Possible Insight

You may recall my two posts on the California budget back in May 2009.  I just haven’t had the heart to dive back into this issue again, even though it’s obviously timely.  However, I though it was worth mentioning this article in Reason Magazine highlighted in one of today’s  Coyote Blog posts.

Funnily enough, the article was published in the May 2009 issue.  So I guess great minds not only think alike, they do so at the same time.  What struck my about the article was that they performed a similar exercise to that of my post, which looked at real, per-capita spending in California.  Reason compared actual revenues to a constant real, per-capita baseline totaled across all 50 states.  Here are the money graphs for all revenues and just taxes:

When times were relatively good, the money was flowing in.  So we went on a spending binge.  When we hit the recession in 2008, we discovered that this level of real, per-capita revenue was not permanent.  But by then, a bunch of people had been accustomed to getting their money from the states and it was hard to cut them off.

One budget watchdog estimates that the states are in a combined $112B budget hole for 2012.  As you can see, if we’d stuck to our 2002 baseline, we’d have accumulated plenty of surplus during the good times to plug this hole.  But asking a state to save money is like asking an addict to go without a fix.