Last week we took a look at the constitutional spending limit imposed on general fund expenditures, a device adopted by the 1978 Constitutional Convention in the hope that the growth in the size of government would parallel the growth in the state’s economy.
As noted last week, once the state piggy bank got so fat, the temptation to exceed the spending limit was so great that lawmakers acquiesced and found ways to not only exceed the limit, but devised ways to take the money even before it hit the general fund.
So how did elected officials get away with exceeding the spending limit? Well, in the first year (1989) lawmakers went over the spending limit, they provided taxpayers a substantial tax refund credit of $125 per exemption. To some degree that placated taxpayers who thought they were getting their money back.
Another reason why there wasn’t much of an uproar is because everyone was feeding at the trough. There was this program or that project that specific constituencies wanted even though, all together, the total amount of spending went nearly 15% over the spending limit.
A further reason why the public didn’t riot in the streets was because of the way lawmakers met the constitutional mandate that they declare that the spending ceiling was being exceeded. Even though in the end the total amount of general fund expenditures was more than $300 million above the limit, lawmakers fulfilled the declaration requirement by announcing how much each spending bill exceeded the limit. Thus, as each bill appropriating general funds was approved, lawmakers declared that the appropriations in that specific bill would exceed the spending limit. Since each bill contained amounts that were relatively small by comparison to the state budget, no one seemed to pay attention.
For example, the budget for the judiciary was declared to exceed the spending limit by $67 million for the fiscal year 1990. The amount of money represented only 2.89% more than the general fund spending ceiling. On the other hand, the state budget for that year was declared to exceed the ceiling by $125 million or 5.37%. How could taxpayers get upset when each individual bill was declared to exceed the ceiling by only thousands of a percent?
Indeed, given the fact that the state was sitting on millions of dollars of surplus, no one paid attention or complained because everyone was getting something. Only in the years that followed did taxpayers realized what a travesty those actions set into motion. With a government much larger than the economy could handle, the state was headed for a financial crisis.
Even as the economy was going into a tailspin, elected officials tried to deny that there was anything wrong. In fact, they kept on appropriating general funds as the money began to run out. Things got so desperate that in 1994 administration officials quietly settled a tax dispute and put the escrowed taxes into the general fund so that the year would end with a surplus. The state had gone from a fat surplus of nearly $650 million in 1989 to just over $27 million by the end of fiscal year 1994. And if the disputed tax case had not been settled, the state would have wound up with an $82 million deficit.
Though well intended the constitutional general fund spending ceiling just has too many loopholes for elected officials to squiggle through. However, that is not to say that those oversights cannot be corrected. For example, no one thought that elected officials would deliberately move public programs into special fund financing. Yet a plethora of programs which were once funded out of the general fund are now paid for with special funds.
How lawmakers and the administration declare that they will exceed the spending ceiling could also be addressed by requiring the aggregate amount be declared so that taxpayers know the sum total of all appropriations that will exceed the ceiling. If taxpayers knew that the ceiling was being exceeded by ten or fifteen percent, maybe they would sit up and pay attention.
In any case, the spending ceiling is an important barometer of how large government has grow relative to the growth in the economy that produces the revenues that pay for government. The provision needs closer examination to make it more effective.