LET’S SAY YOU got a 1 percent raise. It’s just enough to keep up with inflation. Would you consider that “surplus” money? Money that you should use to buy a bigger house? Money that you should refuse to take? Or is it money you would use to pay for the electricity and groceries and prescription drugs and other necessities that will cost more this year than last?
On top of that raise, you got a year-end bonus. It wasn’t a surprise; except during the recession, you always get a year-end bonus, which you count on every year to help you pay for that year’s unexpected extra expenses: a new refrigerator, a rebuilt engine, the co-pay for back surgery — there’s always something. So would you use this latest bonus to pay those bills, or would you consider it surplus?
If you’re like most people, you don’t think of your pay raise as surplus money, to be spent on new things, even important new things. You probably don’t even think of your bonus that way.
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The Legislature has about $1.2 billion in that kind of money to spend in the budget year that begins July 1. Among budget wonks, the usual term for it is “new” money, even though a lot of it isn’t new, at least not if “new” means “more than we had the previous year.”
This “new” money is what many legislators and the governor incorrectly call “surplus.” Mostly, they use the “S” word either because it helps them make their political point (look at all that extra money we collected last year that we didn’t need; we should slash taxes, or at least fix all of our roads) or because they’re lazy in their language or because they simply don’t understand budgeting. A lot of my friends in the media are careless with the terminology as well, which is why most people incorrectly believe that the state has $1.2 billion in “surplus” money to spend next year.
In fact, nearly half of that so-called surplus, $560 million, is like your pay raise: It’s additional annual revenue that allows the state to keep doing the things we are doing this year, even as inflation and a growing population increase the cost of doing those things.
Another $460 million is actually surplus — money that was collected last year or is expected to be collected this year above what budget forecasters projected and the Legislature spent.
But here’s the thing about surplus money that even budget wonks don’t generally talk about: As with you, if you count on that year-end bonus to make ends meet, it doesn’t actually represent an increase in the amount of money you have available to spend this year. The $460 million surplus that legislators have available to spend in next year’s budget simply replaces the surplus money included in the current year’s budget, which by pure coincidence also was $460 million.
An additional $200 million that is being lumped in as “surplus” is the amount of recurring revenue that the Legislature used for non-recurring expenditures in this year’s budget. In other words, it’s part of our salary from last year that we used to buy a new car, rather than paying the bills.
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Now, I will be the first to say that it’s wonderful to see the Legislature using recurring funding to pay for one-time expenditures, instead of the other way around: using one-time money to create new programs and raise salaries and pay for other recurring expenditures.
But what all this means is that even if you count that $200 million as “surplus,” lawmakers don’t have $1.2 billion in “new” money or in surplus money. They have about $660 million in surplus money that is not new, and about $560 million in new money that is not surplus.
If you want a single term for all of that money, it’s “unobligated revenue,” and that term in itself points to the screwy way the Legislature writes the budget: Rather than deciding each year what the state needs to spend money on, lawmakers start by assuming that everything they spent money on the previous year was good and worthy and essential, and then they decide how to divvy up the “unobligated revenue.”
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Check that: They assume everything they funded with recurring revenue was essential. Those items funded with one-time money are considered to have been one-time needs, whether they were or not. So any agency or program that received one-time money in the last budget has to fight with any proposed new programs for funding the next year, while any equally or less valuable programs that received recurring money automatically get that same amount of money again.
It’s a bad way to budget — a way that virtually guarantees we will continue spending money on programs that don’t work or don’t work well, while really important programs that need more money don’t get that money, and really worthwhile new programs don’t get started.
But the fact that the Legislature uses a budgeting system that doesn’t allocate our limited resources as well as it should does not mean that we have $1.2 billion in surplus money to spend. It simply means that the Legislature should write a budget in a smarter way.
Ms. Scoppe writes editorials and columns for The State. Reach her at email@example.com or (803) 771-8571 or follow her on Twitter @CindiScoppe.