The tables below are for contextual reference as state and local governments face draconian spending cuts. The combination of public policy with the several bubble periods over the last twenty-five years has created a toxic brew. Some state and local governments are valiantly trying to tackle the issues while other legislatures and councils are more interested in fist pounding. For those involved in financial analysis (as well as taxpayers) a careful eye is called for.
State and local spending grew dramatically during the post-Reagan years of the “Program for American Recovery”. A historic devolution of responsibilities from the federal government to state and local government was coupled with overall economic growth during this period. I have commented on this issue in prior posts and the presentation I gave at the recent analysts’ conference. The following tables are expanded to include the 1982-1992 decade. The first set of columns show dollar increases in 1982 constant dollars. To account for population changes from migration, which naturally cause increased spending for schools, infrastructure, healthcare, etc. the second set of columns shows the constant dollar increase in per capita spending. Embedded in these figures are a complex set of decisions on spending, and different approaches to governance, not to mention divergent demographic and economic profiles across the states.
Florida and Nevada top the list in the 1982-1992 decade with spending increases of 105% and 108% respectively. Florida’s population grew by nearly one-third during this time while Nevada grew by more than 50%. Per capita spending in Florida increased nearly 58% while Nevada increased 36%.
On October 19, 1987, Black Monday, the stock market crashed, followed by the savings and loan crisis and the Gulf War which combined to hit state and local budgets hard. Mid-term elections during the Clinton administration resulted in Republican control of Congress and the “Contract with America” which further devolved responsibilities to state and local governments. Some governments slowed their spending increases in the 1992-2000 period. On a per capita (constant 1982 dollar) basis spending actually declined in some places. (Note that these are combined state and local figures from the Census Bureau — most other sources, such as Pew, Rockefeller and Center for Budget Policy Priorities focus only on the states.)
Population growth figures allow some analysis of the changes. For example, Nevada had nearly 50% population growth which helps to explain a 7% decline in per capita spending during the 1992-2000 period. New Jersey, in contrast, hard hit by the recession, had only a 7% increase in population but had a nearly 2% decline in per capita spending over the period.
(For the detail oriented reader, there is a minor change in the numbers since I adjusted for 2007 population — the prior tables used 2008 population. Data source: Census Bureau and Bureau of Labor Statistics. Note that spending includes current year payments for retirement and health benefits but not capital outlay.)