Bacon's Rebellion

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State Spending: 38 Percent Real Growth Over Last Decade

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by

James A. Bacon
in

Here is the summary conclusion of the 2007 Review of State Spending published by the Joint Legislative Audit and Review Commission:

Virginia’s operating budget doubled between fiscal years (FYs) 1998 and 2007, a result of increasing prosperity, population growth, and policy decisions. Adjusting for the effects of inflation and population growth, the budget increased by 38 percent, an average annual increase of 3.7 percent.

How could this be? I thought Virginia had been chronically under-funded its obligations thanks to the obstructions of the anti-tax Neanderthals!

Read the details and weep.

(Hat tip: Steve Horton)

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13 responses to “State Spending: 38 Percent Real Growth Over Last Decade”

  1. Groveton Avatar
    Groveton

    Now the bonus question – After adjusting for population growth and inflation – where did the extra money go? What programs? What localities (if applicable)?

    And finally – the ultra bonus question – where did the money come from? What new taxes payed by residents of what jurisdictions?

  2. Larry Gross Avatar
    Larry Gross

    Rank Agency
    FY 1998
    General Fund
    Page 10:

    1 Personal Property Tax Relief Program $0 $950.0

    2 Virginia Department of Transportation 45.0 642.7 1,328%

    3 Department of Environmental Quality 42.8 256.7 500

  3. Anonymous Avatar
    Anonymous

    Adjusted for Population and Inflation it grew by 3.7% a year.

    How much did it grow compared to the state domestic product?

    The quote notes that the increase is a result of increasing prosperity, but the comparison to only population and inflation assumes that nothing else has changed.

    RH

  4. Jim Bacon Avatar
    Jim Bacon

    Top four spenders in state budget:

    (1) State aid to public education

    (2) Medicaid

    (3) VDOT

    (4) University of Virginia

  5. Larry Gross Avatar
    Larry Gross

    “How much did it grow compared to the state domestic product?”

    is there supposed to be a connection between the two?

    Is the idea that is the SDP grows as a result of increased productivity that tax increases are therefore okay – as long as they don’t exceed the SDP?

    In other words, it’s okay for government to “grow” as long as productivity “grows”?

    gee.. if the govt is going to reap the rewards.. then what do the folks who work hard to be more productive get besides higher taxes?

    or did I totally misunderstand and if so.. my apologies in advance..

  6. Anonymous Avatar
    Anonymous

    I’m suggesting that as productivity and commerce grows, there is more for the state to do. I’m suggesting that maybe population growth plus inflation is an insufficient measure.

    For example, more commerce means more trucks on the road to be weighed and inspected, and more road wear and tear. It might mean more businesses that need more licenses and oversight.

    If the state budget grows by 3.7% a year compared to population and inflation, it could still be -1% a year compared to the State domestic product.

    I’d suggest that the revenue connection to state domestic product is stronger than the connection to population and inflation.

    Of course, whether the state does anything worthwhile with the revenue is another topic. We would at least like to think that the state has an interest in improving everybody’s welfare, and that this kind of success would be reflected (proportionately, not increasingly) in the states revenues.

    Likewise, if the state fails to improve our welfare, then their income should be reduced accordingly.

    RH

  7. Anonymous Avatar
    Anonymous

    The problem with that calculation is the state utilized a 28% rate of inflation for the past decade which is what the CPI is, not the inflation rate of the major services the state provides. On the list of the top 4 expenses that Jim provided, numbers 2, 3, and 4 have all well outpaced inflation nationwide.

    It’s most likely that there hasn’t been much real growth if you index the expenses based on the basket of goods and services provided.

    ZS

  8. Anonymous Avatar
    Anonymous

    Good point, ZS.

    RH

  9. Larry Gross Avatar
    Larry Gross

    yes.. very good point

    but still.. you’ve got a aggregate adjustment for average inflation….

    so.. does your point mean that for the items shown that they had … 38% higher than average inflation?

    I’m not sure I completely understand if what we’re looking at is NET.. AFTER adjusting for inflation unless some of these – like the VDOT numbers had inflation at twice or even higher the average rate.

    wrong?

  10. Anonymous Avatar
    Anonymous

    What I’m saying is that if there was little to no change in service levels, held constant for population, that yes VA’s goods and services increased in price 38% more than inflation of the economy at large. Items like medical services, higher education, and construction material have been tracking well over inflation for years now. Since those account for a large part of the state’s budget, it’s not that surprising that the budget has increased to maintain service levels.

    ZS

  11. Larry Gross Avatar
    Larry Gross

    If I picked some other examples of service level costs over 10 years…

    For instance, the cost to send a package via Fed Ex or UPS…

    or cell phone service

    or the price of PCs

    Would/should we expect a “market basket” of items NOT provided by the Government to exhibit a similar trend line?

    or perhaps .. more to the point.. is there something inherent in services provided by government that make them more susceptible to higher than average inflation?

    If we looked at the 50 other states – the same services that went up in Virginia, would we expect to see a similar trend – i.e. maintain LOS and experience higher than average inflation?

  12. Anonymous Avatar
    Anonymous

    “or perhaps .. more to the point.. is there something inherent in services provided by government that make them more susceptible to higher than average inflation?”

    Not particularly, it just happens that the goods and services the state heavily buys have gone up pretty significantly. Medical services have tracked well above inflation which the state can do little about since it buys those services in the broader market. Demand for higher education has driven up the price of universities both privately and publically, not much the state can do since they have to hire from the same pool of labor as the rest of the nation. Infrastructure construction and maintenance costs have risen significantly and there isn’t much of a way for the state to get cheaper materials or workers.

    The state is pretty much stuck buying in the general market which doesn’t provide much flexibility. If the state was a massive buyer of PCs cell phones and DVD players it wouldn’t be much of an issue. The state can make some cuts around the edges, but then it becomes relative to the competition.

    With Fedex and UPS when the cost of fuel rises faster than inflation one would expect delivery charges to rise as it has. We don’t complain that the prices of delivery went up while PC prices go down since we realize the underlying costs that Fedex and UPS have little to no control over.

    ZS

  13. Spank That Donkey Avatar
    Spank That Donkey

    Help me with this, but doesn’t this really mean that our Govt. has spent 3.8% annually over and above inflation and population growth?

    Population is up roughly 10% and inflation 3%-4% annually…

    It seems our taxing mechanisms thrive in good economies… (reap a great amount), and if we still have some kind of needs, or even a crisis (transportation), that would seem to fall at the feet of those who are spending the $$$

    Who is to blame the legislature, or the hired professionals in govt?

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