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MN2020 - Deconstructing Emmer’s Spending Growth Claim
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Deconstructing Emmer’s Spending Growth Claim

September 16, 2010 By Jeff Van Wychen, Fellow and Director of Tax Policy & Analysis

Part two of a two-part series

Today we turn our attention to Rep. Tom Emmer's claim that state spending is projected to grow by 17 percent, as reported in MinnPost.

Just a quick recap. Yesterday's article (part 1) looked at Emmer's claim that state government revenues are expected to increase by seven percent from the current biennium to the next. In fact, total state revenue from all sources is expected to fall by nearly three percent, even before adjusting for inflation and population growth. 

Now, let's look at Rep. Emmer's claim of 17 percent spending growth. According to legislative staff, he appears to be basing that number on total general fund spending, adjusted to include approximately $2.1 billion in one-time federal stabilization funds and federal medical assistance (FMAP) dollars in the FY 2010-11 general fund spending total.

However, this method does not account for artificial swings in general fund spending resulting from K-12 education funding shifts. According to non-partisan legislative experts, the most meaningful way to gauge the growth in state general fund spending from FY 2010-11 to FY 2012-13 would be to adjust for both (1) the impact federal stabilization and FMAP dollars and (2) the artificial dip in spending in FY 2010-11 and spike in FY 2012-13 resulting from education funding shifts.  Based on this approach, projected growth in state spending from the current biennium to the next biennium will be 7.1 percent.

Minnesota 2020 has further adjusted for the impact of inflation and population growth on state government spending.*  The 7.1 percent projected growth in nominal (i.e., unadjusted for inflation) spending translates to 3.4 percent growth in real (i.e., inflation-adjusted) dollars.  The change in real per capita state spending is 1.8 percent.

In previous proclamations about growth in state spending, Rep. Emmer has used total consolidated fund spending.  Consolidated fund spending includes general fund spending plus approximately three dozen smaller funds, including the health care access fund, the game and fish fund, and the highway users tax distribution fund.

Based on 2010 end-of-session projections from Minnesota Management & Budget, state consolidated fund spending will increase by 3.0 percent from FY 2010-11 to FY 2012-13-no where near the 17 percent figure cited by Rep. Emmer.  If we further adjust consolidated fund spending for one-time federal recovery dollars, K-12 funding shifts, inflation, and population growth, projected real per capita spending falls by 7.1 percent from FY 2010-11 to FY 2012-13.

growth in general fund.png

The change in spending from FY 2010-11 to FY 2012-13 also needs to be considered

 

in the context of state demographics.  The aging state population is creating increased health and human service costs for state government.  The change in state government spending over time needs to be considered in the context of these cost drivers.

As with the claim of seven percent state revenue growth, Emmer's claim of 17 percent state spending growth does not stand up well under close scrutiny.  Growth in state general fund spending, adjusted to remove artificial swings resulting from one-time federal dollars and education funding shifts, is less than two percent in real per capita dollars.  Consolidated fund spending--a measure used elsewhere by Rep. Emmer himself--will actually decline from FY 2010-11 to FY 2012-13, even prior to adjusting for inflation and population growth.

Rep. Emmer's assertions regarding state revenue and spending are part of a pattern of exaggeration, if not distortion, by anti-tax politicians and pundits.  For example, consider Rep. Emmer's claim that state general fund spending has "literally doubled in the last decade" or Governor Pawlenty's assertion that from 1960 to 2003 "state government spending increased an average of 21 percent every two years."  One statement is patently false and the other so devoid of context it fundamentally misleads, serving no use in meaningful policy discussion.

It speaks volume of the "no new tax" agenda that its chief proponents can advance it only by exaggerated, deceptive, or fallacious statements about the magnitude of growth in government revenue and spending.  A policy that can be espoused only through chicanery is not a policy worth pursuing.

The alternative to "no new tax" dogma is a balanced approached that involves both reductions in public costs through prioritization and increased efficiency combined with reasonable increases in public revenues.  This pragmatic approach is the only real solution to Minnesota's ongoing fiscal train wreck.


*The inflation adjustment here is based on the implicit price deflator for state and local government purchases, which is the appropriate measure of inflation for state and local governments.

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