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Constitutional Amendment To Hold Back State Government Growth Would Be Fraught With Problems, Economist Cautions

December 9, 2003 -- In an era of troublesome state and federal budget deficits, the 2004 General Assembly may well see the introduction of new bills to constrain the growth of Virginia government spending by proposing an amendment to the state constitution.

More than half the states now have some type of limit, with the most popular being a constitutional amendment that ties government spending increases to such variables as population growth and inflation. Such a permanent straightjacket, however tempting on the surface, would be a simplistic and dangerous move for Virginia, one of the state’s best known economists warns.

While some critics blame the state’s current fiscal crisis on government-spending growth in flush years of the 1990s, according to John L. Knapp, director of economic research at the University of Virginia’s Weldon Cooper Center for Public Service, much of that growth was driven by programs with wide public support to meet social needs or was used for re-building programs weakened by the 1990-91 recession.

Fully 16 percent of growth in Virginia’s spending between 1998 and 2001 was for reimbursing localities for the politically popular rollback of the car-tax, Knapp writes in the
current issue of Virginia Issues and Answers newsletter, published by Virginia Tech. Much of the rest of the growth went for K-12 and higher education, Medicaid costs, highways, mental health, prisons, and aid to local police.

A constitutional amendment limiting growth in spending could mean that creative new initiatives couldn’t be undertaken or that needed existing programs couldn’t be strengthened,
Knapp said. “Constraining growth in years of prosperity would remove a recovery mechanism that now exists” to bolster programs hurt by recessions or sudden needs. “It would take away the flexibility to deal with new demands on state government.

“In the past, Virginia has launched important and expensive new programs such as the community college system, the state share of Medicaid, new highway construction, and aid to local law enforcement. Without the flexibility to address new demands, state government will either have to ignore them, make cuts in other important programs, or circumvent the constraints with budgetary gimmicks.”

In the last session of the General Assembly, seven bills were introduced that provided for an amendment limiting the growth of state spending. More bills are likely to draw increased attention in the future, Knapp predicted. Tax and spending limits have been widely promoted nationally by such groups as the Cato Institute, a conservative think tank, he noted.

A constitutional amendment would be “fraught with technical and policy problems,” such as how to estimate population growth or which inflation or income formula to use, Knapp said. “There is no need to overlay the traditional budget process with a new constraint,” he said. It “assumes that today’s decision makers and voters know better than future generations what will be best for them. This breathtaking assumption is incorrect.”

Contact: Bob Brickhouse, (434) 924-6856

FOR ADDITIONAL INFORMATION: Contact the Office of University Relations at (434) 924-7116. Television reporters should contact the TV News Office at (434) 924-7550.

SOURCE: U.Va. News Services

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