A decade of state spending restraint

By • on July 28, 2011

Back to the must read new report from the Senate Fiscal Agency on state taxes and spending over the last decade or so. As you know, conventional wisdom is that the new Administration and Legislature took over from a high tax/high spending regime. Turns out to be complete baloney.

The facts as laid out in the SFA report are the complete opposite. An era of remarkable – almost certainly unprecedented – spending restraint. State spending from all state resource in FY2002 (the Engler Administration’s last year) was $26.087 billion. In FY2011 (the last Granholm Administration budget) it was $26.050 billion. For the general fund (what everyone focuses on) it went from $9.189 billion to $8.280 billion. Nearly a billion dollar reduction. And for school aid from $11.220 billion to $10.776 billion.

These numbers are not corrected for inflation. They are the actual spending levels. The report uses FY2012 as the comparison year. But the numbers won’t be much different for 2011. From FY2002-FY2012 state spending from state resources are up 0.6% while Michigan personal income up 22.4% and the Detroit Consumer Price Index up 18.5%.

You read that right: Michigan personal income up 22.4% over a decade, state spending from state resources up 0.6%. So much for the nonsense told over and over again that Lansing was spending more and more, oblivious to the pain of Michigan residents during our decade long slump. My guess is no other state showed as much spending restraint the last eight years and there is more than likely no other eight year period in Michigan since the Great Depression with this kind of spending restraint.

As for taxes – as we have written previously – revenue as a percent of personal income down by more than $7 billion. With tax revenue declining as a percent of personal income combined with big increases in Community Health and Corrections, everything else suffers substantial spending cuts.

And what gets crowded out the most are the public investments that would help grow the economy. Those that help prepare, retain and attract talent: education, particularly higher education; transportation; revenue sharing which helps local governments provide quality basic services and important quality of place amenities like the arts and parks and outdoor recreation. Not smart!

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