Imaginary budget cuts
The Economic Forum has released its revenue projections, and the worst-case scenario posits an approximately $200 million decrease over the next biennium. Once again, calls for raising taxes have ensued.
And once again, NPRI must remind taxpayers that our budgetary shortfall is the direct result of fiscal mismanagement: The state overcommitted itself when revenues were high and, thinking the good times would never end, failed to prepare for a potential economic downturn. What the state needs is a fiscally responsible budget and to learn how to be accountable when it spends our money.
Nevertheless, tax-loving alarmists have the media and public worried about extreme budget cuts. David Schwartz of the Las Vegas Sun wrote, "A bipartisan consensus has emerged that the state cannot cut 34 percent of the spending compared to the last legislatively approved budget, as would be required without new taxes under revenue projections made Dec. 1 by the Economic Forum."
The problem with this thinking is that no one is actually cutting the budget 34 percent. That number is inaccurate, and absurdly so.
The table below details the annual percentage of increase or decrease in general fund revenue over the past few years.
YEAR | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 |
% Change | 31.7% | 14.1% | 11.5% | 2.8% | -2.9% | -9.1% |
The supposed 20 to 30 percent cuts in the budget are figments of the alarmists' imaginations. Just look at the above table. General fund revenues in 2008 were only 2.9 percent less than in 2007, and the revised 2009 estimate is only 9.1 percent less than 2008.
The budgeted 4.8 percent increase in FY 2008 over the previous year turned into a 2.9 percent decrease, and the 6.8 percent increase for FY 2009 turned into a 9.1 percent decrease, as the general fund shrunk from $3.05 billion in 2008 to $2.77 billion in 2009 (this is the Economic Forum's Dec. 1, 2008 estimate).
According to the Economic Forum, the worst-case scenario projection for the 2009-2011 biennial budget is only 3 percent smaller than the revised 2007-2009 biennial budget.
These are hardly draconian budget cuts that "cut to the bone" or create "irreparable harm" to the state – or, more importantly, to the people. The 34 percent cuts are literally imaginary – it results from cutting what was promised but never actually existed, not cuts from last year's real expenditures.
Making matters worse for the alarmists is the fact that the general fund still takes in more money per person today than it did a decade ago. Not that it should matter either way - government should learn to use resources more efficiently, just like private enterprises. (And yes, NPRI showed Barbara Buckley's graph of revenue to be incorrect – see here and here – since the population and the Legislature's 1996-2000 revenue figures were overestimated.)
So can anyone really say with a straight face that we need to raise taxes, after general fund revenues in 2004 grew at a pace quadruple that of population growth plus inflation, and then proceeded to outpace income growth in 2005 and 2006?
The answer is unequivocally no.
