(06/10/06) Opponents of the South Burlington school budget made the argument that the school spending increase of 55 percent ($21.5M to $33.7M) in 5 years was too dramatic. The defeat of the budget told the school board that they went too far in asking for this much money.

Milton Friedman once noted people can spend money carefully or carelessly. When it’s our money we spend it carefully. If it’s someone else’s money we are much more likely to spend it carelessly.

Government always spends other people’s money. With the recently passed state budget, Vermont’s total state spending, in inflation adjusted dollars, increased by 170 percent in the past ten years, mostly in education and human services, while its population increased only 5 percent. Spending continues to increase between $100 to 300 million yearly.

In addition to increased spending we also have outstanding debt. At the end of 2005, Vermont owed $440 million. Though debt financing has decreased over the last 8 years it still requires $60 million debt service a year.

Vermont state government consumes about 20 percent of our gross state product. There’s no national data to show how competitive we are but New Hampshire’s spending accounts for 10 percent of its gross state product. Gross state product measures the state’s economic resources, labor, materials and time. As government consumes more of our resources, it displaces entrepreneurship which should be the major stimulus to our economy.

The more money spent by the state, the more taxes are required leaving working Vermonters with a smaller share for their own use and less for businesses to fund new ventures or pay for expansions.

Vermont can’t spend its way to prosperity by funding politically correct projects like the Sustainable Jobs Fund, passenger rail, art museum remodeling or promoting the latest development fad. Research shows that higher taxes stifle economic development and Vermont’s cost of living is one of the highest in the nation.

New spending establishes a new base for future commitments that rarely go away. The “waterfall” line item in the state budget was created to support the spending of extra tax revenue if it exceeded projections for the year. Hundreds of millions were spent that way during the last 10 years by the legislature instead of returning excess tax dollars to the taxpayers. Next year’s budget has a $35M “waterfall” to spend any surplus revenue.

The new Catamount Health Plan will further exacerbate our spending obligation. Medicaid is already projecting close to a $200 million deficit in two years. It will require additional tax money to be sustainable.

Enrollment in our schools is declining but our education spending is rising causing property taxes to increase at least 10 percent on average a year for the next several years.

One way to regain control of our spending is to limit our revenue so that politicians can’t spend it. Future budgets’ growth should be limited to increases in population and inflation growth. Tax revenue exceeding that should be returned to taxpayers. If that had happened in the last 10 years, taxpayers would have received $100 million in a refund of forced overpayments from the state.

Another approach is to establish the discipline of zero-based budgeting. Rather than use the prior year budget as the base for the next year’s base, all budget requests are reviewed from point zero, without assuming any existing program should continue. Using this approach you can further reward efficient and effective programs and modify or eliminate programs that can’t meet specific goals.

It shouldn’t be so easy for our elected state officials to spend our money. To insure economic survival in the long run, we need to control their spending and stop the financial joyride.

Frank Mazur
South Burlington

*  *  *

Frank Mazur, a small business owner and former state representative, is chair of the advisory board of Vermont FreedomWorks.