It is a rule of physics that a gas will expand to fill the available space. It is a rule of management that work will expand to fill the available time. And it is a rule of politics that spending will expand to consume the available revenues. Once again, this latter rule has been proven on Beacon Hill.
Earlier this month, the legislature approved a $21.5 billion state budget for FY 2001. That's up about $1.4 billion over last year, which in turn was up about $1 billion over the year before that. As they say in government, "a billion here, a billion there, and pretty soon you're talking about real money."
The Commonwealth's budget is growing at two-to-three times the rate of inflation. From a fiscally conservative perspective, this is not a positive trend. But, green eyeshades aside, spending growth at this level leads inexorably to decision making that is driven more by log rolling than sound judgment.
In an era of budget surpluses, the political dynamic is heavily weighted against setting spending priorities or making difficult choices. Instead of evaluating the effectiveness of a well-intentioned program, it's easier to add another five or ten percent. Instead of wrangling with fellow legislators over competing spending proposals, it's more collegial to fund them all. Instead of taking the heat from constituents for cutting popular, but non-essential line items, it's smarter (politically) to maintain the status quo.
While this type of behavior is certainly understandable, it is not in the public interest. First, legislators have a fiduciary responsibility to taxpayers not to waste money. This responsibility includes not collecting more in taxes than is necessary to fund an efficient and focused government. According the Massachusetts Taxpayers Foundation, the state raked in $775 million more than it needed to fully fund its expansive fiscal year 2000 budget. Instead of returning this surplus to taxpayers, the legislature spent most of it on a variety of construction projects, thereby side-stepping the capital budget cap that is supposed to be a bulwark against overspending.
Second, commitments made today have implications far into the future. Programs that seem cheap during boom times will be a heavy burden when the economy slows. A prime example of this phenomenon is the adoption, over the Governor's veto, of an early retirement bill for teachers. This election-year gift to the teachers unions will over time significantly increase costs to the state, while putting added pressure on municipalities, which are typically responsible for picking up the health insurance tab for their retirees.
Finally, decision making that does not compel managers and advocates to justify expenditures on the basis of performance and relative value leads to complacency and deteriorating quality. If all programs are generously funded whether or not they are effective or well run, where is the incentive to improve? Take the MBTA for example. Just last year, the state enacted landmark legislation designed to make the T financially self-sufficient, thereby imposing fiscal discipline on an agency that had long been addicted to deficit financing. By dedicating a portion of the sales tax collections to the T, the new law was supposed to end the transit agency's long-standing practice of coming to the legislature at the end of each year for an appropriation to cover its losses. Nevertheless, when the dust settled from this year's budget negotiations, the T had been invited back to the trough and was awarded an appropriation of $67 million.
It is probably fruitless to hope for a reduction in the demand for appropriations. It is also highly unlikely that lawmakers will exercise self-restraint against the ever rising tide of nice sounding spending plans endorsed by well-intentioned, reasonable people who vote and make campaign contributions. Instead, the state should look to meaningful constraints on the supply of available funds, specifically through tax rate reductions and capital budget limits with teeth. Without such structural barriers to force legislators to make choices, spending growth will continue in accordance with the natural law of budget politics.
James A. Peyser is executive director of Pioneer Institute, a Boston-based public policy research organization.