Ulbrich: A new way to look at budgeting

By Holley Ulbrich

State budgets are driven by a number of factors, like the land area, the weather and climate, the age distribution of the population (how many senior citizens, how many pre-schoolers), the average income level, and the number of people in poverty or in prison. But from one year to the next, the big factors driving the increase in the cost of public services are increases in population and the price level, or inflation.

State services are provided to people, and more people require more services. Higher prices drive up the cost of providing those services. So the best way to see what is happening to state services is not to look at the revenue side of the budget but the spending side. How big is the state budget, and how much has it grown?

In order to answer that question, we added to the state General Fund budget two important items that are funded separately — the Highway Trust Fund, which is supported by the gasoline tax, and the Educational Improvement Act, which receives one penny of the state sales tax and is an important state contribution to public education.

For benchmark years, we took fiscal years 2000 and 2014, ending on June 30 of that year. The price index we used was for January of each of those years, at the midpoint of the fiscal year. Both 2000 and 2014 were pretty good years in terms of the economy, so they weren’t distorted by either boom or bust in private sector activity. Budget and population figures are from the state’s office of fiscal affairs, and the consumer price index (base year 1992) came from federal sources.

In 2000, the state budget plus the Highway Trust Fund and the Education Improvement Act Fund provided spending combined amounted to just over $6.2 billion, while in 2014, that figure had grown to more than $8.3 billion, an increase of almost 34 percent. Before you become outraged by the extravagance of our legislators, however, prices and population have grown even faster—a lot faster.   Population alone is up almost 19 percent, and prices rose over those 14 years by more than 37 percent. So just to stay in place — to spend the same amount per person on state services — the combined budget and two trust funds would have to have grown, not to $8.3 billion, but to $10.2 billion.

Last week, I rode home from the beach up Highway 17, which rattled my new car a lot. My grandchild is a high school sophomore, and her school has cut some important programs in music and arts — things that matter to her and to all of us in terms of quality of life.

We still don’t have enough highway patrol officers or DSS workers to keep our kids from falling through the cracks. We get what we pay for. Keep that in mind this year as you follow the budget debates in the General Assembly.

Noted economist Holley Ulbrich is senior scholar at the Jim Self Center on the Future at Clemson University.