Kyle Wingfield: Cutting spending while revenue is increasing -- a novel idea

Kyle Wingfield

When it comes to state government, we have been conditioned to think of spending cuts as ominous. The state must balance its budget, so spending cuts ostensibly mean falling revenues — and falling revenues mean a shrinking economy.

But what if spending cuts were just that: a cut in spending, regardless of the amount of revenue coming in or the state of the economy? Pretty novel concept, huh?

That appears to be Gov. Brian Kemp’s thinking with his directive to state agencies to prepare to cut their spending by 4% in the budget year that began July 1, and 6% in the one that follows.

A memo from Kelly Farr, head of the Governor’s Office of Planning and Budget, asserts Kemp “is committed to fundamentally reforming state government to make it more responsive and accessible to our citizens, improve program outcomes, and reduce costs to taxpayers.” Farr explains Kemp is seeking “ways to streamline processes, better leverage technology, reduce duplication of efforts and innovate.”

Importantly, the memo notes revenues for the budget year that ended June 30 “exceed(ed) estimates” and Georgia’s economy “remains strong.” Given that June marked Georgia’s 13th straight month with a jobless rate below 4%, and set a new record for most jobs in the state, it’s hard to argue.

Working now to find efficiencies and invest in technology takes a page from Aesop’s fable, “The Ant and the Grasshopper”: Work hard while times are good, rather than waiting until times turn hard.

But much of the reaction is reminiscent of “Chicken Little.” Kemp is cutting spending? The sky must be falling!

No one can predict the future, but it doesn’t appear that’s the case. Trade wars and possible currency wars and recent gyrations in the stock market notwithstanding, the U.S. economy continues to grow steadily if unspectacularly. The expansion begun after the Great Recession extends its own records for longevity with each positive quarter.

That said, no law says additional revenues must be spent — or that spending can’t be cut even as revenues grow. Put another way: Who’s to say the current level of spending is optimal, or that the only way to make it better is to spend more? Keeping lawmakers’ promise to continue lowering the state’s top income-tax rate, for example, would keep more money in more-productive hands.

Since bottoming out in 2010, state revenues have grown by almost 70% to some $27.5 billion. Spending has grown by more than $1 billion per year on average for an entire decade.

Much of that additional spending reflects growth in enrollment in k-12 schools, higher education and programs such as Medicaid — a trend likely to continue. Certainly, there was some shoring up of agencies battered by so-called austerity cuts, and raises for teachers and state employees who went years without one. Of course, Kemp’s predecessor, Nathan Deal, also rebuilt the state’s reserves to some $2.5 billion along the way.

All of which is to say: Georgia’s finances and operations needn’t have been mismanaged to stand a chance of being improved.

What’s more, some big-ticket items may well require cuts elsewhere. Kemp has made it clear he intends to complete the annual $5,000 raise he promised teachers, $3,000 of which is in the current budget. That will cost a chunk of change.

Another example: The federal government may well require Georgia to invest in the reinsurance program Kemp is contemplating creating as part of the Affordable Care Act “waiver” he is seeking. It should lead to lower health-insurance premiums, helping more Georgians afford coverage, and it could save both state and federal taxpayers money before long. But for now, that money has to come from somewhere.

Agree or disagree with those priorities, it’s clear that’s just what they are: the priorities of the man Georgians elected governor. And there’s no clearer or more effective way to pursue one’s policy priorities than through the budget.

Dalton native Kyle Wingfield is president and CEO of the Georgia Public Policy Foundation (www.georgiapolicy.org).

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