All You Need to Know About State Fiscal Responsibility

Via Reason

The baseline takes state government budgets and grows them by population growth and inflation.  In other words, baseline spending in 2007 would be the same real level per capita as in 2002.  The Total Revenue line is the actual revenue collections by state governments.  Actual collections grew about 4 times faster than population and inflation in this period.  And states still did not balance their budgets or pay down debt in this period.  Nick Gillespie writes

Had the states kept their outlays constant while allowing for inflation and population growth, they would have been sitting on $2 trillion in reserves when the recession hit. Instead, they were broke heading into the recession and are in even worse position now.

Revenue is IRRELEVANT to fixing state budget problems.  No matter how much money is collected, governments will spend all the money and more.  The only solution I can see is imposition of statutory, perhaps Constitutional, spending caps in each state.

  • morganovich

    how about making state politicians responsible for budget shortfalls in the way that partners can (in some cases) be required to make good on the debts of a partnership?

    you want to see balanced budgets, make the politicians put their own financial skin in the game and then let's see how they negotiate with the public sector unions.

  • caseyboy

    morganovich, I like the concept and the bonus would be that the bums would flee office with that kind of accountability, viola (wah-lah), less government.

  • ben

    Another solution is default, probably in the form of a hyperinflation. I know what outcome my money is on.

  • dovh49

    Arizona has a constitutional provision that only allows for $350,000 of debt. Yet has a billion or so dollars of debt (is that right?).

    Constitutional provisions do nothing. What can be done is educating the populace on good governance of a people. This would be done by eliminating gunvernment indoctrination camps (i.e., public schools). I see no other way of going about it.

  • Wow, every other libertarian says you cannot legislate these things. Bravo, glad to see your on my side of this issue.

  • dovh49

    @astonerii,

    That's because it doesn't work. Look at AZ. We have a constitutional limit yet our politicians are still going over the limit and no one cares.

  • Noumenon

    Boo for cutting off charts at the bottom, but pretty persuasive anyway.

  • Graeme

    My suggestion - not that I think it would ever happen in a million years.

    [1] Constitutional limits on Governments to have a balanced budget at the end of each financial year. With mandatory jail terms on politicians if they breach it, followed by mandatory elections to replace those freshly jailed.

    [2] A single tax - Goods and Services levied at the point of sale. No tax evasion and lots of accountants and tax lawyers permanently out of jobs. Set the rate to approx 15%, and allow deviation only by referendum with a majority of 67% to change it. Government than lives within it's means, and a lot of useless labour gets shelved.

    [3] Governments are allowed to save and should do so to create funds for "crisis/disasters".