At the end of the legislative session we told you about the massive spending increase passed by the legislature. Now, the official report of the Legislative Council is out, and it shows that state spending has reached a new milestone.
A critical metric of government growth is to compare total general fund spending to the growth of personal income (personal income being representative of the economy).
On page 388 of the Legislative Council’s report for 2011, we have access to this critical comparison. The data goes all the way back to 1967.
According to the Legislative Council, state general fund spending as a portion ofthe total personal income in the state is now at 7.02%. This means that that the state government is taking and spending 7.02% of all the income earned in the state.
To put that into perspective, the previous record was 6.75% in 1985-87, but this measurement had been on a steady decline since then to 2005-07 where it bottomed out at 4.81%.
But since 2005-07, we have seen a drastic increase in state spending, and that increase has outpaced the growth of personal income.
The General Fund Budget has increased from just over $2 billion to just over $4 billion – a doubling in just eight years. This spending binge has forced the ratio of state spending compared to personal income up from 4.81% to 7.02% – an increase of 37% in eight years.
This means that in just eight short years, state government as a portion of the economy has increased 37%. The 2010 U.S. Census showed only a 4.7% increase in state population.
It does not take an economist to realize that this sort of explosive growth is not sustainable. It will take a concerted effort by the legislature to rein in non-infrastructure spending in next legislature. The oil tax windfall may not always be there, and it is better to prepare for that inevitability before it occurs.
Dustin Gawrylow is the executive director of the North Dakota Taxpayer’s Association.