The state budget: finding the right "measure"

One of the main debates at the State Capitol this year centers on what to do with a projected $900 million dollar budget surplus, the result of anticipated revenues for this current budget biennium exceeding planned government expenditures.

Should lawmakers create a supplemental budget with new expenditures, or put the revenue back in the economy through tax cuts?  Or should they assume that, because of inflationary increases in existing program expenditures and the potential for an economic downturn, the safest course of action is to not gamble with new spending or tax relief?

Data is necessary, but not enough

In an effort to advance their favored budgetary strategies or justify particular spending or tax proposals, lawmakers toss around a variety of numbers and metrics.

For instance, one measure cited frequently in Minnesota budget debates is the “price of government.” It uses the total revenue collected by state and local governments, including school districts, and measures it relative to “Minnesota Personal Income” (MPI), which is a measure of aggregate personal income.

The “price of government” in Minnesota has remained relatively stable since 1999, hovering between 14.5 and 16 percent of MPI, with projected decreases in the price of government services through FY 2019.

Spending has stayed consistent with increases in household income, which indicates economic growth, and which in turn means more demand for infrastructure and government services.  Therefore, it is claimed, spending is not out of control and there continues to be room for prudent investments that improve the quality of life in our state.

This metric is helpful, but critics of the “price of government” highlight its limitations, and that it is merely one metric among many.  For example, because it includes non-cash income in its calculation of MPI, the “price of government” does not accurately reflect how much state and local governments actually consume from the pocketbooks of Minnesotans.

Furthermore, the “price of government” metric does nothing to tell us if our rate of government spending is the “right price,” because hitting a target figure will not necessarily ensure that the $16 billion dollar (almost 60 percent) increase in state and local government spending since 2004 is contributing to a better Minnesota.

Ultimately, empirical data, while helpful, is incapable of fully resolving the more fundamental questions related to budgeting. This is because budgets are moral documents, which reflect a community’s ethical priorities.  They require a different measure.

The human face of the budget

Catholics know that the ultimate budget “metric” is how well our state’s economy and its expenditures promote the human dignity of every person, created in the image and likeness of God, particularly the poor and vulnerable.  (See Matthew 25.) This is the ethical standard to which our lawmaker’s budgetary decisions—and all other policies, for that matter—must measure up.

That’s not to say that all expenditures must be aimed at the poor and vulnerable. Nor is it to give license to imprudent spending that uses money our state does not have.

But it is to say that we should employ a measure of justice and a heart of solidarity, and manage our state budget in the common-sense manner we would a household budget.  (Not coincidentally, the Greek root of “economy” is “oikos,” meaning household.)

Responsible household budgeting focuses on the greatest needs:  the well-being of children and the elderly, housing, education, food, and healthcare.  If there is additional money left over, then we can consider additional spending on “quality of life” amenities.  But until basic needs are met in the home, other opportunities will have to wait.

By this measure, even our fair state has a long way to go in getting its budget priorities right.  Hopefully, Catholics will continue to constructively remind lawmakers and others about the right “measure” of budgetary decisions.

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