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A new plan for old problems

By Jim Waters

Policymakers have undoubtedly breathed a sigh of relief many times over since finally getting a budget passed at the end of the recent legislative session. However, that relief is likely to be short-lived as another round of budget discussions and the probability of a $400 million deficit looms in 2006.

Before the heat of the budget battles is upon them once again, lawmakers may want to consider some key questions:

First, why were the most recent budget negotiations more successful than the two previous ones that failed to produce an agreement?

Did weighing the priorities of government lead to an effective bipartisan agreement, or did the local prospects of $2.1 billion in new projects convince legislators to look beyond party lines? Bringing home the bacon can be a powerful factor in Kentucky politics.

Second, considering the large deficit that looms, how confident can legislators be that the upcoming negotiations will again produce successful results?

Don’t hold your breath. Without significant changes in the way budgets are created, Frankfort’s tortuous cycle of short-term relief followed by divisive budgetary crises will continue.

To help improve the process, the Bluegrass Institute has created “Planning for Kentucky’s Future,” a best-practices handbook that offers alternatives designed to improve the efficiency with which legislators craft spending plans.

Gleaned from successes experienced in other cities, states and nations, this manual is a treasure trove of proven ideas that can lead to “results-based” government. For example:

States that resist raising taxes during tough economic times fare better in the long run.

When revenues began to decline following the economic boom of the 1990s, policymakers faced a choice: Raise taxes or reform their budget processes.

Several governors decided not to raise taxes to meet revenue declines and instead used their time of crisis to push through various reform packages, including tax cuts.

Controversial? Sure. But it demonstrated the ability of these leaders to look beyond the surface clamor of talking heads and special-interest groups that offered “raising revenues” as the solution to all budget challenges.

Priorities must be established in a bipartisan manner.

The budget is often referred to as a “spending plan.” Yet the looming deficit indicates a stronger historical emphasis on spending than on planning in Frankfort.

Some states have done the politically tough work required to determine spending priorities. For example, former Gov. Gary Locke and his fiscal team developed Priorities of Government (POG) in Washington State.

Many functions agreed upon in POG such as “Improve the health of Washingtonians” no doubt need more objective measurements to determine if goals are being met. Still, to get politicians from different backgrounds that represent very diverse constituencies to agree on 10 priorities of government is a monumental step in the right direction.

Other states including Arkansas, California and Virginia have also constructed an impressive list of government core functions and prioritized spending plans. But New Zealand has recorded perhaps the finest example of delivering limited – yet more effective – government services.

New Zealand’s per-capita income declined from third-highest in the world in the 1950s to 27th by the mid-1980s. Newly elected leaders reversed that slide in 1984 by abolishing all agencies and programs within six months that did not fit within the agreed core functions of government.

After only eight months of making spending decisions based on agreed-upon priorities, New Zealand approved a dramatic tax cut even as tax receipts increased by 20 percent.

Political courage is required.

A longtime Kentucky lawmaker recently commented that he “didn’t know of one capital project (in this year’s budget) that’s not important to this state or would have to be at some point.” Yet agreeing to establish priorities is an acknowledgement that some projects are more important than others.

There are many schemes that lawmakers would like to fund. In fact, there seem to be few schemes that they wouldn’t like to fund.

Too much of what Kentucky’s government spends hard-earned taxpayer dollars to fund already is wasted and benefits a select few. Improving our state’s fiscal health requires disciplined decision-making based on consideration of needed services and available revenues instead of just what will enable politicians to garner a few votes or headlines “back home.”

Kentucky families understand how the process works. Many families would like to vacation in Hawaii, but must settle instead for a trip to Kentucky Kingdom.

Politicians often resist efforts to prioritize because it’s hard work and makes the budget process less susceptible to pork-barrel spending. Yet such an attitude will never bring about a return to responsible government.

Albert Einstein once said: “Not everything that can be counted counts, and not everything that counts can be counted.”

We are convinced that the political courage to do right still counts. Are you?

– Jim Waters is Director of Policy and Communications for the Bluegrass Institute, Kentucky’s free-market think tank.

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