleges have requested a 7% increase in funding. That’s fairly reasonable, given the projected revenue figures.
Other agencies and programs, however, seem grounded more in fiscal fantasy than in fiscal reality, and are asking for budget increases of 30% or more. These agencies include:
Ethics Commission – From $914,846 to $1.1 million, a 20.4% increase.
Department of Public Safety – From $57.5 million to $77 million, a 33.9% increase.
Alabama Reading Initiative – From $40 million to $55 million, a 37.5% increase.
Parole Board – From $24.3 million to $34.4 million, a 41.5% increase.
Dept of Corrections – From $264 million to $530 million, an incredible 100% increase.
Combined, this small handful of agencies and programs have requested more than $310 million in increased spending. That’s more than the so-called “shortfall” we’re supposed to be facing, and it’s evidence that the “shortfall” is likely caused by excessive requests for more money by greedy and myopic state agencies.
You don’t have to be a CPA or accountant to know that 30%, 50%, and 100% spending increases aren’t a good idea when you’re only expecting a 6% revenue increase. That’s simple logic and good sense, two attributes apparently not shared by our elected officials.
Each agency, in submitting their outlandish requests for more money, tells of the horrors that will follow if they don’t get it. But, like the villagers listening to the boy crying “wolf,” we’ve heard this before, and the predictions seldom come true. When do “predictions of woe” become lies to fleece taxpayers of their money? Ask the agency that is demanding their budget be doubled, and to blazes with everyone else.
When writing a budget, the job of our legislators is to set priorities and fund agencies with the available money, focusing on priority areas first. Unfortunately, it’s a job they don’t seem to do very well.
So when someone tells you the state is “short of money”, please understand the truth behind the deception. State agencies need to keep spending requests in line with available revenue, and our legislators need to help them.
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