July 23, 2008
By Charles M. Arlinghaus
FINDING A LITTLE extra money from the taxpayers to help out your friends is always more popular than cutting spending to balance the budget. It shouldn’t surprise us that just weeks after the latest round of spending cuts, some administrators are talking about finding some of our money to help out their favored projects.
The broad parameters of the state’s situation are well known. Revenues came in about 2.5 percent higher than last year but are nonetheless below the amount budgeted. Projections are for a two-year revenue shortfall of around $200 million. To fix the problem, Gov. John Lynch proposed a few smaller tax increases, issued executive orders to cut back some spending and borrowed the money for the difference.
This budget had included a 17.5 percent increase over the last one, the largest increase of any of the budgets passed over the last 20 years.
The governor issued a hiring freeze and proposed two rounds of cuts of about $80 million. Unwilling to cut any further, he made the controversial decision to borrow $80 million to pay operating expenses.
Any cut is going to be difficult. Program administrators tend to end up defending their turf instead of aggressively seeking savings. Every program sounds like a good idea and no one item of a few hundred thousand dollars sounds like it will break the bank.
This week, we were treated to the classic example of why the government has so much trouble tightening its own belt. A group that wants to bring passenger trains from Boston to Concord wants government funding. In the short term its members want to hire two staff people to run a rail authority to figure out how to come up with $200 million in capital costs and additional annual operating subsidies to pay for trains.
The state just cut $80 million from the budget and was unable to find the additional $120 million needed to plug the remaining hole. Despite that, state Transportation Commissioner George Campbell offered the rail authority money from “his budget,” as the Nashua Telegraph phrased it, to help pay some of their costs.
When the governor was looking for ways to cut spending to plug a giant $200 million hole in the budget, the transportation commissioner didn’t mention he had some extra money in “his budget.” It’s hard to imagine the governor refusing the extra money, saying “don’t worry, balancing the budget isn’t nearly as important as keeping it in case we need to pay some of the costs for rail authority staff in a few months.”
Unfortunately, this is human nature. It is personally gratifying to take some of our tax money from “his budget” to throw a little largesse at some people who will be suitably grateful. Recipients will be grateful in the same way they are grateful to the philanthropist who takes his or her own money and donates a new stove to the soup kitchen or a new wing to the museum (or perhaps cash to his favorite local think tank).
But cutting your budget almost seems like a betrayal of purpose. You want to do great things in your own bailiwick. Solving a budget problem or saving tax dollars to be spent by someone else or not spent at all seems like someone else’s job.
This helps explain the appeal of an across-the-board 10 percent spending reduction. While in theory every single expense might be examined and a priority list established to guide reductions, practice never seems to work that way. The newest expenses are more likely to be cut than existing programs. Large dollar amounts reach your savings goal faster than small ones, so nickel and dime expenses are more likely to be overlooked.
An across-the-board cut is awkward but it forces every manager of large or small projects to examine every detail and find extra money in “his budget” to help the entire budget.
Most recent budgets include something like this. Back of the budget footnotes often direct an entire department to come up with an additional $2 million in spending reductions. The recent executive orders directed the university system to find $2 million and send it back. The managerial decisions are left to the administrators.
Without some mechanism to force every department to look for savings, we’ll be left scratching our heads and asking: “if cuts were so deep that we ended up cutting aid to the neediest, how was this guy able to find some extra cash for trains in his budget?”
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Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.