Bacon's Rebellion

The 20% Growth Claim Is Not Misleading

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by

Steve Haner
in ,

By Steve Haner

As I noted earlier, defenders of state spending growth have a number of tools and tactics handy to confuse voters, but facts are stubborn things.  So, I’m going to explain a bit further how this proposed budget grew 20% over its predecessor in just one two-year cycle, with some context. The table above should help.

Virginia sets its state budget for two years at a time, with a new two-year spending plan introduced in December of every odd-number year and considered in the session that follows in the even numbered year. 2020 is a budget year. For convenience, the bills are always House Bill 30 and Senate Bill 30. In December, Governor Ralph Northam did as his predecessors have done for decades and published his budget.

In the opening summary, known as the enacting clause, there are tables that always end with a grand total for all proposed spending from any and all categories. The number I’m using is right at the end of that. Note, I am not using the higher revenue estimate – just the proposed appropriations.

The introduced budget is just that, and the General Assembly will change it. It will add new spending based on higher revenue estimates (or cut, if the estimates collapse in the February recalculation.) It may create new revenues by changing tax laws or creating other revenue streams, as happened with the Medicaid expansion funded by new assessments on hospital revenues.

It is just as valid to compare approved budgets to approved budgets, and measure growth that way. We won’t have an approved budget for the upcoming biennium until this Assembly completes its work, and then a comparison to the same product from the spring of 2018 would be valid. But it is fair to compare introduced budgets, as well. Likewise, it would be fair to compare actual spending, not known until the books are closed at the end of the cycle and compiled by the Comptroller of Accounts.

The introduced and approved budgets and final spending report always vary, sometimes significantly. For this discussion, to get that apples-to-apples comparison, I’ve stuck with the introduced bill. Because it is a two-year process by design, I do resist trying to track this on an annual basis.

The rough and rounded chart above shows five cycles, the base in 2010 followed by growth amounts for 2012, 2014, 2016, 2018 and now 2020. It also shows cumulative growth since 2010. Growth happens in most cycles, but clearly this bill shows higher growth than the previous four. Too much higher? That’s your decision to make. Unjustified? Also, not a judgment I am asserting at this time.

Does it include federally-transferred revenues related to Medicaid and other entitlement programs? Yes. Higher revenue collections by the state hospitals and the higher education system? Yes. Does it also include specific tax increases?  Yes – a new cigarette tax, higher transportation taxes, a new tax on gaming devices, and whatever the collections will be from those hospital provider taxes that didn’t exist two years ago. It also includes the uncounted hundreds of millions the state will reap because it tracked most changes to tax rules made by the federal Tax Cuts and Jobs Act, but made few adjustments to protect taxpayers from the impact. That alone was a huge state tax hike.

Given those changes in the past two years and the new taxes included, it is no mystery why this is such a higher starting point for the next budget cycle. When there is an approved budget come April, it is likely the number in that amended enacting clause will blow past $140 billion. Here endeth the lesson.

HB 30 Appropriations Total As Introduced
Year Grand Total ($Billions) % Over Previous % Over 2010
2010 77
2012 86 12 12
2014 97 13 26
2016 109 12 42
2018 116 7 51
2020 139 20 81

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16 responses to “The 20% Growth Claim Is Not Misleading”

  1. JRegimbal Avatar
    JRegimbal

    Steve,

    How again did you get 20% budget growth? The Caboose bill 2018-20 total appropriations are $124,096,320,640 and the 2020-22 biennium introduced bill is $138,786,909,630. This is 11.8% two-year growth. GF growth is even lower – $44,738,241,123 for 2018-20 and $48,216,509,263 for 2020-22 or 7.8% growth over two years.

    1. Steve Haner Avatar
      Steve Haner

      Jim, welcome. Dick now has called in reinforcements! I’m comparing introduced HB 30 cycle over cycle. I’ve been clear all along I’m talking about the entire, 2-year appropriation, general and non-general funds combined, in the introduced bill.

      Students, he forced me to continue the lesson. This is a two year cycle, but as each General Assembly adopts a budget for the future, it also adopts a bill making adjustments to the year underway. This in common parlance is the caboose bill, always HB 29 and SB 29. Jim is again doing that apple and orange thing, in my opinion, by citing the caboose bill. It just shows that the growth I’m pointing to happens gradually, not all at once. Indeed it does. He is also moving between the general fund and the combined total, when I’m sticking with the combined total.

