Monday, January 19, 2009

It's the Spending, Stupid!

Representative Laura Brod sent out a memo today showing graphs that more than suggest that the State currently suffers from a spending problem, not a revenue problem. MN House GOP researcher Craig Stone explains it better than I ever could (all emphases added):

"The following graphs relate to the November forecast. They lend support to the position that the state has a spending problem, not a revenue problem.

The first graph shows that General Fund Revenue and Expenditure growth has exceeded the consumer price index, CPI. The graph uses FY ’02-’03 as a base, and projects through the upcoming FY ’10-’11 biennium using the November Forecast. Actual Revenues have risen 26.02%, which is above the 22.22% increase in CPI. General Fund expenditures are projected to increase by 36.62% over that time.

The second graph builds on the first. It simply shows total GF revenues and spending from the end of the FY’02-’03 biennium through the FY’10-’11 biennium (November Forecast). If spending had been and would be held to the CPI for that time period there would be a budget surplus of over $7.9 billion for the FY’10-11 biennium given actual revenues raised during that time.

That $7.9 billion represents the tax cut foregone by the state having spent over and above CPI. The $7.9 billion is the total potential cut, over that 8 year period.

The third graph shows that for the current FY’08-’09 biennium (the first biennium under renewed House DFL control) spending vastly exceeded revenues coming in. In fact, over $2 billion more was spent than raised! That level of over-spending could only be enacted due to the large budget surplus the GOP left the DFL.

This spending of over $2 billion more than raised in the current biennium, combined with projected further increased spending and nearly flatline revenues raised leads directly to the November forecast of a $4.8 billion shortfall for the upcoming biennium and a $4.6 billion deficit in the out biennium.

Finally, it should be noted that the adoption of the constitutional amendment dedicating MVST revenues to roads and transit has had a significant impact on the general fund. This was not unexpected, but those responsible for the dedication – and the voters – should understand that a portion of any budget reductions for the current and upcoming biennium can be attributed to this dedication.

For the current biennium, the amendment took $625.8 million out of the GF, which would have solved the deficit in the November Forecast.

For the upcoming biennium, the amendment will divert $798 million from the GF, which is 16% of the shortfall. However, it should be remembered that existing law at the time statutorily dedicated a portion of those then General Funds to roads and transit. If those statutory dedications had not been altered to deal with the budget situation then the actual impact on the current biennial deficit would have been $132.3 million and $316 million on the projected shortfall for the upcoming biennium.

State government spending out of control and way beyond increases in the consumer price index. Who'd a thunk it? The fact that we could be sitting on a 7 billion dollar surplus instead of a 5+ billion dollar deficit speaks volumes.