Budgeting for Disaster – Part I

One of the problems of political journalism is trying to parse the difference between what’s really going on and what is said about it. Press releases are misleading as often as they are informative, and interviews seldom get at any matters beyond the superficial.

That’s the secret pleasure behind budget analysis. A budget document is the policy choices of the government made manifest. You don’t have to ask someone what the policy is, it’s there in the sums. There are, of course, ways to obscure policy within a budget, and not all budgets are presented well, but these problems pale before trying to decipher what some people mean when they talk about policy issues. What does it mean to “cut” a program? What does “level funding” mean? Is some program really “new?”

The problem with open government is that sometimes there is altogether too much information available. You can go to the RI Open Government site now and learn how much any department spent on postage last month. That’s fine, but once you know that, what do you really know? The state budget is something similar. The budget documents for the state of Rhode Island are a large and ungainly set of documents. They are seven volumes, and even the Executive Summary has a hundred pages, plus five appendices. It’s hard to know where to begin.

Here, then, is the beginning of an entirely desultory tour through the state budget—and the state budget documents. For the next several weeks, I’ll post an article every few days (and every Monday) about different parts of the budget, and eventually we should be able to get within shouting distance of most of it. Obviously some subjects will get short shrift, but there will be room to cover plenty of the controversies. I’ll monitor the comments for suggestions, directions, and corrections, and will happily accept them via email as well.

Through the same period, the House Finance Committee will be conducting hearings about the various pieces of the budget proposal, but they are unlikely to do anything about any of it until after the beginning of May, when the estimates come in for tax receipts and social service expenses.

Volumes

The budget documents have been rearranged slightly this year, and they consist of the following volumes (and my abbreviations).  All these are available at the link above:

• Executive Summary (ES) contains text descriptions of the budget and its changes. It also has a description of the economic outlook, summary schedules, tables of municipal aid and education aid, and the planning values used.
• Budget, volume I (B1) contains the budget for the General Goverment departments, like Administration and the Legislature, and the quasi-public agencies like RIPTA and the Airport.
• Budget, volume II (B2) has all the Human Services agencies (Health, DCYF, and Behavioral Healthcare, Developmental Disabilities and Hospitals, and so on)
• Budget, volume III (B3) covers all the Education departments, both Elementary and Secondary, and the state higher education institutions.
• Budget, volume IV (B4) is for Public Safety, Transportation, and Natural Resources.
• Capital Budget (C) has all kinds of exciting tables about how much is borrowed and what for.
• The Technical Appendix (TA) is where dollar figures for detailed accounts are published, and includes the accounting codes, which helps when you want to get specific answers later.
• There’s usually a small Budget as Enacted document that toddles along a month or so after the budget is passed. It’s not much more than a restatement of the schedules in the various department budgets; its numbers become part of the next year’s presentation.

In addition to these, the word “Budget” can also refer to the Appropriations Act itself. This is the law that actually gets passed by the legislature and signed by the Governor, and this year it’s been introduced to the House as bill 2012-H7323. All the numbers presented in the seven volumes are in Article 1, and the other articles contain the necessary legal changes to make the numbers work. Of course, the budget is a must-pass piece of legislation, so by the time the budget hits the floor of the House for debate, the articles will often include some hidden delights, too.

So let’s begin.

Austerity

To begin with, let it be clear from the outset that this is an austerity budget. Governor Chafee is getting lots of flack from the usual sources about his high spending and his tax increases, blah blah blah. What these people don’t want you to know is that this is a budget with many savage cuts in it. Chafee claims $45 million in program cuts in his transmission letter (beginning of ES), and the overall budget is down by 2.8%, to $7.943 billion from $8.173 billion in FY12. Federal funds are to be cut $271 million, largely due to the expiration of the stimulus funds.

For a little perspective, the state’s economy is expected to be a hair less than $50 billion in 2012, so the state budget is about 16% of everything. Municipal expenses add another $2 billion or so, so together we’re talking about a fifth of the state economy under very tight constraint. Recovery from our downturn can happen under these circumstances, but the austerity we’re seeing in government is roughly the opposite of stimulus, so it’s not as if the state is helping dig the economy out of its hole.

Why is the Governor’s budget so stingy? Because the Legislature told him that’s what they wanted. Last year, Governor Chafee proposed some changes in the sales tax to give his budget a modestly expansionary flavor. The state has to balance its budget, so we can’t do wholesale stimulus; the idea was only to keep from slashing everything, and to prevent a situation where government was laying people off during a recession. Any tax at all, of course, was anathema to the business “community” and the legislature duly shot it down, in peremptory fashion. House Speaker Gordon Fox essentially foreclosed the tax change before the budget even got to the behind-closed-door phase. So most towns enacted a property tax increase, and this year we have more austerity and cities going bankrupt. It’s really a pretty simple connection, even though lots of people want you to think it’s complex.

You have likely already heard lots of righteous-sounding arguments about how we ought to balance the government’s checkbook just like we balance a household’s. The analogy hides that fact that the austerity we feel is self-imposed, with much of it due to ill-advised tax cuts in the recent past.  Second, and more important, it would have us imagine that paving roads, jailing criminals, and providing universal public education is somehow comparable to buying groceries and paying rent. Yes, the accounting can be made to look similar, but does the analogy stretch any further than that? The benefit of my groceries goes to me. The benefit of public education and roads doesn’t accrue to the state government in any but the most indirect sense. There is a difference between public goods and private ones that the accounting cannot reach and that many fiscal “conservatives” apparently cannot see. But more about all of this further down the road.

Next: “Assistance, Grants, and Benefits” — 44.6% of the budget?