It’s misleading to claim that controlling additional taxpayer money in new investment accounts obligated for future spending isn’t growing government.
Taxpayers have received mixed messages since the legislative session about the growth of the state budget. Some lawmakers claim the budget grew spending less than 2%, far under the growth of inflation and in-line with general metrics for fiscal responsibility. Other lawmakers have argued that this session “blew up the budget” with double digit “mega-spending” growth.
That’s quite a contrasting view of our state’s fiscal responsibility! At the heart of this budget debate is an important policy question of consequence to taxpayers: what’s the best way to measure the growth of state government?
A conventional way of measuring the growth of state government might be to look at the budget top-lines on the balance sheet, measuring the overall increase in budget from last biennium. The General Fund Status report from May showed the overall budget increase hovering around 17%, a significant growth. After vetoed legislation, overall All Funds budget growth has decreased to around 13.5%, still outpacing fiscally conservative metrics like population growth plus inflation. This is what has been cited by legislators arguing that the budget was fiscally irresponsible.
The “official” way of measuring the growth of state government relies on the Legislative Fiscal Division’s Biennial Comparison, which measures the increase in appropriations from the last biennium according to specifications set in § 17-7-151, MCA. This comparison officially marks growth of appropriations for this biennium’s budget at less than 1%. This has been the metric cited by legislators defending the state’s budget growth as fiscally responsible.
What’s the difference between these two measures? The big important difference is that the “official” Biennial Comparison only counts appropriations and excludes things like inter-fund transfers from its calculations. For example, this means that transfers from the state general fund to an investment trust account like the new GO Trust that was set up under HB 924 this spring do not get counted as new “spending” for this comparison. Factoring out the significant amount of funds transferred to the GO Trust reduces the spending growth technically accounted for this biennium substantially, compared to just reading the top-lines.
So yes, according to the official Biennial Comparison’s technical measures, state budget growth may look rosy and conservative. But from a taxpayer’s perspective, this is an incomplete measure that masks the real scale of government expansion.
Consider this: next biennium the state could double our taxes and funnel all of the additional revenue into an investment account obligated for future spending on subsidized housing, childcare, infrastructure etc. and the official Biennial Comparison methodology would register no growth in the budget. That’s obviously wrong!
As Milton Friedman observed “nobody spends somebody else’s money as carefully as he spends his own.” From a taxpayer’s perspective, the government’s financial burden is more than just a narrow measure of immediate appropriations, it’s the total amount of money controlled by government and not by taxpayers.
Of course the state should plan for the long-term by responsibly saving and investing. I’m not arguing it shouldn’t. I also don’t think it’s crazy to factor out transfers to get a more accurate picture of spending growth. However, the Biennial Comparison methodology obviously has some flaws. It’s misleading to claim that controlling additional taxpayer money in new investment accounts obligated for future spending isn’t growing government.
Perhaps instead of narrowly counting immediate appropriations, the state’s Biennial Comparison methodology could be updated to include a separate category like “committed future obligations” or “deferred spending,” to reflect revenue capture and its earmarking for future expenditures in trusts.
Regardless, we should represent the growth of state government fairly and let taxpayers decide whether that growth was a good investment.
This column originally appeared in Lee Newspapers.
