Day 2 - Supplemental appropriations and government growth
State government growth is frequently understated because growth rates do not account for two factors: supplemental appropriations and earmarked general fund expenditures. In the explanation below, you'll see how a 17% increase in state government expenditures eventually ends up being a 21.9% increase.
Every year, the Legislature works on two budgets: the current year budget and next year's budget. Next year's budget gets nearly all of the attention, but the current year budget also deserves attention because supplemental budgets increase government spending but the increase is usually not noted by elected officials or the press.
Supplemental appropriations to the current year budget are typically surpluses from the previous year's budget. Usually, they are spent on capital projects.
The 2007 Legislature will be adding supplemental appropriations to the FY2007 budget and drawing up the FY2008 budget which starts July 1st, 2007. When the dust settles at the end of the session, the Legislature will calculate government spending growth by calculating the difference between the FY2008 budget and the FY2007 budget. However, there is a problem with this approach: the FY2007 budget includes supplemental appropriations but the FY2008 budget does not include supplemental appropriations and will not until next year. Next year when the Legislature is determining supplemental appropriations for FY2008, no one will be focusing on the growth in FY2008 but will instead be focusing on the growth in the FY2009 budget.
To illustrate this example, let's go back to the end of last year's legislative session which ended in March 2006. When the session concluded, the state claimed that FY2007 appropriations were 17.0% higher than FY2006 appropriations. However, ten months later, the Governor is proposing more than $114 million in FY2007 supplementals. If the supplementals are approved, the FY2007 budget will be 19.7% higher than FY2006.
However, even this doesn't cover all of the increase. The Legislature and the Governor do not consider earmarked general funds to be part of the general state budget. (This is bad policy, by the way). In FY2007, earmarked general sales tax revenue will be more than $215 million, up from $103 million in FY2006. When earmarked sales taxes are included for both years, FY2007's budget will be 21.9% higher.
That's right: 21.9% state government growth in one year, and unless you read this blog, you won't know about it. Most legislators are completely unaware of this.