Disgusted with the California Budget
First, let me apologize for the posting lull. I’ve been busy with work and also struggling with a sinus issue that has sapped my discretionary intellectual energy. But enough about me.
In honor of California’s special election on budget measures, I thought I’d shed a little light on the fundamental problem. Contrary to what polticians are saying, the cause of the budget problem is not falling revenues in a recession. Rather, the cause is a dramatic increase in spending over the last 10 years.
If you live in California, you’ve probably read or seen numerous news stories about all the sacrifices in services we have to make to balance the budget. When I saw them, I became curious about how would go about making these difficult tradeoffs. From a public policy perspective, this is an interesting problem.
I started looking at some historical data to get an idea of the choices we made on the margin in the past. The thinking is that newest spending categories probably have the least benefit. But my analysis went of the tracks very quickly when I discovered just how much spending has ballooned.
In about five minutes of Googling, the problem was obvious. First, I found historical state and local per capital spending here. You have to look at state and local expenditures together in California. There is a lot of transfer of funds back and forth, as evidenced by the budget measures aimed at raiding local coffers for state needs. This data is from the US Census Bureau’s annual survey of State and Local Government Finances (which goes back to 1992). Now, it’s in nominal dollars so I went to Bureau of Labor Statistics Consumer Price Index calculator to convert everything to 2009 dollars.
Here’s the resulting graph of state spending controlled for both population and inflation from 1992 to 2009:
As you can see, spending was flat from about 1992 to 1999. But in only 10 years, real per capita state and local spending has increased a whopping 38%! According to the official numbers for the 2009-2010 budget, we expect $86.3B in revenues and $111.1B in expenditures, for a current year gap of $24.8B (there’s another $13.7B carried over from last year, but we wouldn’t have had that either without the spending increase). If we had just managed to keep our real per capita spending at 1999 levels, we would only need to spend $80.4B today. That means that we would have a $5.9B surplus! So it’s definitely spending growth that is the issue.
Now, I don’t know about you, but I can remember 1999 pretty clearly and I don’t think I’m getting 38% better services. Do you? This sorry state of affairs viscerally disgusts me.