  2. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    I, too, welcome Jim. I did not call him in, but I’m glad he is chiming in.

    One way of looking at this is to use the example of compounded interest. The interest earned gets rolled into the principal and is then the interest rate is applied to the new larger principal. The new interest due is more than what would have been if the interest rate had been applied to the previous principal amount. The same thing happens to budgets. Changes to the introduced 2018 introduced bill, those made in the 2018 and 2019 sessions, are in the base that was used to construct the 2020 bill. Unless one is going to pull those changes out, they get counted when comparing the size of the introduced 2018 and 2020 bills.

    So, yes, unquestionably, spending will have increased 20% between the 2018 introduced bill and the end of fiscal 2022, which is the second year of the proposed budget bill. But the introduced 2020 budget will not have been responsible for the initiation of all that increase.

  3. JRegimbal Avatar
    JRegimbal

    The largest chunk of nongeneral funds are university tuition and fees, hospital revenue and federal funds including the medicaid match. I have no quarrel with how fast those have grown.

    1. Steve Haner Avatar
      Steve Haner

      No quarrel? Good to know. Some disagree, I expect. I’ll leave that to the rest of the Usual Suspects.

    2. djrippert Avatar
      djrippert

      You have quarrel with how fast university tuition & fees have grown?

      1. Steve Haner Avatar
        Steve Haner

        I do believe the topic has come up in this forum from time to time. 🙂

  4. LarrytheG Avatar
    LarrytheG

    The 20% thing is designed to be a “taxpaying grab your wallet” type message though and when we don’t have the specifics that make it up nor a number that shows how much taxpayers will actually be affected – it’s just so much trumpet blather.

    What I suspect is that taxpayers won’t be affected that much because a lot of the revenues are already built in – primarily from Federal pass-through money and the increases that occurred from conformity.

    See, this is all about trying to pin this on Northam – as if he did it himself with his budget that he is actually proposing significantly higher taxes taxpayers. But you don’t see that headline: “Northam proposes tax increases”. Instead what you see is “Budget grows 20%”

    tsk tsk more partisan tom foolery

    1. Steve Haner Avatar
      Steve Haner

      Help, I’m trapped in another one of those Monty Python sketches. I know I’ve won this argument. Moving on…

  5. Izzo Avatar
    Izzo

    I don’t see anything wrong in Steve’s math. The most important thing when calculating growth over time is using like to like data points. He did that. If you introduce the caboose bill on one data point, you break that.

    Dick’s compound interest analogy is explanatory. It is akin to how interest on the debt has become such a large part of the federal budget over time. It is fair to say earlier actions and actors share some of the responsibility. But if you focus on only that, you will lose sight of the key question: should we be OK with 20% biennial growth in spending on all state programs at a time when inflation is at a historically low 2% per year?

    For me the answer is no. The non-general fund growth is driven by items like health care and higher education where, although they have been much discussed on this board, no progress has been made to address a 40+ year trend of growth that is multiples of the overall rate of inflation. The general fund budget contains “progressive” items that will become the compound interest Dick refers to in his post. Today’s dessert is tomorrow’s plaque build up in the arteries.

  6. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    Izzo –

    I have long stood in awe of your wizardly with the numerical arts, but until now was quite unaware of your deft mastery of human vascular systems as they be related to dentistry. Very impressive. A triple doctorates program at Johns Hopkins perhaps?

  7. Steve Haner Avatar
    Steve Haner

    “Today’s dessert is tomorrow’s plaque build up in the arteries.” Someday, maybe not today and maybe not tomorrow, I will steal that one.

  8. JRegimbal Avatar
    JRegimbal

    What I meant about “no quarrel” is that I agree with you Steve that tuition and fees and health care costs have risen very fast and that is reflected in the growth rates of nongeneral funds in the state budget. My comment was not a value judgement on those program increases. We clearly need to get a handle on the cost increases in health care and higher education. This is why I don’t get involved online often – too many misunderstandings on what people really mean.

    1. Steve Haner Avatar
      Steve Haner

      This medium does require careful word selection at times….but your input is welcome any time.

    2. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      I appreciate you coming back on this issue. A bit of reassurance can often make world of positive difference, erasing what otherwise might be construed as indifference at best.

      1. Steve Haner Avatar
        Steve Haner

        I pay attention when I’m accused of being “misleading.” First step is to go back and check my work. Since I did it, I shared it. I never want to be misleading (not by accident, anyway.)

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