Telling the Truth
This is two weeks old, but I just found it, thanks to a link on Virginia Postrel's blog. It seems that USA Today decided to tell the real truth about all those state budget shortfalls you hear about from coast to coast.

State governments are struggling to pay for expensive programs that were approved or expanded during the economic surge of the late 1990s. Although the economy began to cool in 2000, state and local spending has continued to grow, increasing by an annual rate of 4.2% in the first nine months of 2002. Governors and legislatures meeting this month in 42 states must decide whether to raise taxes or retreat from spending promises made before the recession set in. But most of the budget cuts under consideration are reductions in planned spending increases, not actual declines in spending from last year.

Tax collections by the states fell 5.7% nationwide in the 12 months that ended June 30, the Census Bureau reports. That decline was offset somewhat by increases in federal aid and other revenue. Many states met their higher spending obligations by tapping reserve funds and using accounting gimmicks. Tax collections are rising again: up 1.4% nationwide in the quarter that ended Sept. 30. But that's not enough to match spending increases that legislatures have approved.

The paper actually published two stories. Here's a link to the other one, which says:

State and local governments are spending more money and hiring more people than last year, even as governors and mayors warn of draconian cuts in public services because of the economic slump. The National Governors Association says states face the ''most dire fiscal situation since World War II.'' But a USA TODAY analysis shows that most of the budget cuts being studied are not declines in spending from last year. Instead, they are reductions in spending increases that were approved when the U.S. economy was booming.

UCLA management professor Daniel J.B. Mitchell told USA Today the words "'shortfall'' and ''budget gap'' are political terms, not accounting terms, and "the public mistakenly thinks this means you have to cut spending or raise taxes by this amount to balance the budget.''

Consider California. The terms "shortfall" and "budget gap" are merely an estimate of the difference between what the Legislature approved spending and what it has money to pay for. Says USA Today:

California's budget ''shortfall'' is largely caused by the Legislature's plan to increase general fund spending from $78 billion this year to $85 billion next year and $91 billion in 2005. Those proposed increases are likely to be cut. It's like an employee who expects a 5% raise, gets only 3% and complains about a 2% pay cut. Mitchell says questionable accounting makes it hard for the public and legislators to understand the state's true financial condition. California reported a $3 billion surplus in the budget year that ended June 30, 2001, just as the high-tech bubble was bursting. But the state actually spent $5 billion more than it took in - a deficit. ''California is in trouble now because it ran huge deficits even at the peak of the revenue cycle,'' Mitchell says. ''If you run deficits in good times, you're bound to have a fiscal crisis in hard times.''

Postrel's Jan. 15 blog item notes that a sidebar chart in the printed version of the paper, but not available online, revealed more data on how states have spent themselves into their current crises.

The printed sidebar includes a great chart, unavailable online, that shows the average annual change in each state's budget from 1997 to 2002 and the projected change for 2003. Examples: California's state budget grew 9.4% a year from 1997 to 2002 and is projected to shrink by 0.2% this year; Colorado's grew 8.1% a year and is shrinking 2.7% this year; Virginia's grew 8.0% a year and is projected to grow 1.6% this year. Major outliers: Florida, which grew 4.4% a year from 1997 to 2002 and is supposed to grow 8.0% this year, North Dakota (3.5% vs. 15%), and West Virginia (2.8% vs. 10.8%).

Tennessee's budget also grew exponentially during that same five-year period, from less than $15 billion in fiscal year 1997 to more than $20 billion in the current fiscal year.