Thursday, August 03, 2006

Utah Budget Surplus Redux

It’s déjà vu all over again. This year’s legislative session was mostly about how to deal with the largest budget surplus ($1 billion) in Utah state history. It made for some pretty interesting, and sometimes strange political wrangling. Many legislators thought it was worse than having a budget shortfall.

It now turns out that the state has a surplus of $351 million on top of the original surplus, which has politicians, administrators, and lobbyists circling like buzzards over road kill (see here, here, and most importantly here). Of course, I want to know who calculated this amount. Hopefully it’s not the same folks that had to keep revising the figures they were feeding to the Governor about potential tax system changes earlier this year. Grab your seatbelts, because we’re in for a bumpy ride.

The Governor wants to cut taxes to give back about a third of this extra surplus to the taxpayers that overpaid it. Of course, you may recall that our politicians are still in a quandary about how to get the paltry $70 million of the original surplus that was set aside for tax relief back to the taxpayers. So maybe some of the money you overpaid could come back to you—someday, if our elected officials ever come up with a way to do it. Although it seems like this should be a simple task to oafish rubes like me, apparently our erudite elites have great trouble with the enormity and complexity of the task, so don’t get your hopes up just yet.

Ah, and what to do with the other two-thirds of this cash? I know, let’s expand the size of government. Heck, Republicans on the federal level seem to have pretty much given up on all of this limited government stuff (for which they may pay dearly this November), so why shouldn’t our Republican controlled legislature follow suit?

Oh yeah, they already have. In fact, the legislature found it absolutely necessary to use 93% of the original record surplus to “invest in the future” and to fund “under funded” government programs. I’m not saying that none of this was the right thing to do, but I believe we got our priorities messed up. The tax cut should have come first, followed by considerations of education and infrastructure (and the education cash should have been tied to some serious changes in the system), followed by social programs.


It is a good idea to limit the size of government even if it appears that society can afford to pay for more government, because every Dollar put into government increases the amount of control government exercises over your individual rights. Oh, you don’t see your rights disappear overnight. They evaporate a drop at a time over years until you find that you have to get permission to school your kids at home, you can’t have any semblance of religious practice on public property—especially in schools, and especially if it might demonstrate faith in the dominant religion, or a whole host of other limits we now blindly accept on our liberties.

And here’s a news flash for you: almost all segments of the government will *always* be “under funded.” How can this be? There are a couple of rules of simple economics and human nature at play here. One is that you can never get enough of what you don’t truly need. When we fund government programs that are “good” or “useful” but that do not fit into the context of actual need, there is no logical limit to their growth, no matter how tightly we try to define their mission.

Also, you will never find a department manager in the government that will tell you that their budget is big enough. The sheer nature of the beast means that each manager will always tell you that they need more. In fact, if you threaten to make this year’s increase less than last year’s, some will scream about “draconian cuts.” I know. I have worked in government, and that’s the way it is. Admittedly, this makes it difficult for legislators to know where true needs lie and where unnecessary demands are being made, but that’s what we elected them to do.

It is nearly impossible to cut funding below the previous allocation, so it is imperative to be extremely cautious on funding increases. When we lavishly increase spending during times of economic booms and budget surpluses, we set ourselves up for future budget shortfalls, because economic booms do not last forever. California has discovered this the hard way. But even in dire straits, they find cutting the fat (ridiculous laws and programs) out of their government to be an insurmountable task.

Cutting taxes first says that the taxpayer takes priority. It says that the people that are funding government take priority over everything else that government does. It says that producers take priority. It says that the average Joe and Jill American Taxpayer that are the majority of the “people” that our government is “by,” “of” and “for” come first.

Cutting taxes first also boosts those on the margin into a slightly better economic situation by letting them keep more of what they earn. Don’t underestimate the importance of those on the margin. Those that are doing OK often think, “Hey, a tax cut is only going to put only $X back into my pocket. The government might as well keep it.” The problem with this is that they are projecting their situation onto the whole of society. History shows that small actions that affect those on the margin have major impacts over time. We need to make sure that we are helping them become what will be best for them and for society.

It will be interesting to see what our elected officials choose to do with this new surplus amount. I would like to see a positive change in priorities, but I’m not holding my breath.

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