Monday, February 3, 2014

Parsimonious Montana

Montana Senate Republicans are going after each other hammer and tongs over one of their perennial favorite shibboleths: the unbridled growth of government. Usually it’s us Democrats who get blamed, fairly or otherwise, for this state of affairs, but conservative Republicans, led by Art Wittich and Jeff Essmann, have apparently decided that we are beyond hope, and that the real culprits are now the moderate Republicans, who during the 2013 session betrayed GOP principles, made common cause with the governor and Democrats and spent an unconscionable amount of money.

This dispute was already smoldering when we packed up and left Helena last April, and in his parting remarks to the Senate, Wittich, the majority leader, made it clear exactly how disappointed he was with the session and how betrayed he felt by the moderates in his caucus. And things just got worse in June, when the Legislative Fiscal Division reported that General Fund spending was slated to increase by 14.2% from the last to the current biennium. The conservatives read that number – which is admittedly pretty big – as a sign of government run amok.

But last month, as Chuck Johnson reports, the moderates fired back, when Bruce Tutvedt asked the LFD to prepare a report showing the increase in total appropriations, not just General Fund. It turns out that total appropriations rose by just 4.3% from last biennium to this one; on an annual basis, that’s a little more than 2.1% per year.

So what number should we be looking at? 14.2% or 4.3%?

What’s going on here is that while we spend an awful lot of time during the session figuring out how to spend General Fund revenue, that revenue actually accounts for less than 40% of all the money we appropriate, which also includes a boatload of Federal dollars and State Special revenue such as gas taxes and hunting license fees. To some extent spending can be switched from one of these sources to another. For example, in 2009, when a big chunk of Federal stimulus money was available, we used it to pay for stuff that normally would have been paid for out of the General Fund, which had been hammered by the recession. And this past year, we went in the opposite direction, and appropriated almost $130 million out of the General Fund for things previously paid for with State Special Revenue. This kind if budgetary whack-a-mole means that you shouldn’t pay a lot of attention to what is happening in particular funds. Spending pops up in one place but goes down in another. If you really want to figure out what’s going on, you should look at the total for both places at once.

Another reason to look at total and not just General Fund appropriations is that if you want to understand the impact of government on citizens, the economy and society at large, then the way we spend Federal and State Special revenue is important. These funds pay for roads and highways, education and social services that by anybody’s reckoning are basic functions of government. To ignore them when considering how fast government is growing just doesn’t make sense. So I’m with Tutvedt on this one: the expansion of total spending is the right metric for the growth of government, and the right number, last biennium to this, is 4.3%. But is that a lot of growth, or a little?

It turns out that it’s no real growth at all.

According to the LFD’s report, the legislature appropriated a total of $4.95 billion in fiscal year 2009; for fiscal year 2015, the figure is $5.45 billion. That calculates out to a growth rate of about 1.6% per year, which is almost exactly equal to the rate of inflation between 2009 and 2013. Admittedly, we don’t know what inflation is going to do this year or next, but if anything, it’s likely to accelerate a bit. So that means that in 2015 we will be spending almost exactly the same amount of real, inflation-corrected dollars as we spent six years before, in 2009.

And then think about this: over this same period, while real state government spending is running in place, both real personal income and population will be growing. So on a per capita basis, or in relation to family incomes, government spending is going down!