States Increased Spending Even During Recession

Despite rhetoric about state governments' cutting budgets because of declining revenues, aggregate discretionary state spending has continued to increase, according to state governments themselves.

The National Association of State Budget Officers (NASBO) reports that state general fund expenditures-"the primary discretionary expenditure"-increased a real 0.4% in fiscal 2003 over the previous year. That matched the increase for fiscal 2002. This means states were increasing their spending even during the recession. In the four years before that, state spending increased at a sharper rate. In other words, states just kept spending more right through the latest recession.

All states except Indiana and Vermont have balanced budget requirements. During the down economy most states relied on smaller spending increases along with tax and fee hikes-not spending or tax cuts-to balance their budgets, according to NASBO.

Politicians and news organizations often call smaller-than-anticipated spending increases "spending cuts." Take, for example, Connecticut.

"Six hours before the start of Connecticut's 2003 fiscal year, lawmakers approved a revised $13.2-billion state budget this evening that would cut spending, increase taxes and avoid potential layoffs and state-agency shutdowns that Gov. John G. Rowland had warned of two days ago," the New York Times reported July 1. In truth, Connecticut increased its discretionary general fund appropriations by a real 1.4%. Counting "mandatory" spending, Connecticut's budget grew by 3.4%.

In fiscal 2002, "Many states broke a trend of tax cuts that began in 1994 to balance last year's budgets-raising taxes by $9.1 billion in the aggregate," says the National Conference of State Legislatures. "Eighteen states raised taxes by more than 1%, while Hawaii was the only state to cut taxes by more than 1%."

The last time states in the aggregate cut general fund budgets was in 1983.

Even Republican governors often follow the trend. The Wall Street Journal reports that many Republican governors are now proposing tax increases to balance their budgets, while some Democratic governors are opposing tax increases. The Journal criticized Republican Governors Mike Huckabee (Ark.), John Rowland (Conn.), Dirk Kempthorne (Idaho), Bob Taft (Ohio), and Kenny Guinn (Nev.) for proposing tax increases.

Never a Down Year in Spending
Aggregate state spending has gone up for 20 straight years.

Source: National Association of State Budget Officers. Figures are for annual state general fund expenditures.