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Wednesday, July 11, 2007

5.3% Increase, with No Tricks

Pete DeCoursey of Capitolwire.com tries to explain all the tricks that are being used to disguise the real agreed-to budget increase of 5.3%:

Less than 16 hours after Gov. Ed Rendell on Monday night told reporters the state budget, counting everything, planned to spend $27.369 billion, he changed the numbers.

At his 3:30 p.m. press conference on Tuesday afternoon, Rendell said the real, “all-in number, that’s $27.494 billion.” Asked why the budget total had grown by $125 million, Rendell said that since Monday night, he and his staff decided not to use a budget maneuver to conceal the total level of spending.


Rendell of course is not alone in selective budgeting. Senate Republicans are saying the budget is really $27.178 billion, a 3.3 percent increase over last year's budget. How do they get there? They are not counting the $317 million that is going to a dedicated mass transit fund for this year and into the future.

The problem with that math is those funds were in the budget last year. So dropping that $317 million out of sight by assigning it to another account in this budget, simply is a gimmick. It is oney they are taking from you in taxes and spending on mass transit, the same this year as they did last year. They are just moving that pea to another shell and telling you it's not the same game.


Rendell says that with transit counted, spending growth is 4.5 percent, lower than three-quarters of the states which have passed budgets so far this year. But his estimate is based on another cute annual trick that governors and lawmakers have used in this state for more than a decade to lower their spending increase. This trick is called “the supplemental appropriation.”

The rate of annual budget increase is determined by dividing this year’s budget by last year’s budget. So what Rendell and his predecessors do, each year, is propose a “supplemental appropriation” when they introduce their budget, to increase the previous year’s budget.

Now last year’s budget called for $26.1 billion in spending. But by adding that supplemental request of $197 million, it magically becomes $26.3 billion, retroactively.

That means because you add that money to last year’s budget, this year’s increase can etroactively be made to look smaller. And since you add it a year later, the governor and lawmakers never have to defend the real spending increase of last year, which they not only lowballed, but actually under-spent by $197 million. It’s magic money. It never counts against them and always helps shrink the rate of increase in the new budget.

So if you sand the magic sparkles off the magic supplemental appropriations trick, you end up comparing the proposed new budget to the $26.1 billion budget passed last summer. Any calculator will tell you this budget increases spending from last year's budget by 5.3 percent. That is 18 percent higher than the 4.5 percent Rendell is citing.


Anonymous said...

I'm confused.

At his press conference yesterday (11 July 2007), Governor Rendell said the Pennsylvania economy is booming, and that by two or three Wall Street accounting ratios/measures (debt/person, debt/total wealth etc.) the state
debt low. Is that true?

Nathan Benefield said...

The PA economy is growing, but booming is relative - we are one of the slowest growing state in the nation, and are growing much slower than the US economy.

I have seen some similar debt numbers in the past - basically arguing that PA isn't that much in debt compared to other states. However, that doesn't make borrowing a good thing - especially when we are borrowing for things that should be considered regular/current expenditures (as opposed to major construction) and corporate welfare handouts. Our overall debt has risen dramatically over the past few years, and we are paying more interest on the debt than ever before.

Additionally, while the federal government gets criticized for a budget deficit, states get praised for a "balanced budget". That is quite easy to do when you track borrowing in a different budget. We are borrowing more each year than we are paying off in interest - so the "balanced budget" is really a silly notion.