Fiscal Democracy in the States: How Much Spending is on Autopilot?

Research Report

Fiscal Democracy in the States: How Much Spending is on Autopilot?

Abstract

Governors, lawmakers, and journalists often decry constitutional and statutory formulas, federal grant requirements, and court rulings they think excessively limit state budget decisions.

Some observers estimate as much as 70 percent of state spending is “on autopilot,” meaning these constraints are in place before proposals or negotiations begin.

But measuring predetermined state budget commitments is far from straightforward. The federal government explicitly defines “tax expenditures” and “mandatory spending” and reinforces these concepts through the annual budget process. In contrast, few states rigorously and transparently assess the long-term cost of tax breaks and spending programs that are either fixed in size or will grow automatically without policy changes.

In this report, we perform a first-of-its-kind analysis of how much spending was restricted or partially restricted in California, Florida, Illinois, New York, Texas, and Virginia from 2000 to 2015.

Key findings

  • As much as 70 to 90 percent or as little as 25 to 50 percent of total state spending (including federal funds) was restricted in 2015.
  • State budgets appear to be growing more restricted over time.
  • Comparing spending growth by category to spending growth overall, we find that cash assistance, higher education, and corrections bore some of the squeeze on spending.

Recommendations

  • States should measure and monitor the extent and growth of their fiscal constraints.
  • States should prepare current services budgets showing the cost of maintaining existing services given caseload and price increases and assess proposed policy changes against this baseline.

For additional details on data sources and methods, as well as supplemental state background, see the data appendix.

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