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Friday, April 24, 2009

UPDATE: The graph below has been updated to reflect the budget agreement released today, which would impose significantly deeper budget cuts relative to the economy than any other budget over the period shown.

When looking at state fiscal trends, the standard methodology is to compare state spending and revenue to total personal income.* This provides insight on the resources we have to fund public investments and also recognizes that the cost of government grows along with economic and demographic trends.

This graph looks at spending (the green line) and revenue (the blue line) as a share of personal income from 1995-97 to the legislative budget proposals for 2009-11. Some key facts to note:
  • Revenue had been eroding before the current economic recession because of significant tax cuts, spending limitations, and a tax system that doesn’t grow along with the economy even during good times.**
  • The decrease in revenue in the current biennium is twice as large as previous declines.
  • State spending has been fairly flat for a decade.
  • The proposed budget cuts for 2009-11 are significantly deeper relative to the economy than any other budget over this time. They would result in a much smaller investment in public priorities.

*Personal income is an estimate of the total income received by all Washingtonians from all sources (employment, dividends, interest, etc.). For more, see the Bureau of Economic Analysis.

**Wonder why revenue increased in 2005-07?
The housing market.

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